Estate of Monroe v. Commissioner
United States Court of Appeals for the Fifth Circuit
124 F.3d 699 (1997)
Louise Monroe died, leaving specific gifts in her will for 31 people. Louise’s estate (plaintiff) was required to pay taxes on these gifts. Anything remaining in the multimillion-dollar estate went to Louise’s husband, Edgar Monroe (plaintiff). Under the marital deduction, any transfer from Louise’s estate to Edgar was tax-free. For 29 of the designated beneficiaries in Louise’s will, Edgar and his nephew (1) asked the beneficiaries to disclaim their specific gifts, (2) explained how disclaiming the gifts would save the estate considerable tax liability because the gifts would then go to Edgar tax-free, and (3) reminded them how generous Edgar had always been to them. Later, all the beneficiaries testified that no specific promises or threats were made during these presentations. However, some beneficiaries believed that Edgar would compensate them somehow if they disclaimed their inheritances from Louise, and some beneficiaries were worried that Edgar would stop being generous on other matters if they did not disclaim their inheritances. All 29 beneficiaries disclaimed their estate gifts, in writing. Later, Edgar personally paid all the beneficiaries the same amounts that they had disclaimed. The federal government (defendant) determined that the disclaimers were not effective and that the estate owed taxes on all 29 gifts. The estate petitioned for a determination that the disclaimers were effective. The Tax Court held that 28 of the 29 disclaimers were not effective because the beneficiaries had been either induced or coerced into making the disclaimers. The estate appealed.
Rule of Law
Holding and Reasoning (Jones, J.)
Dissent (King, J.)
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