Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Sunday, November 18, 2007

Another Self-Help Estate Plan Gone Awry

Mr. B, having decided not to consult with attorneys or accountants, made lifetime transfers of property to his son and his three stepchildren. His son received securities in the amount of $150,000 and his stepchildren received the family home. Mr. B passed away 18 months later.

Robert L. Moshman, Esq., The Wrong Gift, Est. Analyst (Nov. 2007), tells us about the consequences of Mr. B’s lifetime transfers:

The house, being highly appreciated, was a poor asset to select to make a lifetime gift. Because it was transferred during life, the children received it with Mr. B's basis instead of a stepped-up basis at death. Sale of the home by the three stepchildren resulted in over $80,000 of capital gains liability.

Nor did the lifetime transfers improve transfer tax liabilities. As gifts made within three years of death, the house as well as the securities had to be included in Mr. B's gross estate for estate tax purposes.***

The moral of this story: Spontaneous self-help by a Testator/Grantor can backfire and deprive heirs of large percentages of an estate and prompt family tensions. Professional planning would have made a huge difference for Mr. B.


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I am very sorry about Mr. B

Posted by: Sue | Nov 20, 2007 6:00:57 AM

Mr. Moshman, when did Mrs. B die? If it was after 1981 the gift of the house would not have been included in her estate, but would have been a taxable gift. See IRC 2035. I assume that this is a current demonstration and hence probably incorrect or am I wrong.

Posted by: Kevin | Nov 27, 2007 9:07:06 AM

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