ESTATE OF HELEN B. BROOKS et al. v. KEVIN SULLIVAN, COMMISSIONER OF REVENUE SERVICES, SC 19577

Judicial District of New Britain

 

      Taxation; Whether Trial Court Properly Determined that Property in Qualified Terminable Interest Property (QTIP) Trust Created in Florida Includable in Decedent’s Connecticut Taxable Estate Where Decedent Held Only Life Interest in Property.  The decedent, Helen B. Brooks, was the widow of Everett M. Brooks, who died in 2000 as a Florida domiciliary.  With his will, Everett Brooks created a qualified terminable interest property (QTIP) trust, which held intangible personal property such as cash, publicly traded stocks, and bonds.  The decedent received a life interest in the QTIP trust property, and the property was to pass to Everett Brooks’ children on her death.  Everett Brooks’ estate elected to treat the QTIP trust property as qualifying for a marital deduction under the Internal Revenue Code, and the federal estate tax due on the property was therefore deferred until the decedent’s death.  The QTIP trust property was included in the decedent’s estate for federal tax purposes.  The decedent was domiciled in Connecticut when she died in 2009.  While the plaintiffs, the decedent’s estate and its executors, initially paid Connecticut estate taxes on the QTIP property, they subsequently sought a $988,827 refund, arguing that the property was not includable in the decedent’s Connecticut estate because the decedent was not the “owner” of the property in that she only had life use of the QTIP trust assets.  The defendant denied the claim for a refund, and the plaintiffs appealed to Superior Court.  The trial court rendered judgment in favor of the defendant, noting that General Statutes § 12-391 (c) (3) specifically provides that the “gross estate” for Connecticut estate tax purposes “means the gross estate for federal estate tax purposes,” and that it was undisputed that QTIP property here was properly includable in the decedent’s gross estate for federal estate tax purposes.  The plaintiffs appeal, claiming that the trial court wrongly determined that the QTIP trust property was includable in the decedent’s Connecticut taxable estate.  They claim that, while a “fictional transfer” of ownership of the QTIP trust property allowed under the Internal Revenue Code rendered the property taxable by the federal government, the state of Connecticut lacks any such statutory authority to tax that property.  The plaintiffs also contend that imposition of a Connecticut tax here violates the estate’s due process rights under a minimum contacts analysis and that the legislative history of § 12-391 (c) (3) evinces the legislature’s intent to impose estate tax on intangible personal property only when it is “owned” by the decedent.