“How Soon Is Now: Estate of Moore & The Unraveling of Deathbed Estate Planning,” an article with a dramatic sounding title, is a very useful and pragmatic read for all trusts and estates attorneys and others in the field. It’s a well- paced accounting of major developments in case law surrounding Internal Revenue Code Section 2036, a subject that’s held increased relevance as it’s evolved.
At a high level, the article is a great resource to practitioners and others for many reasons. First, it confronts and organizes a topic (IRC Section 2036), which trusts and estates attorneys find themselves consistently grappling with and must continually refresh themselves on, and is nonetheless constantly changing and evolving. Said evolution and change are clearly demonstrated by the article’s intuitive chronological organization of case law related to Section 2036. Second, the article is useful for those who are new to trusts and estates as well as those who’ve been practicing or working in the field for much longer. Third, the article is an excellent resource for an overview of Section 2036 issues. It summarizes the basic holdings in the relevant cases well, but the piece is equally useful for digging deeper into the cases that interpret Section 2036 and other resources that provide further insight. The cases cited within the article and the citations to other articles on the topic provide the reader with many avenues to dig deeper into more precise issues that aren’t covered here (although there’s a lot that’s covered here). Finally, the article effectively synthesizes the contemporary case law pertaining to Section 2036 in a concise manner—no easy task.
The first two parts of the article begin at a very high level by discussing the transfer tax system in general, how estate tax is computed, who it applies to and the coupled unified credit for lifetime gifts and testamentary transfers. The article next discusses family limited partnerships (FLPs) and why they’re useful in the estate-planning field, including the lack of marketability and lack of control discounts that are applied to such structures and how these structures relate to other estate-planning techniques, such as grantor retained annuity trusts, charitable lead annuity trusts and other trusts. These first two sections will be familiar material for practitioners who’ve been in the field for some length of time. For those who don’t have as much experience, these sections are an excellent overview of this segment of the practice.
The next section regarding Section 2036 is a brief look into the actual text of the IRC section and serves as a precursor to the next, most important section, which is an overview of the case law interpreting Section 2036: The cases covered will be familiar names to many practitioners—Bongard v. Commissioner, Strangi v. Comm’r, Powell v. Comm’r and Moore v. Comm’r.
“Section IV: Seminal Cases” goes into great detail (far more detail than can be covered in this review) for each of the Bongard, Strangi, Powell and Moore cases. Each summary is replete with the facts of the case, the arguments brought forth by each party, the court’s rationale and application of the applicable provisions of Section 2036, case citations and connections among the other cases summarized. It would behoove most practitioners to review this section and reacquaint themselves with the facts and holdings in each case, because after seeing the case summaries side by side, in chronological order, it becomes easier to tie the common threads together and to identify the pitfalls that we each must be aware of in practice. A studious read through this section will no doubt give a practitioner better awareness of those red flags and equip them with the ability to better able avoid a similar end result.
The article closes with a summary of the case law, a section discussing the policy considerations and another section with an eye towards the future in which the author discusses the likely direction of Section 2036 jurisprudence going forward. While these sections are interesting in their own right, and the summary is a useful way to wrap together what can fairly be described as a morass of case law, the most interesting and useful part of the article is the entirety of the “Section IV: Seminal Cases” section. Because many practitioners frequently advise their clients with respect to transactions involving FLPs, becoming well acquainted with the case law is essential. This article has thoroughly summarized the important points in each of those cases and corralled and connected them in a concise manner. It’s worth reading for practitioners of all vintages, or at the very least, keeping on hand for a convenient reference.