United States District Court, E.D. Kentucky, Northern Division
MEMORANDUM OPINION AND ORDER
DAVID L. BUNNING, District Judge.
The United States moves for summary judgment in this action affecting property subject to a federal tax lien, claiming that it is entitled to recover $60, 614.17 in proceeds from the sale of Decedent's condominium pursuant to federal tax liens filed against one of Decedent's three sons. The Estate of Audrey Deinlein also moves for summary judgment, arguing that Decedent's son Christopher did not have an interest in the condominium to which the liens could attach because either (1) Decedent had already given her son an advancement against his share of the estate; or (2) Decedent's son disclaimed his interest in the estate. The Court has jurisdiction over this removed action pursuant to 28 U.S.C. § 2410.
I. Factual and Procedural Background
On October 4, 2011, Audrey E. Deinlein (hereinafter "Decedent") passed away. She was survived by three adult sons, Christopher Edwards Deinlein (hereinafter "Chris"), Ronald Jack Deinlein, Jr. (hereinafter "Jack") and Paul Edwards Deinlein (hereinafter "Paul"). (Doc. #13 at 1). At the time of her death, Decedent owned a condominium, located at 26 Grand Lake Drive in Fort Thomas, Kentucky (hereinafter "the condo"), that was subject to a properly recorded mortgage. ( Id. ).
Twelve years earlier, Decedent executed a Last Will and Testament (hereinafter "the will") that disposed of her real and personal property as follows:
I give, devise and bequeath all of my tangible personal property, including household furnishings, jewelry, automobiles, personal effects, (but excluding cash), and also any interest which I may own in real property used by me as a residence at the time of my death, to my husband, Ronald Jack Deinlein. If my said husband does not survive me, then all of the foregoing property shall pass absolutely and in fee simple and in equal shares to my three children, namely, Christopher Edwards Deinlein, Ronald Jack Deinlein, Jr., and Paul Edwards Deinlein.
(Doc. #13-2 at 2)(emphasis added). The will also included a residue clause, directing that any assets otherwise unaccounted for in the will should pass to the trustee under the Revocable Trust Agreement. ( Id. at 3). There is nothing in the briefing or the record to suggest that the will was improperly executed or otherwise deficient.
Decedent's three sons all submitted competing applications to the Campbell County Probate Court (hereinafter "Campbell Court"), asking to be named executor of Decedent's Estate. (Doc. #13-6). All three applications expressed concern about the other brothers' fitness to perform the requisite duties, as well as the propriety of the other brothers' financial transactions with Decedent. ( Id. ). On February 10, 2012, the Campbell Court appointed third party Laurie B. Dowell (hereinafter "Dowell") as fiduciary of the Estate and probated Decedent's will. ( Id. ).
Two weeks later, the three brothers and Dowell entered into a Settlement Agreement and Mutual Release (hereinafter "Settlement"), in which the brothers resolved the claims among them without any admission of liability. ( Id. at 2). Chris agreed to "relinquish his claim to be appointed executor of the Estate" and "renounce any further claims as a beneficiary of the Estate." ( Id. ). The Settlement then allocated responsibility for certain outstanding debts among the three brothers. ( Id. at 2-3). Chris promised to bring the mortgage and condo utilities current as of March 31, 2012, pay off Decedent's Sears/Visa card and assume responsibility for Decedent's 2010 federal tax liability. ( Id. ). Jack and Paul agreed to pay condo fees through March 31, 2012. ( Id. ). The three brothers would be equally responsible for funeral expenses, headstone costs and administratrix fees. ( Id. ).
The Agreement further provided that "other than inter-family loans, any debt or claims against the estate that were incurred by any heir for his individual benefit, shall be assumed by that individual and he shall hold the estate harmless." ( Id. at 3). Additionally, all debts, loans, gifts, and other transactions between Decedent and the three brothers "shall be deemed settled, satisfied, and conclusively resolved, and the Parties shall not be entitled to any further accounting concerning any such debts, loans, gifts, or other transactions." ( Id. at 4).
Chris has had outstanding federal tax liabilities for several years. (Docs. #13 at 3-4 and 13-7). The first Notice of Federal Tax Lien, recorded in Campbell County on May 30, 2006, shows an unpaid balance of income and employment taxes totaling $21, 784.99. ( Id. at 1). On November 13, 2007, a second lien was filed in Campbell County, reflecting income tax deficiencies in the amount of $53, 071.02. ( Id. at 2). Between 2008 and 2010, four more liens were filed against Chris for income and employment tax deficiencies. ( Id. at 3-6). As of April 1, 2013, the total outstanding balance was $459, 409.49. (Doc. #13 at 3-4).
In an effort to ameliorate Chris' financial situation, Decedent wrote him eight checks, totaling $150, 500, between 2000 and 2010. (Docs. #13 at 3 and 13-1 at 9-16). Decedent also made two wire transfers, totaling $35, 000, to Chris from her Raymond James investment account. ( Id. at 17-18). Shortly before her death, Decedent told her sons that she wanted an accountability of debts. (Doc. #13-1 at 19). Decedent also wrote a statement to this effect: ""Before my assets are divided, there should be accountability of debts. [illegible] Ring to Audrey. Baba's wedding ring to Phyl. Piano to Paul." ( Id. ). Chris now maintains, based on his history of financial transactions with Decedent and her wish that there should be "an accountability of debts, " that Decedent gave him $185, 500 with the intent that this sum would be an advancement against his share of the Estate. (Doc. #13 at 3).
On January 1, 2012, Paul and Jack began making payments on the condo mortgage. (Doc. #13 at 1-2). By April 8, 2013, they had reduced the mortgage from $104, 351.69 to $87, 935.66 and put the condo up for sale. ( Id. ). However, the Internal Revenue Service took issue with this attempt to sell the condo, alleging that its federal tax liens against Chris had attached to his one-third interest in the condo. ( Id. ). The Estate brought this issue to the Campbell Court's attention in a filing styled as a "Complaint/Motion Concerning Advancement." (Doc. #1-1). The United States promptly removed the action to federal court. (Doc. #1). After some negotiation, the United States agreed that Paul and Jack could sell the condo, provided that the proceeds were placed in escrow pending resolution of this dispute. (Doc. #13 at 2). On April 8, 2013, the condo was sold for $303, 000, with net proceeds totaling $198, 339.56. ( ...