IN THE MATTER OF ESTATE OF SMITH, 2003-CA-02811-SCT.
| Decision Date | 20 January 2005 |
| Docket Number | No. 2003-CA-02811-SCT.,2003-CA-02811-SCT. |
| Citation | 891 So.2d 811 |
| Parties | In the Matter of the ESTATE OF Anthony Walker SMITH, Deceased: W.E. Davis, Administrator, First Security Bank and Bank of Holly Springs v. Raymond Smith and Ruth Smith. |
| Court | Mississippi Supreme Court |
John T. Lamar, Jr., Senatobia, Bryan E. Dye, Jackson, William F. Schneller, Holly Springs, attorneys for appellants.
John B. Turner, M. Darin Vance, Hernando, William A. Baskin, Southaven, attorneys for appellees.
Before WALLER, P.J., GRAVES and DICKINSON, JJ.
¶ 1. When Anthony W. Smith died without a will, he had three life insurance policies in full force and effect. The aggregate value of the proceeds of these policies was $2,155,000. The beneficiaries were Raymond Smith, Anthony's father, who received $2,000,000; Ruth Smith, Anthony's ex-wife, who received $125,000; and Vickie Smith, Anthony's wife at the time of his death, who received $30,000. Raymond filed a petition in the Chancery Court of DeSoto County seeking a declaratory judgment from the chancery court that: (a) the administrator of Anthony's estate must first pay any estate taxes out of the estate; and (b) if the estate did not have enough funds to pay the taxes in full, only then could the administrator seek contributions from the three life insurance proceeds beneficiaries. W.E. Davis, as administrator of Anthony's estate, responded that the tax liability of the estate increased substantially because of the pay-out of $2,000,000 of the life insurance proceeds. He averred that the beneficiaries' proportionate tax liability amounted to $561,354 for Raymond; and $35,085 for Ruth,1 and that Raymond and Ruth should be ordered to interplead these amounts into the registry of the court. Davis also argued that, without the amount of the insurance proceeds added in, the estate would not have had any estate tax liability, so the entire tax liability should be paid by the insurance beneficiaries.
¶ 2. After a hearing, the chancellor found that (1) the gross value of the estate was $9,395,811, including the insurance proceeds; (2) at that time the estate had a tax liability of $596,439, but all of the estate's assets had not been secured and valued; (3) the estate could recover from the insurance beneficiaries a portion of the tax liability, but it could not recover the full tax liability; (4) to impose all of the tax liability on the insurance beneficiaries would be inequitable inasmuch as other valuable, unencumbered assets of the estate would not be taken into consideration; (5) each insurance beneficiary should contribute toward the estate tax liability a percentage of the insurance proceeds equal to the proportion of the insurance proceeds to the value of the gross estate, meaning Raymond must pay 21.8% of the tax liability because the insurance proceeds paid to him constituted 21.8% of the gross estate, and that Ruth must pay 1.3% of the tax liability because the insurance proceeds paid to her constituted 1.3% of the gross estate; and (6) Raymond owed $130,023 (21.8% of the tax liability) and Ruth owed $7,753 (1.3% of the tax liability) to the estate.
¶ 3. Miss.Code Ann. § 27-10-7 (Rev.2003) provides that estate tax liability shall be apportioned "in the proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate," meaning that apportionment would be based on the gross estate. However, Miss.Code Ann. § 27-10-21 (Rev.2003) provides as follows:
If the liabilities of persons interested in the estate as prescribed by this chapter differ from those which result under the Federal Estate Tax Law, the liabilities imposed by the federal law will control and the balance of this chapter shall apply as if the resulting liabilities had been prescribed herein.
26 U.S.C. § 22062 provides that if an estate consists of assets which include, inter alia, the...
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