Gowling's Estate, Matter of
| Decision Date | 18 October 1979 |
| Docket Number | No. 15374,15374 |
| Parties | , 33 Ill.Dec. 6 In the Matter of the ESTATE of Lyman L. GOWLING, Deceased. Gene PROSSER, Lyman Fleming, and Virginia Prosser, Respondents-Appellees, v. Pearl GOWLING, Petitioner-Appellant. |
| Court | United States Appellate Court of Illinois |
Gerald J. McGivern, Wiseman, Shaikewitz, McGivern & Wahl, Alton, for petitioner-appellant.
Michael J. McDonald, Jerseyville, for respondents-appellees.
This appeal arises from an order of the circuit court directing the executor of the estate of Lyman L. Gowling to pay Federal estate taxes out of the probate assets of the decedent's estate including property specifically bequeathed. Pearl Gowling, the decedent's surviving spouse appeals from that order contending that the specific bequest, to her, which qualified for the Federal estate tax marital deduction should not have been consumed to meet Federal estate tax liability which was largely generated by nonprobate assets. In addressing this issue we are incidentally, but necessarily, confronted by the question of whether the doctrine of equitable apportionment of Federal estate taxes is applicable with respect to Testate estates.
Briefly, the factual setting is as follows: The decedent died on November 21, 1977. He was survived by his widow, Pearl Gowling. In his will he made specific bequests to: his wife of $50,862.03; Gene Prosser of $18,370.28. The residue of his estate amounting to $1,211.04 was left to Virginia Prosser.
In April 1963, the decedent and his then spouse, Nettie Gowling, deeded two parcels of realty to Virginia Prosser and Lyman Fleming, reserving life estates. Nettie Gowling predeceased the testator and he acted as the executor of her estate.
The decedent also left certain miscellaneous property and bank accounts in joint tenancy with his wife. The bank accounts were valued at.$19,000.
Lyman E. Fleming was named the executor of the decedent's estate. On June 29, 1978, Fleming filed a petition to establish and assess Federal estate tax liability. The petition requested that the court apportion the estate tax liability among the recipients of the probate and nonprobate property in the ratio that each recipient's property bore to the gross estate subject to Federal estate tax.
The probate assets consisted of the aforementioned specific bequests and the residue of his estate which amounted to $70,443.35. The total amount of Federal estate taxes was $72,142.62. This tax resulted from the inclusion of the remainder interests held by Lyman Fleming and Virginia Prosser valued at $232,600 and $114,561.04, respectively, and the joint accounts held by the decedent and his wife.
Pearl Gowling filed an answer, affirmative defense, and objection to the personal representative's petition to assess Federal estate tax liability. She contended that it would be error to require the surviving spouse to contribute to the payment of a proportionate share of the Federalestate tax when the interest she received qualified for the marital deduction and thus did not generate a Federal estate tax liability to the estate.
Thereafter, Lyman Fleming, in his status or capacity as a remainderman of one of the parcels of real estate held by the decedent, and Virginia Prosser, the remainderman of the other parcel, filed appearances in the action. It was asserted on their behalf that, contrary to the relief sought in the petition of the executor, there should be no apportionment of the Federal estate taxes. It was their position that the deed of decedent and his first wife, Nettie Gowling, indicated a donative intent on the part of the donors to convey the real estate without encumbrances including any share of estate taxes generated by the gift.
On December 4, 1978, a hearing was held on the executor's petition and the respective answers and defenses which were filed. Following the hearing, the court determined that the testator had manifested an intent to make the Federal estate taxes payable out of the probate assets of the estate. The court relied on a provision in the decedent's will which provided Inter alia :
The court reasoned that since debts due the United States (including Federal estate taxes) were listed under section 18-10 of the Probate Act (Ill.Rev.Stat.1977, ch. 1101/2, par. 18-10) as claims having priority over distribution to legatees or devisees, the testator intended to pay the estate tax debt from the probate assets.
We first address the trial court's determination that the decedent manifested an express intent that Federal estate taxes be paid only out of the probate assets of his estate. Our analysis to a large degree follows that adopted in the recent Illinois Supreme Court opinion of Roe v. Estate of Farrell (1978), 69 Ill.2d 525, 14 Ill.Dec. 466, 372 N.E.2d 662, for we believe much of what was stated there is applicable in the instant case.
We begin with the acknowledgment that the Federal estate tax is imposed on the transfer of the taxable estate as a whole (Int.Rev.Code of 1954, 26 U.S.C. § 2001 (1976)), and not on the individual beneficiary's right of succession. This aspect of the estate tax, however, does not necessarily prohibit contribution for taxes from persons acquiring nonprobate assets, for it is State law which determines how the burden or "ultimate impact" of estate tax should be borne. Riggs v. Del Drago (1942), 317 U.S. 95, 97-98, 63 S.Ct. 109-110, 87 L.Ed. 106, 110-11; Roe.
Here the trial court considering the power of the executor to settle "claims" against the estate in conjunction with section 18-10 of the Probate Act determined that the testator's intent was that estate taxes be paid, to the extent possible, solely from probate assets. In Roe, the court reasoned that:
69 Ill.2d 525, 531, 14 Ill.Dec. 466, 469, 372 N.E.2d 662, 665.
We acknowledge the respondent's contention that this language from Roe is not controlling because there the court was dealing with an intestate estate. We find, however, that the court's analysis and reasoning with respect to section 18-10 is equally persuasive when applied to a testate estate. If section 18-10 does not represent a legislative pronouncement against contribution with respect to intestate estates, then logically it must be similarly viewed with respect to testate estates. Respondents' attempt to distinguish Roe on this basis lacks merit.
Thus, we are left to determine whether the decedent intended the estate tax liability to be borne by the probate assets, by looking solely to the language of the will. The mere recital that the executor is to pay the claims of the estate seems to lack any indication of who should bear the burden of estate taxes. In other jurisdictions, the simple directions in a will that the executor is to pay all just debts or obligations is not viewed as a specific direction concerning the payment of death taxes nor does it necessarily constitute a direction against apportionment. See generally Annot., 70 A.L.R.3d 630 § 6(a) (1976).
Further, it seems unlikely that a testator would make specific bequests only to have them absorbed by estate taxes. In view of the rather ambiguous language we are hesitant to imply or presume that the testator intended such a result. Under these facts, the testator's mere recital that claims against his estate should be paid fails to manifest any intention of the testator with respect to the burden of estate taxes. Thus, absent any direction by the testator we resort to the initial premise that the burden of estate taxes is determined by State law. Riggs.
We conclude, in view of the supreme court ...
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