Reversing its appeals court, New Jersey's highest court finds that the doctrine of manifest injustice prevents the court from enforcing retroactive tax assessments against two estates following changes in the state's tax laws in response to changes made in federal estate tax law in 2001. Oberhand v. Director, Division of Taxation (N.J., No. A-106-06, Feb. 27, 2008).
Eugene Seidner and Cynthia Oberhand executed wills that were designed to avoid federal and state estate taxes by using marital and family trusts. In June 2001, the U.S. Congress changed the federal estate tax law, increasing the amount of property that could pass tax free. In response, New Jersey changed its estate tax laws to make up for lost revenue. The law was passed in July 2002, but was retroactive to January 1, 2002.
Mr. Seidner died in January 2002 and Ms. Oberhand died in March 2002. Because of the retroactive changes in the law, the state Division of Taxation issued considerable tax assessments against the estates. The estates challenged the assessments. The tax court found that though the retroactive tax assessments did not violate substantive due process, they had to be vacated because they were manifestly unjust. The Division of Taxation appealed, and the Appellate Division of the Superior Court of New Jersey reversed, holding that the doctrine of manifest injustice is inapplicable in tax cases. The estates appealed.
The Supreme Court of New Jersey reverses, holding that the doctrine of manifest injustice prevents the court from enforcing the retroactive tax assessment. The court notes that the decedents reasonably relied on the previous law and the record does not reveal that denying the retroactive application of the law would seriously affect the state's revenues.
For the full text of this decision, go to: https://lawlibrary.rutgers.edu/courts/supreme/a-106-06.doc.html.
Did you know that the ElderLawAnswers database now contains summaries of more than 1,400 fully searchable elder law decisions dating back to 1993? To search the database, click here
Subscribe to the Knowledge Bank.
