Vose v. Lee (In re Estate of Vose)

• Decision Date: 17 January 2017
• Docket Number: No. 115,424,115,424
• Citation: 390 P.3d 238
• Parties: In the MATTER OF the ESTATE OF Anne S. VOSE, Deceased. C.A. Vose, Jr., Appellee, v. Robert E. Lee, III, Personal Representative of the Estate of Anne S. Vose, Deceased, Appellant.
• Court: Oklahoma Supreme Court

390 P.3d 238

In the MATTER OF the ESTATE OF Anne S. VOSE, Deceased.C.A. Vose, Jr., Appellee,

v.Robert E. Lee, III, Personal Representative of the Estate of Anne S. Vose, Deceased, Appellant.

No. 115,424

Supreme Court of Oklahoma.

FILED: JAN. 17, 2017

Rehearing Denied February 21, 2017

Rebecca Farris, Oklahoma City, Oklahoma, for Appellant.

Andrew W. Lester, Spencer Fane LLP, Edmond, Oklahoma, for Appellee.

COMBS, C.J.:

¶ 1 The essential question before this Court is whether the district court erred by ordering the administrator of a decedent's estate to timely prepare and file a federal estate tax return for purposes of electing portability of the decedent's Deceased Spousal Unused Exclusion Amount (DSUE), pursuant to 26 U.S.C.A. § 2010, for the benefit of the decedent's surviving spouse. We hold that it did not.

I.FACTS AND PROCEDURAL HISTORY

¶ 2 This cause arises from a dispute concerning the estate of Anne S. Vose (Decedent). Decedent died intestate on January 22, 2016. Appellee C.A. Vose, Jr. (Vose) is her surviving spouse, having married Decedent on June 3, 2006. On May 24, 2006, and prior to their marriage, Vose and Decedent entered into an antenuptial agreement that is relevant to this cause. Appellant Robert E. Lee, III (Lee) is the current administrator of the estate, and also Decedent's son from a prior marriage.

¶ 3 On January 25, 2016, Lee sought admission to probate of Decedent's will from 1995 and, in accordance with the will, appointment of himself and his sister as co-administrators of Decedent's estate. On January 29, 2016, Vose filed his own petition, alleging that Decedent died intestate, asserting a prior right over all Letters of Administration, and seeking to become sole administrator of Decedent's estate.

¶ 4 Lee eventually withdrew his petition, according to him because of representations from Vose concerning the revocation of Decedent's 1995 will. He also claims that at that time he had yet to see the antenuptial agreement between Vose and Decedent. The court held a hearing on Vose's petition on February 23, 2016, where the antenuptial agreement was mentioned but not presented. Vose was appointed administrator of Decedent's estate and letters were signed. After the antenuptial agreement was produced and Vose's waiver of the right to be appointed administrator of Decedent's estate was made manifest, an agreed order was entered appointing Lee as the administrator of Decedent's estate.

¶ 5 Lee has filed several applications concerning this matter with the district court. Some have been granted, but many have been stayed pending a conflict of interest hearing concerning Vose's counsel. Part of the way through the proceedings, three attorneys from McAfee & Taft entered appearances for Vose, and Vose's previous counsel withdrew. Lee objects to Vose's new counsel.

¶ 6 On August 10, 2016, Vose filed his Application to Compel Administrator to Timely Prepare and File a Federal Estate Tax Return for Purposes of Irrevocably Electing Portability of Decedent's Deceased Spousal Unused Exclusion Amount (DSUE Application). The DSUE Application is the primary matter at issue in the order Lee appeals. At a hearing held on August 24, 2016, the district court decided to stay all pending issues in the cause until the alleged conflict of interest issue could be resolved, but stated it would allow the DSUE Application to be heard as scheduled on September 9, 2016, so long as it was presented through special counsel.

¶ 7 On November 8, 2016, the district court entered its order effectively granting Vose's DSUE application. The district court, non- exhaustively: 1) denied Vose's request for appointment of a special administrator for purposes of filing an estate tax return for Decedent; 2) ordered Lee to provide Vose with a list of the records necessary to prepare the estate tax return and ordered Vose to provide the records; 3) ordered Vose to produce to Lee a detailed inventory of the personal property of Decedent in his possession and make it available for pickup; 4) ordered, if a DSUE is available, that the administrator shall timely file an estate tax return electing portability of the DSUE and allow Vose 60 days to review the return and documentation prior to filing; and 5) ordered Vose to pay for the filing of the return if a DSUE is available.

¶ 8 Lee appealed, filing an Amended Petition in Error (with the district court's order attached) with this Court on November 9, 2016. Vose moved to dismiss the appeal on October 31, 2016, and this Court denied the motion on December 12, 2016. Lee filed a Motion to Retain Appeal and Place on Fast Track Docket on November 23, 2016, and the Court granted the motion and ordered accelerated briefing. The cause was assigned to this office on December 16, 2016.

