In re Estate of Graves

Mr. Justice Dunn delivered the opinion of the court: This is an appeal by the executors of the will of Henry Graves, deceased, from a judgment of the county court of Cook county fixing the amount of inheritance tax payable by them. Henry Graves died testate October 3, 1907, leaving as his only heir a grand-niece, Louise DeKoven Bowen, who was not mentioned in his will. She threatened to contest the validity of the will, and thereupon all the residuary legatees agreed among themselves that two of their number, Henry Graves and John C. Neely, who were named in the will as executors, should pay to her $50,000 out of the assets of the estate to withdraw her opposition to the will and relinquish her claim to the estate. Afterward Mrs. Bowen entered into an agreement with Graves and Neely to accept the $50,000 and withdraw her opposition to the will. Accordingly the will was admitted to probate. Graves and Neely qualified as executors and paid Mrs. Bowen $50,-000 out of the assets of the estate, and Mrs. Bowen transferred to them all her interest in the estate and covenanted' not to begin any proceedings to interfere with said will or their execution thereof. The cause was submitted to the county court upon an agreed case made under section 103 of the Practice act. Among the points of law was the question whether the sum of $50,000 paid to Mrs. Bowen was taxable as going to her or as going to the residuary legatees. The court held that it was taxable as going to the residuary legatees and fixed the amount of the tax. The only question presented on this appeal is whether this sum was taxable to the residuary legatees. The descent of property in this State, whether by inheritance or devise, is regulated entirely by statutory provisions. (Kochersperger v. Drake, 167 Ill. 122.) All the property owned by any person at his decease passes either under the Statute of Descent, to the persons mentioned in that statute, or under the Statute of Wills, to his devisees. In either event it passes subject to the indebtedness of the decedent and the expenses of administration, and to no other charges. The Inheritance Tax law provides that all property so descending, whether under the Statute of Wills or the Statute of Descent, shall be subject to a ta:x at certain specified rates at the fair market value thereof, which shall be due at the death of the decedent. The tax is not upon the estate of the decedent but upon the right of succession, and it accrues at the same time the estate vests,— that is, upon the death of the decedent. Questions may arise as to the persons in whom the title vests, and such questions may affect the amount of the tax and the person whose estate shall be chargeable with it; but when those questions are finally determined their determination relates to the time of the decedent’s death. No changes of title, transfers or agreements of those who succeed to' the estate, among themselves or with strangers, can affect the tax. All questions concerning it must be determined as of the date of the decedent’s death. It is insisted that the value of the residuary estate is diminished by the adverse claim of the contesting heir, and that the payment of $50,000 made in good faith upon reasonable grounds for the settlement of such claim should therefore be deducted in fixing the value of the estate. The statute requires all the property of the estate to be appraised at its fair market value. The value of the estate which passes is the value so ascertained less the indebtedness of the decedent and the expenses of administration. Whatever litigation may occur between those who succeed to the estate as to their respective rights, or between different claimants of interests, cannot affect such value. The fair market value so ascertained is the basis upon which the amount of the tax must be fixed. Unjust claims may be made against those succeeding to the estate and they may be put to great expense in defending their property, but the value of the property or of their respective interests in the property is not thereby affected. The case of Connell v. Crosby, 210 Ill. 380, is cited to sustain the deduction of the $50,000 payment. The $12,-363.65 deducted in that suit was for lawful expenses incurred by the executors in successfully defending a suit brought to contest the will. Such expenses are a part of the expenses of administration. Executors have no authority to make a payment of the character of that made in this case. The payment was made by virtue of the agreement among the residuary legatees and was no part of the expenses of administration. It is argued that the amount paid in compromise of the threatened litigation diminished the value of the estate as much as if it had been paid in attorneys’ fees. While the result to the residuary legatees may have been the same, the amount of the beneficial interest which passed to them under the will was not affected by the fact that they used a portion of the amount which did so pass in the defense against or settlement of an assault upon their title. Moneys lawfully paid by the executors in such defense stand on a different footing, because the beneficial interest which passes under a will is only what remains after the payment of the indebtedness of the estate and expenses of administration. It is argued that the heir received the sum of $50,000 as the value of her interest in the estate by virtue of the fact that she was heir, and that it therefore passed by descent. In fact, however, she received nothing as heir. She received nothing from the estate. No beneficial interest passed to her under any statute. The money was paid to her by virtue of a contract with the heirs. Henry Graves died testate. His will disposed of all his estate. The whole of the residuary estate vested, at the instant of his death, in the residuary legatees. The inheritance tax was then due and payable. The beneficial interest in the property then passed to the legatees and their succession gave rise to the tax. Subsequent events did not affect it. (In re Cooke, 187 N. Y. 253.) The contrary view is held by the Supreme Court of Pennsylvania in Pepper’s Estate, 159 Pa. St. 508, and Kerr’s Estate, id. 512, but we cannot assent to the reasoning or the conclusion in those cases. The judgment of the county court is affirmed. Judgment affirmed.