Svoboda v. Larson
| Decision Date | 15 April 2022 |
| Docket Number | S-21-290. |
| Parties | Cindy SVOBODA, Personal Representative of the Estate of Blain Larson, appellee, v. Matthew LARSON, appellant. |
| Court | Nebraska Supreme Court |
Jared J. Krejci, Grand Island, of Smith, Johnson, Allen, Connick & Hansen, for appellant.
Jeffery T. Peetz and Blake K. Simpson, of Endacott, Peetz, Timmer & Koerwitz, P.C., L.L.O., for appellee.
The county court for Colfax County, Nebraska, approved the schedule of distribution for the estate of Blain Larson, filed by Blain's personal representative. The court overruled the objections of a devisee, and the devisee appeals. We conclude that the court erred in charging inheritance tax to the estate. The appeal is otherwise without merit. We therefore affirm in part, and in part reverse and remand with directions.
Blain's will nominated Cindy Svoboda (Cindy) as personal representative. Cindy and Blain cohabitated from 2008 until Blain died on February 19, 2017, at age 63. The will devised to Cindy one-half of Blain's livestock and one-half of the ownership of his pharmacy business. To Matthew Larson, Blain's son from a former marriage, the will devised one-half of the livestock, one-half of the pharmacy business, a pontoon, a fishing boat, sport utility vehicles, and certain personal property. The will devised the residue of his estate to Cindy. There was no devise for Blain's daughter, Amber Fixemer (Amber).
Of central relevance, Blain's will contained the following provision concerning the payment of debts and estate expenses:
My Personal Representative shall pay from the residue of my estate all my debts, funeral expenses, administration expenses and all estate, inheritance, succession and transfer taxes imposed by the United States or any state, territory or possession which shall become payable by reason of my death. It shall not be necessary to file any claims therefor, nor to have them allowed by any court.
In March 2017, Cindy initiated informal probate proceedings in the county court and was appointed Blain's personal representative. Matthew and Amber subsequently filed a petition to prevent informal probate, seeking an order that Blain died intestate based on the allegations that he lacked sufficient capacity to execute his will and that the will was invalid due to undue influence, fraud, and duress. Cindy denied the allegations. The matter moved to district court, where the court entered judgment on a jury verdict in favor of Cindy. In addition, the court found Matthew and Amber had filed their appeal " ‘vexatiously or for delay’ " and consequently awarded Cindy $2,871.70 in costs.
The matter returned to county court, where Cindy filed a formal petition for complete settlement after the informal testate proceeding, along with a schedule of distribution. Pursuant to Neb. Rev. Stat. §§ 30-2480 and 30-2481 (Reissue 2016), the petition sought approval of Cindy's final accounting and the fees and expenses she had incurred as personal representative. Cindy's petition specifically requested "[a]pproving distributions previously made and authorizing and directing [Cindy] to distribute the assets and the Final Accounting of the Estate to the Distributees in accordance with the annexed Schedule of Distribution."
Cindy's schedule of distribution allotted to Matthew a half interest in the proceeds from the sale of pharmacy stock, 26 cows, recreational vehicles, personal property, and taxes. To Cindy, the schedule allotted a half interest in the proceeds from the sale of pharmacy stock, 26 cows, taxes, and the balance of the residuary estate after payment of taxes, debts, and administration expenses. Some estate items had already been distributed in kind. Cindy's tentative inheritance tax totaled $224,249, whereas Matthew's totaled $7,190.
Cindy's final accounting showed that $545,029.98 remained in the estate account after payment of tentative inheritance taxes and administration expenses, including attorney fees incurred in defending the will contest, property taxes, and half the cost of a headstone. The court refunded $16,387 for overpayment of inheritance taxes and assessed inheritance taxes due in the amount of $208,758 against Cindy and $6,294 against Matthew.
On March 6, 2020, pursuant to Neb. Rev. Stat. § 30-24,104(b) (Reissue 2016), Matthew filed an objection to Cindy's proposal for distribution, alleging that she failed to properly apportion inheritance taxes once the residue had been exhausted and that each beneficiary should be responsible for his or her own inheritance tax. Matthew further alleged that Cindy, as personal representative, incurred unnecessary and unreasonable expenses and that estate funds should not be used to pay Cindy's attorney fees.
