Union Planters National Bank, as Executor and Trustee Under the Will of James A. LeRoy, Deceased, v. Betty Clair Reinhardt Dedman, John Dedman, Bernice A. LeRoy, Jill LeRoy Dimiceli, and Sue LeRoy Henderson, et al.

Union Planters National Bank (“Bank”), as executor for the estate of James A. LeRoy (“Testator”), filed an action in the Probate Court of Shelby County for probate of Testator’s will on January 5, 1989. Bank subsequently filed suit for declaratory judgment against the beneficiaries and legatees of Testator’s property (“appellees”) alleging that the residuary estate provided for in Testator’s will to pay all death taxes was insufficient to cover his tax liability and seeking restitution from the appellees for their proportional share. Dedman appellees responded by contending that the post-death appreciation of residuary estate assets and the receipt of income from those assets had sufficiently increased the value of the residuary estate to enable it to sufficiently cover all death taxes requested by Bank. The Special Master appointed by the trial judge confirmed the sufficiency of the residuary estate on the date the taxes were due. The trial court entered judgment for appellees confirming the report of the Special Master finding that there was no shortfall in the residuary estate established by the testator in his will and thus rendering appellees not liable to Bank for reimbursement of death taxes in any amount. We find the decision of the lower court as to the issue of post-death income to the residuary trust to be in error and remand. Due to the complicated facts of this case and our determination that one issue in this case requires a remand to the lower court, we will only present the facts relevant to that issue.