Lincoln Bank & Trust Co. v. Huber

• Decision Date: 29 May 1951
• Citation: 240 S.W.2d 89
• Parties: LINCOLN BANK & TRUST CO. et al. v. HUBER.
• Court: United States State Supreme Court — District of Kentucky

Page 89

240 S.W.2d 89

LINCOLN BANK & TRUST CO. et al. v. HUBER.

Court of Appeals of Kentucky.

May 29, 1951.

Alfred C. Krieger, Louis E. Ackerson, and Franklin S. Fitch, all of Louisville, for appellants.

Earl B. Fowler, Louisville, for appellee.

A. E. Funk, Atty. Gen., Hal Williams and William Scent, Assts. Atty. Gen., amicus curiae for Department of Revenue and another.

LATIMER, Justice.

Appellee, Bertha H. Huber, filed this declaratory judgment action to determine a question of taxation. Her husband, N. F. Huber, died testate on August 16, 1948. Under his will the Lincoln Bank and Trust Company was appointed and qualified as executor. Appellee renounced the provisions of the will. She filed this action to recover from the executor her statutory one-half interest in the surplus personalty left by the decedent without any reduction by reason of an apportionment of federal estate taxes based upon the decedent's taxable estate. The cause was submitted on the pleadings. Judgment was entered, in substance to the effect, that appellee's interest was not subject to any part of federal estate taxes and that the federal estate tax should be apportioned among the beneficiaries participating in the net taxable estate.

The defendants named in the action below were the executor, Lincoln Bank and Trust Company, and the children and heirs of the deceased, N. F. Huber.

Apparently all parties to the action are satisfied with the judgment of the court below but in order to obtain a final determination of the matter, the defendants below prosecute this appeal. It appears to be the contention of all the parties that since the share allotted to the surviving spouse by KRS 392.020 is not included in the taxable estate for federal estate tax purposes, that share should not have to bear any portion of the federal estate tax imposed upon the remainder of the estate We are not disposed to enter a discussion of the federal provisions relative to a marital deduction from the value of the gross estate in the determination of the tax value of the net estate. That is a matter to be determined entirely by the taxing authority directly concerned with that determination. It does appear, however, that under the provisions of Section 812, 26 U.S.C.A., the surviving spouse is entitled to deduct the statutory allotment before arriving at the net value of the estate for purposes of federal taxation. It is contended, however, that the state law will govern as to where the burden of the federal estate tax will ultimately rest. This contention is based upon the case of Riggs v. Del Drago, 317 U.S. 95, 63 S.Ct. 109, 110, 87 L.Ed. 106, 142 A.L.R. 1131, which involves the constitutionality of a New York statute which provided that, except as otherwise provided by decedent's will, the burden of any federal estate tax should be spread proportionately among the distributees or beneficiaries of the estate. That statute was held constitutional by the Supreme Court. It was said: 'We are of opinion that Congress intended that the federal estate tax should be paid out of the estate as a whole and that the applicable state law as to the devolution of property at death should govern the distribution of the remainder and the ultimate impact of the federal tax; * * *'.

In support of the contention that the widow's share should not bear any portion of the federal estate tax, it is pointed out that this court has developed and maintained a rule of 'equitable apportionment' relative to imposition of the federal estate tax, and that under this rule the widow's share in the present case should not bear any portion of the estate tax. In Hampton's Adm'rs v. Hampton, 188 Ky. 199, 221 S.W....