Belleville: 618-234-9800 | Edwardsville: 618-656-2244 | ST. LOUIS: 314-421-2325

A Bond County, Illinois judge agreed that the executor of an estate had reasonable cause for filing an Illinois Estate tax return late and waived the penalty of $46,000 previously imposed by the State of Illinois on the estate.

At the time of the decedent’s death, he did not have a taxable estate for either federal or Illinois estate tax purposes. However, as a result of settling litigation surrounding the estate, assets were brought back into the estate and it became a taxable estate under Illinois law, but not under federal law. The executor filed the Illinois estate tax return shortly after the settlement, but later than the regular filing deadline under Illinois law.

The executor asked the Illinois Attorney General’s Office (which oversees the Illinois estate tax system) to waive the late filing penalty. The Illinois Attorney General’s Office declined to do so.

MMR filed a petition with the court asking the judge to waive the penalty on the basis of federal law, which provides for waiving the penalty if the late filing was due to reasonable cause. MMR argued on behalf of the executor that the executor could not possibly have known that the settlement, which was entered into after the Illinois estate tax filing deadline, would result in assets coming back into the decedent’s estate, thereby creating a taxable estate. The Judge agreed and ordered that the penalty be waived and called the Attorney General’s decision to not waive the penalty, “(A)rbitrary, capricious [and] constitute[s] an unreasonable exercise of power at best and perhaps an unconscionable overreach of authority.”

Given that there is no Illinois case law on this issue, this is an important ruling and will be beneficial for future estate tax litigation. Attorneys Patrick B. Mathis, Beth K. Flowers, and Rebecca K. Wohltman represented the estate in this matter.

Contact the experienced estate tax attorneys at Mathis, Marifian & Richter, Ltd. for all of your estate planning, estate administration, and estate tax needs.