Wisconsin Court Says Estates, Not Heirs, Responsible for Taxes
The Wisconsin Supreme Court ruled last week that personal estates -- not those who inherit from them --are responsible for paying state and federal estate taxes.
From the Associated Press article on the ruling:
Writing for a unanimous court, Chief Justice Shirley Abrahamson said state and federal law is clear in making estates responsible for tax liabilities that can be up to 50 percent on the accounts and not the recipients.The court declined to adopt a so-called apportionment rule that would divide tax liabilities among beneficiaries of an estate when the deceased does not specify who is responsible. Abrahamson said state lawmakers, not the court, should decide whether that is the policy in Wisconsin.
The decision was a victory for Jessica Schleis, who was 17 when she inherited more than $3.7 million in two accounts from her deceased godfather, James Sheppard.
Sheppard, a co-founder of the Menomonee Falls, Wis.-based Cousins Subs sandwich chain who died in 2007, had an estate worth $12 million and other heirs scattered across the country.
Her parents signed an agreement with the estate to keep 50 percent of the money in the accounts to cover any "required" state and federal taxes on them.
Attorneys for Jessica Schleis and her parents later said the agreement was not binding since they were not required to cover the tax bill under Wisconsin law.
The estate filed a lawsuit to require Schleis to pay all the taxes generated by the two accounts she received. Its attorneys argued she would receive a windfall at the expense of other heirs if she wasn't required to pay the taxes as originally envisioned.
A Washington County judge dismissed the case, saying the estate was responsible for the inheritance taxes.
Are you up to speed on the latest developments concerning estate taxes? If not, contact our Jacksonville Florida estate planning law firm.
