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The law is often open to interpretation, which can cause confusion that could lead to legal disputes. Federal laws regarding estate tax and gift tax are sometimes problematic in Florida and other jurisdictions. One reason for this is that these laws deal with valuation of property as well as the applicability of any legal agreements made between a person and his or her heirs. This seems to have been the case in a recent court case involving the Internal Revenue Service and the estate of an 87-year-old woman.
The dispute arose because the woman reduced the value of assets which she had gifted to her daughters prior to her death. The woman gave her daughters the gift under the agreed upon conditions that her daughters would pay all tax liabilities which would have been owed if the woman ended up dying within three years after making the gifts to her daughters. However, the IRS rejected this reduction in value.
The IRS filed a motion in Tax Court for summary judgment, claiming that the estate is required by law to pay gift tax on any gifts made by the decedent during the period of three years before the decedent’s death. The IRS argued that there was too much speculation involved in valuing the property, therefore voiding the agreement for the daughters to pay the tax liabilities. However, the court disagreed and denied the motion for summary judgment.
This case illustrates how nuanced interpretations of gift tax and estate tax laws can be in Florida or in any other state. It is essential that one understands all applicable state and federal laws in order to avoid potential legal disputes. Proper estate planning can save on expenses associated with future litigation caused by poor decisions during creation of an estate plan.