In re Estate of Denman, 362 S.W.3d 134 (Tex. App.—San Antonio 2011, no pet. h.).
A dispute arose regarding whether generation-skipping transfer taxes should be allocated against the residuary estate or against the generation-skipping transfer. Both the trial and appellate courts in In re Estate of Denman, 270 S.W.3d 639 (Tex. App.—San Antonio 2008, pet. denied), agreed that the GSTT should be charged against the transfer itself.
GST Beneficiary claimed that a will provision which provided that “taxes shall be paid out of my residuary estate” clearly expressed the testator’s intent that the gift pass without reduction for the GSTT triggered by the gift. However, the Residuary Beneficiary pointed to I.R.C. § 2603(b) which mandates that a GST bears the burden of the tax unless otherwise directed by a “specific reference to the [GSTT]” in the will. The will’s reference to “transfer, estate, inheritance, succession and other death taxes” was not a specific reference to the GSTT and thus the tax was allocated against the GST.
In this case, GST Beneficiary sought reimbursement of the GSTT paid from the estate noting that the court in the original case stated in a footnote that the issue of reimbursement was not before the court. Both the trial and appellate courts held that GST Beneficiary was not entitled to a reimbursement or “grossing up” of his devise to account for the GSTT. The court, however, did not actually reach the merits of the GST Beneficiary’s claim and instead determined that the statute of limitations had run on the claim.
Moral: Failure to bring a action within the statute of limitations period precludes a claim even if that claim may actually be meritorious.