Before Schwelb, Reid, and Glickman, Associate Judges.
The opinion of the court was delivered by: Schwelb, Associate Judge
Appeal from the Superior Court of the District of Columbia
(Hon. Wendell P. Gardner, Jr., Trial Judge) (Hon. Kaye K. Christian, Trial Judge) (Hon. Peter H. Wolf, Trial Judge)
This appeal concerns adult siblings who are embroiled in a prolonged legal dispute with one another over their deceased mother's estate. Specifically, we must determine the estate tax consequences of the settlement of related Maryland litigation. In the Maryland case, the appellant, Joann B. Conrad, agreed to pay her siblings, appellees Julia B. Randall and Dr. Winslow Brabson, a total of $350,000 to resolve the appellees' allegation that Mrs. Conrad had obtained control, by undue influence and by abuse of a relationship of trust and confidence, of certain property belonging to the parties' mother. Following extensive proceedings before three different judges in the Probate Division of our Superior Court, that court ruled that the appellees had no estate tax obligations with respect to the funds paid to them in conformity with the settlement. Mrs. Conrad appeals; we reverse.
The decedent, Esther Brabson, a resident of the District of Columbia, died on January 5, 1992. She was survived by the three children who are parties to this case, namely, the appellant, Mrs. Conrad, and the appellees, Mrs. Randall and Dr. Brabson. Mrs. Brabson left a gross estate valued at more than $1,500,000.
In the years preceding her death, Mrs. Brabson had acquired two annuity policies from Kemper Investment, Inc. (Kemper). The first Kemper policy, purchased in 1981 for $181,973, named Mrs. Conrad as the successor owner and annuitant, and Allison Conrad, Mrs. Conrad's daughter and the decedent's granddaughter, as contingent beneficiary. *fn1 In 1982, Mrs. Brabson purchased a second Kemper policy for the sum of $75,375, naming all three of her children as successor owners. Later that year, the decedent changed that designation, made Mrs. Conrad her sole successor, terminated the interests of Mrs. Randall and Dr. Brabson, and established a trust in favor of Allison.
Mrs. Brabson also owned a home in Chevy Chase, Maryland, jointly with Mrs. Conrad. She, Mrs. Conrad, and Allison lived in the home from 1979 to 1987. In 1983, Mrs. Brabson transferred her entire interest in the Chevy Chase home to Mrs. Conrad. Mrs. Brabson was suffering from Alzheimer's disease and in 1987, unable to care for herself, she was placed under conservatorship. Mrs. Brabson was moved to the Army Distaff Home in the District, where she died less than five years later.
Following their mother's death, Mrs. Randall and Dr. Brabson brought suit against Mrs. Conrad in the Circuit Court of Montgomery County, Maryland. The appellees challenged the inter vivos disposition of their late mother's assets, claiming that Mrs. Conrad had exercised undue influence upon Mrs. Brabson and had thereby caused Mrs. Brabson to transfer to Mrs. Conrad the Kemper annuity policies, the Chevy Chase home, and approximately $100,000 in cash. The appellees asked the Circuit Court to set aside the deed to the Chevy Chase home and to order that the home, as well as the proceeds of the policies, be made a part of Mrs. Brabson's estate and disposed of accordingly. Mrs. Brabson's will, executed in 1981, contained certain bequests which were followed by a residuary clause leaving the balance of her property "unto my three children . . . in fee simple and in absolute estate, share and share alike." Thus, if the assets previously conveyed to Mrs. Conrad were to become a part of the estate, each appellee would be entitled to receive one third of the value of each such asset.
In their suit, the appellees also demanded that Kemper refrain from making payments to Mrs. Conrad under the annuity policies. In response, Kemper requested instructions from the court as to the proper disposition of the policies. The two policies were subsequently liquidated by order of the court, and the proceeds were deposited in the registry of the court.
Three years after their mother's death, the principals resolved the Maryland litigation with a negotiated compromise. The settlement was somewhat unorthodox in that the parties' agreement was not reduced to writing. Rather, the judge (Weinstein, J.) made the following announcement in open court:
THE COURT: The defendant [Joann B. Conrad] will pay to the plaintiffs Julia Randall and Winslow Brabson the total sum of $350,000. Payment of that sum of money will be accomplished once the parties receive tax advice.
On June 12, 1995, the court ordered the release to the appellees, from the registry of the court, $350,000, less ...