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ATTORNEYS FOR APPELLANT: JAMES R. BYRON JACOB S. FROST THORNE GRODNIK, LLP Elkhart, IN

ATTORNEYS FOR APPELLEE: STEVE CARTER ATTORNEY GENERAL OF INDIANA KRISTEN M. KEMP DEPUTY ATTORNEY GENERAL Indianapolis, IN _____________________________________________________________________

IN THE INDIANA TAX COURT
_____________________________________________________________________ IN RE THE ESTATE OF PAUL DUNNICK, DECEASED, ) ) ) DEWITT KIM DUNNICK, AS EXECUTOR ) OF THE ESTATE OF PAUL DUNNICK, ) ) Appellant, ) ) v. ) Cause No. 49T10-0504-TA-00034 ) INDIANA DEPARTMENT OF ) STATE REVENUE, INHERITANCE TAX ) DIVISION, ) ) Appellee. ) _____________________________________________________________________ ON APPEAL FROM THE ELKHART COUNTY SUPERIOR COURT The Honorable Stephen E. Platt, Judge Cause No. 20D02-0209-ES-00127 FOR PUBLICATION November 1, 2006 FISHER, J. The Estate of Paul Dunnick (Estate) appeals the Elkhart County Superior Court's (probate court) order determining its Indiana inheritance tax liability. The issues before this Court are as follows:

I.

Whether the probate court erred in determining that it had jurisdiction over the Indiana Department of State Revenue, Inheritance Tax Division's (Department) Petition for Rehearing, Reappraisement and Redetermination of Inheritance and Transfer Tax; and Whether the probate court erred in determining that the Estate's inheritance tax liability was to be calculated according to intestate succession and not a family settlement agreement.

II.

FACTS AND PROCEDURAL HISTORY On September 1, 2002, Paul Dunnick died testate. Paul was survived by his wife, Ruth Dunnick (Ruth), and three sons from a previous marriage, DeWitt Kim Dunnick (Kim), James Scott Dunnick (James) and Nicholas Reed Dunnick (Reed). On December 29, 1995, almost seven years before his death, Paul created the Paul Dunnick Trust (Trust). Paul reserved the right to revoke and amend the Trust as he saw fit, and named himself trustee and beneficiary of the Trust during his lifetime. Paul also named Kim as co-trustee, and all three of his sons as beneficiaries. Paul placed the majority of his assets in the Trust. On September 1, 1996 (prior to their September 9, 1996 wedding), Paul and Ruth entered into a prenuptial agreement. The prenuptial agreement provided that Ruth was entitled to the marital residence and all the furnishings, two lawn tractors, and a $100,000 promissory note owned by Paul. The prenuptial agreement further indicated that monies earned by either Paul or Ruth were to remain property of that individual and that both parties had the right to give to their heirs as they saw fit. On December 24, 1999, Paul executed his Last Will and Testament (Will), in which he provided for the payment of all debts, expenses regarding his last illness and burial, and the administration of his estate by Kim as personal representative. The Will

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also provided that the remainder of Paul's assets was to be transferred to the Trust and distributed according to the Trust terms. Ruth was not named as a beneficiary in either Paul's Will or his Trust. On December 18, 2002, after Paul's will was admitted to probate, Ruth filed with the probate court a Petition of Surviving Spouse For Statutory Allowance pursuant to Indiana Code

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