Estate of Bell v. Olmstead ( 2000 )

HANSEN, Presiding Judge,

concurring in part and dissenting in part:

€ 1 This appeal arises from an unusual set of cireumstances. Appellant, Randy Olm-stead, personal representative for the estate of David Bell, was a neighbor and friend of David and Barbara Bell. When Olmstead filed his final accounting and petition for approval of fees, Heirs filed an objection to both. The trial court originally awarded Olmstead $127,029 but on Heirs' 12 0.98.1991 § 1031.1 motion to vacate it reduced the fee to $48,145. The trial court also awarded Olmstead $5,000 in legal fees incurred by him in defending his first application for attorney fees and $18,000 for attorney fees for defending his request for personal representative's fees. Olmstead's argument in his appeal is that the trial court erred in reducing the original award of his fees as personal representative. He is partially correct. Section 58 0.8.1991 § 527(A) provides:

When no compensation is provided by the will, or the executor renounces all claims thereto, he must be allowed commissions upon the amount of the whole estate accounted for by him, excluding all property not ranked as assets,. ..... ¹

12 Olmstead claims the value of the "whole estate accounted for by him" must include al funds handled by him in his administration of the estate. Originally the trial court had included in the estate $800,000 given the estate by the heirs to pay the estate tax liability and the $777,683 refund from the IRS. But on Heirs' motion to vacate, the trial court modified its award and disallowed both sums and this appeal resulted.

1 3 Problems arose with the IRS regarding marital deductions, primarily because of application of the slayer statute. The parties decided to enter into a settlement agreement with the estate rather than risk all or nothing depending upon the outcome of the criminal trial, The settlement agreement involved assets of over $7,000,000. Olmstead encouraged a settlement which would keep assets out of the taxable estate. He testified there were questions as to how much money would be in the estate. Under the slayer statute, if Barbara was convicted, she would not be entitled to any of the marital assets and they would all go to the estate. Also, if Mr. Bell's insurance proceeds, rather than going to Barbara, came into the estate, the estate tax liability would be around $2.6 million dollars. By entering into the settlement agreement, this $2.6 million dollars would be saved.

T4 Recitation of the exact terms and distributions of the settlement agreement are not necessary for resolution of this appeal. The section of the agreement pertaining to the $800,000 payment by Carter and Turner to the estate reads as follows:

Upon final determination of estate and gift tax liabilities, if any, such taxes shall be paid from the residuary estate, provided if said sums are not sufficient to satisfy said obligation, the same shall be paid equally by Erin and Carter

15 Olmstead filed the estate tax returns claiming entitlement to the marital deduction based on the settlement agreement. The IRS and the Oklahoma Tax Commission did not allow the deduction. The IRS assessed estate taxes and interest. The OTC followed suit and assessed $180,000 in estate taxes. After much negotiation, the IRS allowed some of the deductions and disallowed others for a total tax lability of $940,582. In response to this assessment, Heirs transferred $800,000 directly into the estate to pay the federal estate tax liability and pursue a claim for a refund in the United States District Court.

16 Ultimately the IRS refunded $777,683 to the estate.

17 The only issue in Olmstead's appeal is whether the $800,000 and the $777,683 should be included in "the amount of the whole estate accounted for by (Olmstead)" as contemplated by § 527.

T8 Although no Oklahoma decision directly addresses the issue, clearly money received by the estate, paid out, and then refunded to the estate may not be counted twice. The record reflects an undisputed estate accounting of $2,540,596 including the $800,000 paid in to the estate by the heirs. The $800,000 became a part of the estate and it was distributed as such rather than being treated as a loan and returned to Heirs outside of the estate corpus. An accounting is the personal representative's statement under oath of the amount of money received and spent. The personal representative has a statutory right to a commission on the whole estate accounted, exeluding property not ranked as assets. That fee must be at least that mandated by § 527. Matter of Estate of Heimbach, 1998 OK CIV APP 16, 847 P.2d 824. The $800,000 became an asset of the estate. In my view, the trial court erred in not including the $800,000 as an asset when figuring the percentage Olmstead should receive as his fee. I therefore dissent to the majority's affirmance of the trial court's determination of Olmstead's fee for acting as personal representative of the estate.

9 I coneur to that portion of the majority's decision affirming the balance of the trial court's judgment.

1 . The balance of § 527 sets out the percentages allowed.