Battle Over Federal Taxes Due is Not a Federal Court Concern.

A brother and sister, residents of Arkansas, were battling each other over who was responsible for paying an estate tax liability exceeding $2 million of their mother's estate.  The plaintiff was executor of the estate and the defendant was the trustee of the decedent's trust and received life insurance proceeds as a trust asset.  The plaintiff asked the defendant to disburse trust funds such that the estate tax liability triggered by the insurance could be paid.  The defendant refused, and the plaintiff sued in federal court to force the defendant to disburse trust funds.  The court ruled for the defendant, holding that the Code does not create a claim for the decedent's estate until the taxes are paid.  I.R.C. Sec. 2206 specifies that unless the decedent directs otherwise by will, if any part of the gross estate on which tax has been paid consists of proceeds of policies of insurance on the decedent's life receivable by a beneficiary other than the executor, the executor can recover from the beneficiary the portion of the total tax paid as the proceeds of the policies bear to the taxable estate.  No other direction was provided in the decedent's will.  Thus, the court lacked jurisdiction until the federal estate tax is paid.  The matter belonged in state court.  Manley v. DeVazier, No. 2:15-cv-54-DPM, 2015 U.S. Dist. LEXIS 58782 (E.D. Ark. May 5, 2015).