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In Re Estate of Gowling





APPEAL from the Circuit Court of Jersey County; the Hon. HOWARD LEE WHITE, Judge, presiding.


Rehearing denied November 20, 1979.

This appeal arises from an order of the circuit court directing the executor of the estate of Lyman L. Gowling to pay Federal estate taxes out of the probate assets of the decedent's estate including property specifically bequeathed. Pearl Gowling, the decedent's surviving spouse, appeals from that order, contending that the specific bequest, to her, which qualified for the Federal estate tax marital deduction should not have been consumed to meet Federal estate tax liability which was largely generated by non-probate assets. In addressing this issue we are incidentally, but necessarily, confronted by the question of whether the doctrine of equitable apportionment of Federal estate taxes is applicable with respect to testate estates.

Briefly, the factual setting is as follows: The decedent died on November 21, 1977. He was survived by his widow, Pearl Gowling. In his will he made specific bequests to: his wife of $50,862.03; Gene Prosser of $18,370.28. The residue of his estate amounting to $1,211.04 was left to Virginia Prosser.

In April 1963, the decedent and his then spouse, Nettie Gowling, deeded two parcels of realty to Virginia Prosser and Lyman Fleming, reserving life estates. Nettie Gowling predeceased the testator and he acted as the executor of her estate.

The decedent also left certain miscellaneous property and bank accounts in joint tenancy with his wife. The bank accounts were valued at $19,000.

Lyman E. Fleming was named the executor of the decedent's estate. On June 29, 1978, Fleming filed a petition to establish and assess Federal estate tax liability. The petition requested that the court apportion the estate tax liability among the recipients of the probate and non-probate property in the ratio that each recipient's property bore to the gross estate subject to Federal estate tax.

The probate assets consisted of the aforementioned specific bequests and the residue of his estate which amounted to $70,443.35. The total amount of Federal estate taxes was $72,142.62. This tax resulted from the inclusion of the remainder interests held by Lyman Fleming and Virginia Prosser valued at $232,600 and $114,561.04, respectively, and the joint accounts held by the decedent and his wife.

Pearl Gowling filed an answer, affirmative defense, and objection to the personal representative's petition to assess Federal estate tax liability. She contended that it would be error to require the surviving spouse to contribute to the payment of a proportionate share of the Federal estate tax when the interest she received qualified for the marital deduction and thus did not generate a Federal estate tax liability to the estate.

Thereafter, Lyman Fleming, in his status or capacity as a remainderman of one of the parcels of real estate held by the decedent, and Virginia Prosser, the remainderman of the other parcel, filed appearances in the action. It was asserted on their behalf that, contrary to the relief sought in the petition of the executor, there should be no apportionment of the Federal estate taxes. It was their position that the deed of decedent and his first wife, Nettie Gowling, indicated a donative intent on the part of the donors to convey the real estate without encumbrances including any share of estate taxes generated by the gift.

On December 4, 1978, a hearing was held on the executor's petition and the respective answers and defenses which were filed. Following the hearing, the court determined that the testator had manifested an intent to make the Federal estate taxes payable out of the probate assets of the estate. The court relied on a provision in the decedent's will which provided inter alia:

"I give the executor the following powers and discretion, in each case to be exercisable without court order:

(b) to settle claims in favor of or against my estate."

The court reasoned that since debts due the United States (including Federal estate taxes) were listed under section 18-10 of the Probate Act (Ill. Rev. Stat. 1977, ch. 110 1/2, par. 18-10) as claims having priority over distribution to legatees or devisees, the ...

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