¶ 9 Lee raises several points of error on appeal, including: 1) the district court lacked subject matter jurisdiction; 2) its order concerning the DSUE is preempted by federal law; 3) the trial court failed to properly consider the antenuptial agreement and therefore erroneously determined Vose had standing; 4) the district court's order violates the terms of the antenuptial agreement.¹

II.STANDARD OF REVIEW

¶ 10 Probate proceedings are of equitable cognizance. In re Estate of Carlson , 2016 OK 6, ¶ 11, 367 P.3d 486 ; In re Estate of Holcomb , 2002 OK 90, ¶ 8, 63 P.3d 9 ; In re Estate of Sneed , 1998 OK 8, ¶ 8, 953 P.2d 1111. While an appellate court will examine and weigh the record of proof, it must abide by the law's presumption that the district court's decision is legally correct and cannot be disturbed unless found to be clearly contrary to the weight of the evidence or to some governing principle of law. In re Estate of Bleeker , 2007 OK 68, ¶ 12, 168 P.3d 774 ; Sneed , 1998 OK 8, ¶ 8, 953 P.2d 1111 ; In re Estate of Maheras , 1995 OK 40, ¶ 7, 897 P.2d 268. Whenever the law and facts so warrant, an equity decree may be affirmed if it is sustainable on any rational theory and the ultimate conclusion reached below is legally correct. Harrell v. Samson Resources Co. , 1998 OK 69, ¶ 31, 980 P.2d 99 ; Bankoff v. Bd. of Adjustment of Wagoner County , 1994 OK 58, ¶ 17, 875 P.2d 1138 ; In re Estate of Bartlett , 1984 OK 9, ¶ 4, 680 P.2d 369.

III.THE DECEASED SPOUSAL UNUSED EXCLUSION AMOUNT AND PORTABILITY

¶ 11 With the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, § 303, 124 Stat. 3296 (2010), a concept known as portability was introduced into the United States Tax Code. The mechanism was made permanent by the American Taxpayer Relief Act of 2012, Pub. L. No. 112-240, 126 Stat. 2313 (2013). In the event a first-to-die spouse has not fully used the estate tax exclusion, portability allows for the unused portion to be transferred to the surviving spouse. Details concerning the mechanics are provided in 26 U.S.C.A. § 2010.² The unused exclusion amount that may be transferred to the surviving spouse is called the Deceased Spousal Unused Exclusion Amount (DSUE). 26 U.S.C.A. § 2010(c)(4). However, in order for a surviving spouse to make use of the DSUE, an election must be made by the executor of the deceased spouse's estate, who must also file an estate tax return. Specifically, 26 U.S.C.A. § 2010(c)(5)(A) provides:

(A) Election required.—A deceased spousal unused exclusion amount may not be taken into account by a surviving spouse under paragraph (2) unless the executor of the estate of the deceased spouse files an estate tax return on which such amount is computed and makes an election on such return that such amount may be so taken into account. Such election, once made, shall be irrevocable. No election may be made under this subparagraph if such return is filed after the time prescribed by law (including extensions) for filing such return.

¶ 12 The Internal Revenue Service has promulgated rules³ concerning portability that further clarify the election process and who may make the election. Specifically, 26 C.F.R. § 20.2010-2 provides in pertinent part:

(6) Persons permitted to make the election—(i) Appointed executor. An executor or administrator of the estate of a decedent survived by a spouse that is appointed, qualified, and acting within the United States, within the meaning of section 2203 (an appointed executor), may timely file the estate tax return on behalf of the estate of the decedent and, in so doing, elect portability of the decedent's DSUE amount. An appointed executor also may elect not to have portability apply pursuant to paragraph (a)(3) of this section.

(ii) Non-appointed executor. If there is no appointed executor, any person in actual or constructive possession of any property of the decedent (a non-appointed executor) may timely file the estate tax return on behalf of the estate of the decedent and, in so doing, elect portability of the decedent's DSUE amount, or, by complying with paragraph (a)(3) of this section, may elect not to have portability apply. A portability election made by a non-appointed executor when there is no appointed executor for that decedent's estate can be superseded by a subsequent contrary election made by an appointed executor of that same decedent's estate on an estate tax return filed on or before the due date of the return, including extensions actually granted. An election to allow portability made by a non-appointed executor cannot be superseded by a contrary election to have portability not apply made by another non-appointed executor of that same decedent's estate (unless such other non-appointed executor is the successor of the non-appointed executor who made the election). See § 20.6018-2 for additional rules relating to persons permitted to file the estate tax return.

¶ 13 In its Summary of Comments and Explanation of Revisions, the IRS further clarified why only an executor, and not a surviving spouse who is not an executor (such as Vose in this cause) may make the DSUE portability election. Portability...