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ATTORNEYS FOR APPELLANT: ATTORNEY FOR APPELLEE: STEVE CARTER JEROME L. WITHERED ATTORNEY GENERAL OF INDIANA WITHERED BURNS & PERSIN, LLP JENNIFER E. GAUGER Lafayette, IN DEPUTY ATTORNEY GENERAL Indianapolis, IN _____________________________________________________________________

IN THE INDIANA TAX COURT
_____________________________________________________________________ INDIANA DEPARTMENT OF STATE REVENUE, INHERITANCE TAX DIVISION, ) ) ) ) Appellant, ) ) v. ) Cause No. 49T10-0602-TA-17 ) IN THE MATTER OF THE ESTATE OF ) JAMES M. PICKERILL, DECEASED, ) ) Appellee. ) _____________________________________________________________________ ON APPEAL FROM THE TIPPECANOE CIRCUIT COURT The Honorable Donald L. Daniel, Judge Cause No. 79C01-0312-EU-311 FOR PUBLICATION November 1, 2006 FISHER, J. The Indiana Department of State Revenue, Inheritance Tax Division

(Department) appeals the Tippecanoe Circuit Court's (probate court) order determining the Estate of James M. Pickerill's (Estate) Indiana inheritance tax liability. The issue before this Court is whether the probate court erred in determining that the Estate's

inheritance tax liability was to be calculated according to the distribution set forth in a family settlement agreement as opposed to the decedent's will. FACTS AND PROCEDURAL HISTORY On December 6, 2003, James M. Pickerill, Sr. (James) died testate. James was survived by his wife, Susan Pickerill (Susan), and three sons from a previous marriage, James M. Pickerill, Jr., (James, Jr.), Casey Pickerill (Casey) and Kipp A. Pickerill (Kipp). On January 20, 2000, prior to his marriage to Susan, James executed his Last Will and Testament (Will). In his Will, James provided for the payment of all debts, expenses regarding his last illness and funeral, administration expenses of his estate, and all inheritance, estate and succession taxes. The Will also provided that all of James's personal belongings were to be divided amongst his three sons in substantially equal shares. James bequeathed all of his residuary estate to his sons equally, per stirpes. Susan was not named as a beneficiary to the Will. In March of 2004, after James's Will was admitted to probate, James's three sons entered into a family settlement agreement (Agreement) with Susan. Under the terms of the Agreement, the parties agreed that James's three sons would receive his one-half (1/2) interest in real estate located in Wisconsin (to be divided into three equal shares). Susan would receive the marital residence and the contents thereof, two

marital vehicles, and the contents of a checking account she held jointly with James. The residuary estate was distributed to Susan and the three sons in four equal shares. As part of the Agreement, Susan waived her statutory right to elect to take against

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the will and to file for a spousal allowance. 1 Likewise, the three sons waived their rights to contest the will, claim statutory rights of inheritance, or any other claims against the Estate (other than claims for expenses related to the administration of the Estate). Ultimately, the property transferred to Susan under the Agreement was valued at $735,293. James, Jr. and Casey's interests were each valued at $463,914, while Kipp's interest was valued at $527,707. On September 3, 2004, the Estate filed an Amended Indiana Inheritance Tax Return (inheritance tax return) in which it treated the $735,293 transferred to Susan as non-taxable, pursuant to Indiana Code

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