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In Re Estate of Wheeler

DECEMBER 13, 1965.

IN THE MATTER OF THE ESTATE OF SCOTT WHEELER, DECEASED. FIRST METHODIST CHURCH OF WESTERN SPRINGS, ILLINOIS, AND THE TRUSTEES OF THE FIRST METHODIST CHURCH OF PLANO, ILLINOIS, APPELLANTS,

v.

RUSSELL E. OWENS, APPELLEE.



Appeal from the Circuit Court of Cook County, Probate Division; the Hon. JAMES A. GEROULIS, Judge, presiding. Affirmed. MR. JUSTICE KLUCZYNSKI DELIVERED THE OPINION OF THE COURT.

The First Methodist Church of Western Springs, Illinois, and the Trustees of The First Methodist Church of Plano, Illinois, specific legatees under the Last Will and Testament of Scott Wheeler, deceased, appeal from an order entered in the Probate Division of the Circuit Court directing decedent's executor to pay the inheritance tax levied on property of a revocable inter vivos trust created by the decedent, which trust property vested in one Russell E. Owens, upon the death of the decedent. The chronology of essential events is as follows:

On June 22, 1956, the decedent, Scott Wheeler, established a trust with the Chicago Title & Trust Company, as trustee, wherein he was beneficiary of the proceeds with full power to assign any or all right, title and interest or dispose of any or all of them. He retained the right to revoke, alter or amend the provisions thereof relative to the person or persons who might be entitled, from time to time, to the ownership and enjoyment of any beneficial interest thereunder. He did provide that in the event of his death, during the existence of said trust, all such right, title or interest, not previously assigned or otherwise disposed, should vest in said Russell E. Owens, if he be then living. Thereafter, on three different occasions, he amended the trust but each time confirming his right to the whole thereof and only making changes as to the beneficiary or person to whom the trust assets should pass in the event of his death and in the event the trust were in existence. The final amendment was made on December 4, 1958, and the assignment was to Russell E. Owens, if he survived the settlor.

On December 11, 1958, one week after the last amendment, Scott Wheeler, the decedent, executed his Last Will and Testament. The aforementioned legatees were among those listed therein. The significant and pertinent part of the will essential to disposition of the issues herein was Article Nine which read as follows:

I direct my Executor, hereinafter named, to pay out of the principal of my estate, or to make deposits therefrom to secure such payments, all estate, inheritance, transfer and succession taxes, including any interest and penalties thereon, which may be assessed in any way by reason of my death, and I hereby waive on behalf of my estate any right to recover from any person any part of such taxes so paid.

Scott Wheeler died April 5, 1963, and the will was admitted to probate. The inter vivos trust property passing to Russell E. Owens was assessed at $67,500 and inheritance tax thereon set at $8,384.

Owens filed a petition in the probate estate to have the executor directed to pay the Illinois inheritance tax assessed on the trust property. The executor filed answer thereto requesting that he be relieved of any duty or obligation to pay the tax. He alleged that the assets of the estate were insufficient to pay in full the specific bequests of the will; that the residuary legatees would receive nothing, and if required to pay the tax on the property left to Owens, the specific legatees would suffer a further reduction.

The matter was submitted to the court on the petition, answer, brief and arguments of counsel. The court entered the order and only these specific legatees appeal.

The parties, on appeal, agree (a) that the initial burden of Illinois inheritance tax is placed on the successor to the property, be he legatee, devisee, donee or beneficiary (In re Estate of McCalmont, 16 Ill. App.2d 246, 262, 148 N.E.2d 23 (1958)); (b) that our courts have held a testator may, by appropriate terms in his will, shift the burden of the inheritance tax on property passing under his will, and provide that such taxes be paid out of general or residuary estate or out of a particular fund. (In re Estate of Betts, 2 Ill. App.2d 453, 119 N.E.2d 801 (1954)); and (c) that no Illinois cases have dealt with the specific question of whether a testator may shift the burden of Illinois inheritance tax from property passing outside of the will. Thus, the issues raised in this appeal are (1) whether an executor may, by appropriate language in a will, be compelled to pay the Illinois inheritance tax on property which passes upon the testator's death but which is not an asset of the probate estate; and (2) whether the language used in Article Nine of the Last Will and Testament of Scott Wheeler is sufficient to so indicate.

The legatees in this appeal contend that "it is the intent of the Illinois inheritance tax laws that each legacy shall bear the tax due thereon." They cite In re Estate of McDonald, 314 Ill. App. 148, 150, 41 N.E.2d 128 (1942), where the court said: "Under inheritance tax laws, such tax is not considered one of the expenses of administration, or a charge upon the general estate of the decedent. It is in the nature of a tax upon the right of succession to be imposed upon the several amounts to which the successors thereto are entitled, and is a charge against each share or interest according to its value and against the persons entitled thereto [citing authorities]." From this they argue that in the absence of authority permitting the burden of inheritance tax on non-probate property to be shifted to the executor the Revenue Act (Ill Rev Stats 1953, c 120, § 378) itself should govern and the burden of tax remain on the recipient.

The legatees, however, admit that all Illinois cases are in accord with another principle set forth in the McDonald case, namely, that:

It is considered competent for a testator to specify what property shall assume the burden of inheritance tax on the transfer or the right of succession of his estate. For example, he may provide that such taxes shall be paid out of the general or residuary estate, or out of a particular fund. Since the effect of such a provision is to increase the gift, the intent of the testator to make such a gift will not be drawn from vague or uncertain language. The question depends upon the intent of the testator as set forth in his will. 28 Am Jur 137, par 280 (p 150).

The Illinois cases hold, without exception, that the intention of the testator to shift payment of the taxes, if indicated by appropriate language in his will, is controlling. The cases draw no distinction between testamentary and non-testamentary assets or transfers. And we can find no reason for such distinction so long as the testator's intention is clearly manifest. That the recipient or beneficiary of the property is the primary obligor is undenied, but the state is not concerned with who actually pays so long as payment is made. Owens recognized this and therefore proceeded by petition to direct the executor to pay in his behalf in accord with the testator's intention. It is our opinion that a testator can shift the burden of payment of the inheritance tax on non-probate transfers as well as transfers within the probate estate.

The basic issue therefore is: Was it the testator's intention that the inheritance taxes on the inter vivos trust property passing to Owens be paid out of the probate estate? The intention must be ascertained from the language of the will itself and where the language on its face has a clear and unmistakable meaning, that meaning will be taken as the expression of his intention. Tortured constructions will not negate the intention expressed on the face of the will. Peck v. Drennan, 411 Ill. 31, 38, 103 N.E.2d 63 (1952).

The legatees say that certain language may be clear and unambiguous when used in one context and yet when used in another context may be ambiguous and unclear. Such, they argue, is the issue regarding the language in Article Nine of Wheeler's will. It is clear, they say, regarding payment of taxes on probate assets and unclear regarding payment on non-probate property. Therefore, they contend, failure to identify the inter vivos trust specifically in the will is an important fact ...


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