In Beim v. Hulfish, the Supreme Court of New Jersey determined for the first time that federal estate taxes didn’t constitute pecuniary injuries under the state’s wrongful death statute and, therefore, couldn’t be recovered by a decedent’s heirs. In early February 2008, John Kellogg died from serious injuries he received as a result of a car accident that was allegedly caused by the defendants’ negligence.  John was 97 years old at the time of his death.  The executors of John’s estate and the trustees of a marital trust brought a wrongful death action against the defendants, claiming that if John hadn’t died in 2008, but rather had survived until 2009, his estate would have paid substantially less in estate taxes.  Further, the plaintiffs claimed that if John had survived until 2010 or later, his estate would have owed no federal estate tax.  Therefore, the plaintiffs sought to hold the defendants liable for the estate taxes incurred due to the decedent’s death in 2008—approximately $1.2 million. 

 

Lower Court Rulings

The trial court held that estate taxes weren’t recoverable under New Jersey’s wrongful death statute.  In particular, the trial court reasoned that the potential estate tax liability of John’s estate was too speculative to determine, as Congress hadn’t determined the 2011 and 2012 federal estate tax laws at the time of John’s death.  The plaintiffs appealed, and the Appellate Division reversed, holding that the estate tax laws for 2011 and 2012 had been established, the amount of the estate tax losses weren’t speculative and, therefore, these losses constituted pecuniary damages under the New Jersey wrongful death statute (427 N.J. Super. 560 (App. Div. 2012)).  The defendants then appealed to the Supreme Court of New Jersey, which reversed the Appellate Division’s decision.

 

Court Interprets Wrongful Death Statute

The plaintiffs’ primary contention was that successive amendments to federal estate tax laws created a significant difference between the estate tax burden imposed due to John’s death in 2008 and the federal estate taxes that would have been owed had he survived beyond that year.  In light of these changes to the federal estate tax laws, the New Jersey Supreme Court considered whether the difference between the federal estate tax liability imposed on estates of decedents who died in 2008 and the liability imposed on estates of decedents who died thereafter gave rise to a cognizable claim under the New Jersey wrongful death statute, found in N.J.S.A. 2A:31-1 et. seq.

The court reviewed the case de novo and began with a careful statutory interpretation of the wrongful death statute. Prior case law had determined that the legislative intent behind this statute was to enable a decedent’s heirs to recover in a wrongful death suit only if the deceased could have recovered had he survived the injury.  For instance, in Aronberg v. Tolbert, 207 N.J. 587 (2011), the Supreme Court of New Jersey held that the mother of an uninsured driver killed in a motor vehicle accident couldn’t bring a wrongful death action, as any personal injury claim that her son could have brought had he survived would have been barred because he didn’t have insurance.  Therefore, the statute prohibited a decedent’s heirs from bringing a wrongful death suit if the decedent couldn’t have brought a suit on his own behalf if he had survived.

Furthermore, New Jersey’s wrongful death statute limits damages in a wrongful death suit to “pecuniary injuries.”  The court noted that two principles could be divined from this limitation.  First, under this statute, recovery is limited to a survivor’s calculable economic loss; damages must not be based on mere speculation.  Second, if a decedent’s survivors successfully brought a wrongful death action, they may be compensated for certain financial and non-financial contributions that they were deprived of due to the decedent’s death.  Prior case law held that financial contributions should be measured in accordance with educational, occupational, demographic and other relevant factors and should derive from the decedent’s expected contributions to his family during his continued lifetime.  Further, non-financial contributions, such as companionship, care and advice, were to be valued in accordance with “what the marketplace would pay a stranger with similar qualifications for performing such services.”  Green v. Bittner, 85 N.J. 1 (1980).  In the case of both financial and non-financial contributions, therefore, the focus is on the value of what the decedent would have contributed to his survivors over the remaining course of his life, rather than on the needs of the decedent’s heirs.

 

Estate Taxes Aren’t Recoverable

The court determined that the federal estate tax payments were significantly different from the typical pecuniary damages allowed in a wrongful death action.  In particular, the estate taxes borne by John’s estate were unrelated to the financial and non-financial contributions that he would have provided to his family members had he survived the car accident.  Rather, the court recognized that John’s deferred death was significant to his heirs only because it would have delayed the payment of estate taxes until a time when a more favorable federal estate tax regime was in place.  As such, the plaintiffs’ wrongful death claim was based not on the contributions that the decedent would have provided to his family had he survived, but rather on the tax benefits that would have been achieved if he’d survived, which was contrary to legislative intent.  Therefore, the Supreme Court of New Jersey held that the plaintiffs’ claim for the payment of estate taxes wasn’t a cognizable claim and that estate taxes weren’t recoverable pecuniary damages under the New Jersey wrongful death act.