Curtis' Estate, In re
| Decision Date | 27 May 1963 |
| Docket Number | No. 37507,37507 |
| Citation | 28 Ill.2d 172,190 N.E.2d 723 |
| Parties | In the Matter of the ESTATE of John Guernsey CURTIS, Sr. Edwin V. HALE et al., Appellants, v. The PEOPLE of the State of Illinois, Appellee. |
| Court | Illinois Supreme Court |
McKay, Moses, McGarr, Solum & Gibbons, Chicago (Walter H. Moses and Floyd H. Abrahamson, Chicago, of counsel), for appellants.
William G. Clark, Atty. Gen., Springfield , for appellee.
By this appeal, Edwin V. Hale, Florence Hale Curtis, and The Northern Trust Company, as trustees under the last will and testament of John Guernsey Curtis, Sr., deceased, seek to review an order of the county court of Lake County reassessing the Illinois inheritance tax payable by reason of said decedent's death. Since the matter relates to revenue, the jurisdiction of this court has been properly invoked. People v. Schallerer, 12 Ill.2d 240, 145 N.E.2d 585, 146 N.E.2d 193, 73 A.L.R.2d 150.
At the time of his death on September 18, 1956, John Guernsey Curtis, Sr., left a last will and testament under which assets valued in excess of $1,360,000 were bequeathed to the above named trustees under a marital trust for the benefit of his widow, Florence Hale Curtis, who, in addition to receiving the net income therefrom, was granted The marital trust further provided that should the widow die prior to complete withdrawal of the marital trust assets, then upon her death the principal remaining should be added to a residuary trust for the benefit of trustor's son, the son's descendants and wife, trustor's daughter, trustor's brother-in-law, and trustor's sister and her descendants. The petitioners herein, Edwin V. Hale, Florence Hale Curtis, and The Northern Trust Company, were also named as trustees of the residuary trust and were directed to pay all death taxes from the principal of this latter trust without right of reimbursement from the beneficiaries.
In the inheritance tax appraisement proceedings held in the county court of Lake County on March 21, 1958, the life estate granted the widow, Florence Hale Curtis, under the marital trust was valued at $722,481.36, and the remainder interest under such trust was valued at $637,611.57. Since the remainder interests were contingent in nature, the inheritance tax thereon was assessed at the highest rate, in accordance with section 25 of the Inheritance Tax Act (Ill.Rev.Stat.1955, chap. 120, par. 398,) upon the assumption that the widow would not exercise her right to withdraw the remainder, that it would become a part of the residuary trust upon the widow's death, that all the beneficiaries of the residuary trust except a descendant of trustor's sister would predecease the widow, and that the entire marital trust remainder would be distributed to such descendant. The total inheritance tax payable by reason of the death of John Guernsey Curtis, Sr., was then fixed at $321,666.61 and subsequently paid.
However, by an instrument dated November 7, 1958, Florence Hale Curtis withdrew the entire principal of the marital trust as her absolute property, thus terminating the marital trust, and thereafter the trustees of the residuary trust petitioned the county court of Lake County for a reassessment of the inheritance tax paid upon the death of John Guernsey Curtis, Sr., claiming that the widow had in fact exercised a power of appointment and that, as a result thereof, the value of the remainder interest of the marital trust was not taxable as a part of the John Guernsey Curtis, Sr., estate. Therefore, according to the petitioners, the inheritance tax payable by reason of the trustor's death was only $219,648.76, instead of the $321,666.61 previously assessed, and said trustees were allegedly entitled to a refund of $102,027.85.
In its answer to the petition for reassessment, the State of Illinois acknowledged that the contingencies upon which the original inheritance tax were based could never occur and that a reassessment was proper under section 25 of the Inheritance Tax Act, but denied that the remainder interest of the marital trust should be excluded in computing the reassessment. Rather it contended the value of such remainder should be taxed in the trustor's estate as a transfer to his widow, thereby resulting in a reassessment of $308,914.38 rather than the original assessment of $321,666.61. Both parties moved for judgments on the pleadings and, after hearing, the county court of Lake County found for the State of Illinois and reassessed the inheritance tax to an amount of $308,914.38. The present appeal followed.
The sole question presented is whether, under the circumstances of this case, the value of the remainder interest of the marital trust is taxable as a part of the trustor's estate. Petitioners contend that by withdrawing the trust corpus, the widow exercised a power of appointment which, under subsection 4 of section 1 of the Inheritance Tax Act (Ill.Rev.Stat.1955, chap. 120, par. 375,) became a taxable transfer only upon her death and not upon the death of the trustor. Even if the withdrawal was not technically the exercise of a power of appointment, reasons the petitioner, the acquisition of the remainder of the marital trust by the widow was not a taxable transfer in the trustor's estate since it was not a property interest passing to the widow under the trustor's will but one resulting solely from the exercise by the widow of her right to withdraw. The State of Illinois, on the other hand, insists the right to withdraw is not a power of appointment within the meaning of subsection 4 of section 1 of the Inheritance Tax Act and that section 25 of the Inheritance Tax Act is applicable.
Section 1 of the Inheritance Tax Act, (Ill.Rev.Stat.1955, chap. 120, par. 375,) imposes a tax upon various transfers of property which are more fully enumerated in subsections 1 through 5. Subsection 1 deals with transfers resulting from the death of Illinois residents; subsection 2 is applicable to transfers of Illinois property by reason of a nonresident's death; subsection 3 makes the inheritance tax applicable to transfers made in contemplation of death or intended to take effect at or after death; subsection 4 states...
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