At a hearing on Matthew's objection, the court heard evidence regarding attorney fees Cindy incurred as personal representative while defending the will contest. Cindy testified that she defended the will to carry out Blain's wishes and denied that her primary purpose was to enhance her prospects of compensation under the will or that her efforts had that effect. She denied defending the will to amass personal representative fees, stating that she attempted resolutions through mediation and summary judgment. Cindy did admit that in the event she lost the will contest, she would not inherit any probate assets.
The county court received affidavits from Cindy's counsel and independent local counsel regarding the attorney fees paid by the estate. An affidavit from one of Cindy's attorneys provided a detailed list of charges, while the other two attorneys stated that the attorney fees incurred in defending the will contest were reasonable and necessary considering the various legal issues raised.
Matthew disputed Cindy's use of estate funds to pay real estate taxes. Cindy testified she used funds from the estate account to pay half of the real estate taxes on the house she owned jointly with Blain until his death. Cindy explained that the real estate taxes she paid were for 2016, when Blain was alive, and that paying the real estate taxes kept the property clear of any liens. Cindy considered this part of her duty as personal representative to preserve the property and avoid incurring additional expenses.
Matthew contested Cindy's use of estate funds to purchase a headstone for Blain. Cindy testified that in July 2017, Blain's mother was concerned that there was no headstone marking Blain's grave. As a result, Cindy ordered a headstone in August 2017, using estate funds to pay half the cost. In January 2018, Cindy learned that Matthew and Amber had also purchased a headstone, but did not present the estate with a bill. The headstone purchased by Matthew and Amber was ultimately placed on Blain's grave, and the headstone purchased by Cindy was placed on her adjacent plot. Cindy testified that based upon Neb. Rev. Stat. § 30-2223 (Reissue 2016), she understood that a personal representative may use estate funds to pay for a headstone, such as the one she purchased. Cindy testified that Matthew and Amber did not timely exercise their rights as to payment of the headstone.
In April 2020, the court entered an order dismissing Matthew's objection to Cindy's proposal for distribution. The court determined that the attorney fees Cindy incurred as personal representative were for the primary purpose of defending Blain's will. The court found no evidence that Cindy did not defend the will in good faith. The court reasoned that the fact that Cindy would receive a greater share of the probate assets did not indicate a lack of good faith. Based on the affidavits from counsel, the court found the attorney fees and estate expenses incurred by Cindy as personal representative were reasonable and necessary.
As to the disputed administration expenses and inheritance taxes, the court found that the will directed such to be paid from the residue. However, because Blain's estate had minimal residuary value, the court found the apportionment provisions under Neb. Rev. Stat. § 30-24,100 (Reissue 2016) controlled. The court determined nonprobate assets were unavailable to pay inheritance taxes, because Matthew had not made a timely demand upon the personal representative under Neb. Rev. Stat. § 30-24,120 (Reissue 2016). The court determined that under § 30-24,100, "the inheritance taxes should be paid from the estate and to the extent the residuary estate is unavailable for payment of these expenses, the specific devisees [sic] in proportion to the share owned by Cindy ... and Matthew ... should be reduced for such estate expenses and inheritance tax."
Cindy filed a supplemental final accounting applying the court's order, which accounting stated that the parties had agreed to apportion administration expenses, funeral expenses, debts, taxes, and claims of 49.4 percent to Cindy and 50.6 percent to Matthew. Deducting for proportionate shares, the accounting set forth the final distribution to Matthew and Cindy.
Matthew appeals. We granted Matthew's request for bypass.
Matthew assigns, summarized and restated, that the county court erred in (1) charging inheritance taxes to the estate, (2) charging real estate taxes to the estate, (3) charging attorney fees incurred by the personal representative to the estate, (4) charging a headstone to the estate, (5) misapplying the rules of abatement and apportionment, and (6) determining that § 30-24,120 applied to the case.
Appeals of matters arising under the Nebraska Probate Code are reviewed for error on the record.1 When reviewing a judgment for errors on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.2
Ordinarily, the...
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Svoboda v. Larson
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