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Matter of Estate of Marks

June 21, 1974

IN THE MATTER OF THE ESTATE OF JERRY M. MARKS, DECEASED


Gaulkin, J.s.c., Temporarily Assigned.

Gaulkin

Plaintiff Russell Marks instituted this action to determine the allocation of the federal estate tax assessed against the estate of Jerry M. Marks, who died intestate on September 2, 1968. Plaintiff, a son, and defendant Sylvia Marks, the widow, are the sole persons entitled to share in the intestate estate. Their dispute is whether the statutory intestate share payable to defendant, which has qualified as a marital deduction in the assessment of the federal estate tax, should be computed before or after deducting the estate tax thus assessed against the estate. If the computation is made before deduction of the tax, the burden of the tax will fall solely upon plaintiff; if after, plaintiff and defendant will share that burden equally.

Decedent's gross estate (26 U.S.C.A. § 2031) reported on the federal estate tax return was $652,153.27; after deduction of debts and expenses of $108,976.21, the adjusted gross estate (26 U.S.C.A. § 2056(c)) was fixed at $543,177.06. The statutory intestate share distributable to defendant, i.e., one-third of the personal property (N.J.S.A. 3A:4-2), was reported at $181,059.02, which amount

was taken as a marital deduction (26 U.S.C.A. § 2056).*fn* That deduction reduced the adjusted gross estate to a taxable estate of $307,970.99, against which a net federal estate tax of $92,032.51 was assessed.

By judgment entered July 18, 1973 the final account of the administrators was approved and the balance of principal and income was directed to be distributed to plaintiff and defendant in equal shares, "except as to $23,008.12 reserved from Russell's share, being the amount of the dispute between them relating to the impact of the respective original shares of Russell and Sylvia." The parties have stipulated that if defendant's statutory share is to bear any federal estate tax burden, the retained sum is to be paid in its entirety to plaintiff, and that if it is not to bear such burden, the fund is to be paid to defendant. There is accordingly no need to explore further the manner in which the net tax was computed or how it might be recomputed following this decision. Cf. Case v. Roebling, 42 N.J. Super. 545 (Ch. Div. 1956), fn. 1 at 556-557; 26 U.S.C.A. § 2056(b)(4)(A).

The question thus presented has not been passed upon in any reported New Jersey decisions. Several cases have considered related questions as to the allocation of the federal estate tax burden to a surviving spouse who is a beneficiary under the decedent's will. See Surina v. Gilbert, 54 N.J. 68 (1969); Gesner v. Roberts, 48 N.J. 379 (1967), rev'g 91 N.J. Super. 255 (App. Div. 1966), and aff'g 88 N.J. Super. 278 (Ch. Div. 1965); Bartel v. Clarenbach, 114 N.J. Super. 79

(Ch. Div. 1971); In re Burnett, 50 N.J. Super. 482 (Cty. Ct. 1958); Case v. Roebling, supra; cf. Dodd v. United States, 345 F. 2d 715 (3 Cir. 1965).

Read together, these cases hold that state law alone determines the allocation of the federal estate tax (Gesner, supra, 91 N.J. Super. at 260); that our apportionment statutes (N.J.S.A. 3A:25-30, et seq.) govern only the allocation of taxes as between probate and non-probate assets (Gesner, supra, 91 N.J. Super. at 259; In re Burnett, supra, 50 N.J. Super. at 494); that a testamentary expression or plan may evidence an intent of the testator that the surviving spouse shall or shall not bear any federal estate tax impact, which intent should be effectuated (Gesner, supra, 48 N.J. at 381), and that "absent an express statement in the will, we should start with the assumption that the testator intended the maximum tax advantage for the estate and maximum benefit to the spouse within the limits of his gift to her" (Ibid).

The parties have stipulated that they have no evidence to offer that would shed light on decedent's intentions or expectations in the devolution of his estate. The holdings of the New Jersey cases thus are not necessarily dispositive here: not only is there no testamentary intent to intuit, but any "assumption" concrning a presumed "maximum benefit to the spouse" is clouded by uncertainty that decedent intended any benefit to the spouse at all.

Case law outside New Jersey is not persuasive. Only a few reported decisions appear to have dealt with the precise issue; they have reached contrary results. See Pitts v. Hamrick, 228 F. 2d 486 (4 Cir. 1955), First National Bank of Topeka, Kan. v. United States, 233 F. Supp. 19 (D. Kan. 1964), Estate of Whipple v. United States, 286 F. Supp. 674 (W.D. Ky. 1968) aff'd 419 F. 2d 494 (6 Cir. 1969), and Snodgrass v. United States, 308 F. Supp. 440 (N.D. Ala. ...


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