In the case of Estate of James F. Sheppard v. Schleis, Judge Abrahamson, writing the opinion for the Wisconsin Supreme Court held that payment of the federal estate tax is the burden of the Estate under 26 U.S.C. § 2002, which provides that an estate pays the estate tax on nonprobate property. Further, the Court held because P.O.D (Payable on Death) accounts do not fall under an exception to the general rule that the estate pays federal estate tax generated by nonprobate assets, the estate, not heirs, were required to pay the federal estate tax. Finally, the Court held that the Estate must pay the Wisconsin Estate taxes generated by the P.O.D. accounts.
A P.O.D. account is an account that designates a beneficiary at death and has become a common estate planning technique in avoiding probate.