There are those who whine a lot about "frivolous lawsuits." While I often challenge some definitions of frivolity in this regard, I have to take this opportunity to poke some fun at my own profession. Especially since this one takes place in the context of estate planning which is, well, an area in which I practice. (When I practice.)
From The Estate Analyst (Chicago Trust Company, September 2002) -- page 7:
They may have looked like the classic farming couple, standing with a pitchfork in, American Gothic, a 1930 painting by Grant Wood,* but Earl and Mildred Koester, a modest farm couple from Minnesota, have left us with a lesson about the American tax system.
Mildred Koester died in 1988 with an estate of $201,000 that she left to her husband. Earl Koester died in 1996 with an estate worth $1 million and an estate tax liability of $109,000. That liability could have been avoided with better estate tax planning since, based on the estate tax rules in effect at the time, a married couple could have transferred up to $1.2 million of assets free of transfer tax.
The Koesters could have avoided the tax, but didn’t. Who, if not themselves, is to blame? The estate argued that considering the complexity of the estate tax system, the Koester’s, having limited education, were disadvantaged and denied equal protection under the law, a violation of the Constitution. (Mrs. Koester had graduated high school. Mr. Koester had completed eighth grade.)
The Tax Court was not swayed by these arguments. The Koesters were free to obtain any legal or tax advice they wanted and arrange their own affairs as they saw fit. Moreover, the Koesters had, in fact, hired an attorney who assisted them in drafting their wills.
The estate also argued that the Koester’s lack of higher education made it impossible for them to hire a competent attorney. This, of course, would mean that anyone short of a college education would be vulnerable not only to complex tax codes and attorneys who look smarter than they actually are, but to all the challenges of a modern world where there are sophisticated choices and unscrupulous people.
The lesson taxpayers may learn from this is that grown ups have to live with their own choices, including their choice of attorneys and their tax decisions. Be advised, it’s called “life” and it’s not always fair. Carry a pitchfork. Estate of Koester v. Comm’r., T.C. Memo. 2002-82.
*The “couple” in American Gothic are intended to be a farmer and his spinster daughter. The artist used his sister and the family dentist as models.
Amen to that. The Tax Court's opinion was affirmed, by the way, on appeal.
