DAVID PATTON, WILLIAM PATTON, AND MARY FULMER JONES, APPELLANTS
DOROTHY FULMER, INDIVIDUALLY, AND IN HER CAPACITY AS EXECUTRIX OF THE ESTATE OF JOHN M. FULMER, DECEASED, APPELLEE
APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, TWELFTH DIVISION [NO. PR-10-420] HONORABLE ALICE S. GRAY, JUDGE
Rose Law Firm, a Professional Association, by: Craig S. Lair and Amanda K. Wofford, for appellants.
Singleton Law Firm, P.A., by: Charles R. Singleton and Damon C. Singleton, for appellee.
KENNETH S. HIXSON, Judge
Appellants William Fulmer Patton, David Patton, and Mary Fulmer Jones (hereinafter referred to as appellants or "the Pattons") are the nephews and niece of the decedent, Dr. John M. Fulmer, and beneficiaries of a residuary trust created by the decedent's Last Will and Testament. Appellee Dorothy Fulmer (hereinafter referred to as appellee or "Fulmer") is the decedent's widow. Appellants are challenging the circuit court's ruling on the construction of the decedent's will, the bequest to Fulmer, and the award of the distribution of the appreciation of the probate estate's assets. They also raise an evidentiary issue concerning the circuit court's refusal to allow two attorneys to testify as to their opinions concerning the construction of the will and the application of certain pertinent probate or estate tax laws. We reverse the circuit court's rulings as to the construction of the will, the bequest to Fulmer, and the distribution of the appreciation of the probate estate's assets, and we remand for further proceedings consistent with this opinion. We affirm as to the evidentiary issues.
The decedent and Fulmer had been married for over thirty years. The decedent did not have any children. He died testate on February 25, 2010, leaving a will dated April 18, 1980. The couple owned a residence and other joint accounts, and Fulmer received the proceeds of various life insurance policies and annuities. Altogether, Fulmer received approximately $1.547 million in nonprobate assets shortly after the decedent's death. Fulmer filed the decedent's will for probate and was appointed as the executrix. The probate estate consisted of two investment accounts: an account with Wells Fargo and an account known as the "Dane Fulmer Account." An early inventory of the estate in 2011 indicated that the balance of these two accounts was $2, 475, 000. The balance of these two estate accounts continued to accrue interest, earn dividends, and appreciate over the life of the probate proceedings, increasing the value of the estate by an additional $400, 000 to $500, 000.
The dispute in this case relates to the distribution of the probate estate (the investment account balances and the appreciation of those accounts) between Fulmer as the surviving spouse and the Pattons as the residual trust beneficiaries. Generally, the will provided for a bequest to the spouse using a common estate tax marital deduction formula with the balance of the estate bequeathed to a residual trust for the use and benefit of the spouse during her lifetime. What brings this probate estate out of the ordinary is that when the decedent passed away in 2010, there was arguably a gap in the federal estate tax law caused by the sunset provisions of The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"). The EGTRRA contained a sunset provision stating that "this chapter shall not apply to estates of decedents dying after December 31, 2009." However, Congress passed the 2010 Tax Relief Act, which purported to retroactively reinstate the estate tax for decedents dying in 2010. Therefore, because the decedent passed away in 2010, there was a significant issue before the trial court as to whether the determination of the amount of the spouse's bequest, which was dependent on a reduction based on a marital deduction calculation, was affected by the sunset provision of the EGTRRA. The trial court ultimately found that because the federal estate tax was not in effect on the date of the decedent's death and there was no estate tax due on the estate, the estate was not required to reduce the amount of the spouse's bequest by the "marital deduction" calculation. The trial court awarded Fulmer 50% of the probate estate (in addition to the $1, 547, 500 that Fulmer received in nonprobate assets, the result of which awarded Fulmer approximately 85% of the adjusted gross estate). The trial court also awarded Fulmer 50% of the appreciation of the probate estate.
II. Proceedings in the Trial Court
The Pattons filed a petition to construe the decedent's will, arguing that it was the decedent's testamentary intent to leave Fulmer only property and assets that qualify for the estate tax marital deduction. Appellants contended that this bequest should be valued at $464, 045 with the balance of the probate estate being transferred to the residual trust. Appellants also argued that Fulmer was making distributions to herself without reporting them and that those distributions did not qualify for the marital deduction. They therefore requested, in addition to construction of the will, an accounting and repayment by Fulmer of the nonqualifying distributions.
Fulmer responded to the petition to construe the will. She acknowledged that the distributions to herself should have been approved by the court. She also asserted that the language in the decedent's will was clear and unambiguous and that the amount of the bequest should be paid to her.
Following a hearing in November 2012, the court entered an order in December 2012 finding, among other matters, that appellants had not shown any ambiguity in the will "which would allow or require the court to hear extrinsic evidence of [the] testator's intent." The order further provided that "[t]he Court concludes that there is no ambiguity in the language of the will[.]" The effect of this ruling would be to later exclude the attorney who drafted the will and an expert witness from testifying in the final hearing of this matter as to the testator's intent and the impact of probate and estate tax laws. The court reserved the issue of whether the court should order a credit or refund of the distributions.
Fulmer filed what was labeled as a final accounting on January 9, 2013. On April 16, 2013, Fulmer petitioned for division of the estate assets. She contended there were no marital deductions provided by federal law at the time of the decedent's death, that his estate totaled $4, 022, 910, and that she was entitled to half, or $2, 011, 455, as her share. She then asked that this amount be distributed to her.
Appellants filed a motion to intervene and responded to Fulmer's petition to distribute assets. Appellants argued that, according to the decedent's will, Fulmer's marital share should only be $464, 045 because Fulmer's calculation did not account for the $1, 547, 410 in insurance proceeds, jointly-held property, and annuities she took outside probate that were allowed as marital deductions and that she listed on her initial tax filings.
On February 6, 2014, appellants filed a motion seeking to have the court determine whether attorney William Haught could testify. Haught had drafted the decedent's will. The motion noted the court's earlier ruling in connection with the construction of the will that extrinsic evidence was not necessary. Fulmer responded, arguing that Haught's testimony was unnecessary because it would not aid in the court's construction of the will ...