Roe v. Estate of Farrell

Mr. PRESIDING JUSTICE ALLOY,

dissenting:

I believe that the issue framed in the instant case is of sufficient significance that the supreme court of this State should resolve this problem at the earliest convenient opportunity. Accordingly, I am outlining the basic issue in this case and briefly stating the reasons this case is distinguishable from In re Estate of Phillips (3d Dist. 1971), 1 Ill. App. 3d 813, 275 N.E.2d 685, in which we determined against equitable apportionment of testate property. In the cause before us, however, we have a case which very closely resembles the case of In re Estate of Van Duser (1st Dist. 1974), 19 Ill. App. 3d 1022, 313 N.E.2d 228. In the Van Duser case, the decedent died intestate leaving her two sisters, a gross probate estate of *25,000 in personal and *40,000 in real estate. In addition to these probate assets, there were other assets held in joint tenancy amounting to *169,540 which were not included in the probate estate. This joint tenancy property was held in the name of the decedent and one of her sisters, and her sister’s children, and her sister’s grandchildren. The total Federal estate tax amounted to *39,667 since joint tenancy property is considered part of decedent’s taxable estate for Federal estate tax liability. Of the tax of *39,667, *30,623 was generated by the value of the assets held in joint tenancy. The court in that case stated the following:

“We therefore agree with appellee that logic, reason, and simple justice dictate that, unless there is a contrary intention expressed by the decedent, as in a will in testate estates, the doctrine of equitable contribution should be invoked as to non-probate assets to fairly distribute the Federal estate tax burden.” (19 Ill. App. 3d 1022, 1024, 313 N.E.2d 228, 229.)

The circuit court in the case before us correctly found that the facts in Van Duser were parallel to those presented in our case and followed the Van Duser case. The majority opinion, however, takes a contrary position.

I feel that the application of equitable principles requires that the holder of nonprobate assets, such as joint tenancy property, should be required to proportionately pay Federal estate tax, in testate as well as intestate estates. If a testator desires a contrary result he may direct in his will that Federal estate tax, as well as other taxes and costs of administration, be paid exclusively out of probate assets. The Van Duser case simply concluded that Federal estate taxes should be paid proportionately by the beneficiaries whose benefits resulted from transfers from the same decedent and that it would be inequitable to place the total tax burden on the estate, unless the testator desired that such burden be so imposed. It is apparent that if the assets in the probate estate would be insufficient to pay the Federal estate tax, that tax could be collected from the joint tenants. To conclude, therefore, that this joint tenancy property should escape the tax burden imposed by Federal estate taxes by reason of the value of such property is not consistent with equity and seems inconsistent with the intention of potential testators, who provide by will for certain benefits to beneficiaries which may be wholly wiped out by reason of the Federal estate tax burden existing principally by reason of the prior conveyances in joint tenancy.

I do not assign to the Van Duser case anything more than a precedent that the proportionate amount of Federal estate tax, unless otherwise designated in the will, should be borne by the joint tenancy beneficiaries. To come to such conclusion does not mean that there should be an apportionment of other expenses of administration, since probate itself is required as to the assets not passing in joint tenancy. Only the expenses incident to payment of Federal estate taxes specificaUy should be apportioned under such conditions.

I recognize that this issue has been discussed in many cases in this State and no practical or final determination has been made by the supreme court on this issue. I believe that such determination should be made and that the burden of Federal estate taxes should be equitably apportioned so as to charge the joint tenancy property with the proportionate tax arising by reason of the inclusion of such property in the Federal estate tax return. I believe that, under the facts in this particular case, which are distinguishable from the case of In re Estate of Phillips, 1 Ill. App. 3d 813, 275 N.E.2d 685 (3d Dist. 1971), and In re Estate of Fairchild, 21 Ill. App. 3d 459, 315 N.E.2d 658 (4th Dist. 1974), since those cases were dealing with nonprobate assets, the trial court should be affirmed.

I believe that the courts should handle the question of equitable apportionment of Federal estate taxes in Illinois as is done in many other States. I do not believe it is wise to impose on the legislature to enact legislation in this area unless such legislation is precise and clearly establishes the equitable apportionment relationship so that all types of property are treated equitably. Action on this particular issue is most significant today, with the tremendous number of living trusts being created and with the existence of some confusion in the State, with inconsistent decisions on the very issue involved in this case.

For the reasons stated, I believe that the judgment of the Circuit Court of Grundy County, to the extent of the obligation arising from Federal estate taxes, should be upheld.