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12/31/87 Eugene Mark Frederick, v. Joseph P. Lewis Et Al.

December 31, 1987





517 N.E.2d 742, 164 Ill. App. 3d 240, 115 Ill. Dec. 331 1987.IL.2002

Appeal from the Circuit Court of Ford County; the Hon. W. Mark Dalton, Judge, presiding.


JUSTICE LUND delivered the opinion of the court. KNECHT and SPITZ, JJ., concur.


Plaintiff Eugene Mark Frederick appeals from an order of the circuit court of Ford County which ordered partition of 240 acres of land but denied Frederick's request that a lien for Federal estate tax, resulting from the death of Hazel L. Martin, attach to the various interests in the 240 acres. He also appeals from orders in consolidated small claims cases which required defendants to reimburse the trust for a share of the crop expenses attributable to the 240 acres but denied his request for reimbursement to the trust for the proportionate share of Illinois inheritance tax attributable to the 240 acres which the trust paid. The denial of the requests to establish the liens and order reimbursement are the subjects of this appeal.

In 1935, Hazel L. Martin deeded the 240 acres to her sons, Eugene Mark Frederick and Sherman Frederick, retaining a life estate. In 1968, Sherman conveyed his one-half remainder interest to his then father-in-law and mother-in-law, Perley M. Lewis and Mildred C. Lewis. In 1982, Perley and Mildred conveyed their remainder interest to their four children, Joseph P. Lewis, John D. Lewis, Christine A. Hoban, and Patricia L. Dalton, all four now being parties to the partition action.

Prior to her death, Hazel L. Martin executed a revocable living trust which named Eugene Mark Frederick as trustee. The trust provided that upon the settlor's death, one-half of the assets were to go to settlor's son Eugene, and the other one-half was to stay in a spend-thrift-like trust for the lifetime and benefit of her son Sherman. Most of Hazel L. Martin's assets were placed in the trust, and at her death on February 12, 1985, there were insufficient assets in her separate estate to pay the Federal estate tax of $56,348.89 and the Illinois inheritance tax of $12,205.64. The 240 acres, which is the subject of the partition action, was part of the decedent's taxable gross estate, and $19,052.92 of the Federal estate tax and $4,707.05 of the Illinois inheritance tax is attributable to this property.

The trustee of the Hazel L. Martin trust has paid all the Illinois inheritance tax and all the Federal estate tax except for $19,052.92. Frederick contends the $19,052.92 must be apportioned to the various interests of the 240 acres and that these interests should reimburse the trust for the proportionate share of the Illinois inheritance tax attributable to the land, and the owners, other than Frederick, contend the Federal estate tax and Illinois inheritance tax should be paid in full by the trust. The trial court ruled against Frederick's position.

The Internal Revenue Code contains no express provisions for contribution from persons acquiring non-probate assets to satisfy the estate tax if the executor is able to satisfy all or a portion of the tax out of probate assets, except in certain cases. (Roe v. Estate of Farrell (1978), 69 Ill. 2d 525, 529-30, 372 N.E.2d 662, 664.) The United States Supreme Court has made clear that the States are free to apportion the ultimate burden or "ultimate impact" of the estate tax. Riggs v. Del Drago (1942), 317 U.S. 95, 97-98, 87 L. Ed. 106, 110-11, 63 S. Ct. 109, 110.

It is well settled in Illinois that in an intestate estate, the tax burden should be equitably apportioned between probate and nonprobate assets. (Roe, 69 Ill. 2d at 532, 372 N.E.2d at 665.) Similarly, it is settled that in a testate estate, absent directions from the decedent, an apportionment of Federal estate tax liability must be made. In re Estate of Gowling (1980), 82 Ill. 2d 15, 22, 411 N.E.2d 266, 269.

The ultimate question in this case then is whether the decedent gave specific directions for the trust to pay the tax. The will provides:

"As soon as practical after my death, my Executor may pay those of my just debts, costs of last illness, funeral expenses, taxes and costs of administration as are required to be paid by law, out of the residue of my estate, provided, however, that if at the time of my death there is in existence a Revocable Living Trust created by me during my lifetime my Executor may seek from the Trustee of said Trust such portion of the above as the Executor deems appropriate and if said Trust holds any bonds commonly known as 'Flower Bonds' the Trust shall be required to expend such bonds in payment of Federal estate taxes."

The trust contains no specific instructions concerning payment of estate taxes. The only clause dealing with payment of ...

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