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Constitution Does Not Protect Against Poor Estate Planning

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APRIL 22, 2002 VOLUME 9, NUMBER 43
Most Americans understand that there will be no federal estate tax (and, in most cases, no state estate tax) due on their deaths so long as they own less than a threshold amount—$1,000,000 in 2002. Many married couples realize that they can take fairly simple steps to ensure that each spouse can “use” the $1,000,000 exemption amount, and pass up to $2,000,000 total to heirs without taxation.

Earl and Koester owned a farm in Waseca County, Minnesota. They also had a home and some other assets; they were not millionaires, but they had substantial assets. Like many couples they had wills leaving everything to one another and directing that the survivor’s estate would be divided among their children after both died.

When Mildred Koester died in 1988 her share of their assets was valued at just over $200,000. Since her estate plan was to leave everything to her husband, Earl Koester received the entire estate.

When Earl Koester died eight years later the total value of his estate was just barely more than $1,000,000. In the year of his death the amount that could be passed to children without estate tax liability was only $600,000; since his estate was larger, it paid taxes of more than $150,000.

Mr. Koester’s heirs petitioned for return of the tax money. They argued that everyone knows that married couples can construct their estate plans to avoid the tax liability, and that the Koesters’ failure to take advantage of the usual tax planning devices was caused by their lack of education. In fact, argued the heirs, the Koesters’ poor educations prevented them from even hiring a competent attorney to prepare their estate plans.

The U.S. Constitution protects individuals from government action that unfairly targets one group over another. The Koesters’ heirs argued that the tax code discriminates against the uneducated, and that the Koesters’ estates should have been as if they had implemented the kind of estate plans that other couples know to execute. Failure to treat the Koesters as favorably as better-educated taxpayers denied them the equal protection of the laws.

The U.S. Tax Court disagreed. It refused to reduce the estate tax based on what the Koesters might have gotten around to doing if they had gotten better advice. Taxes are calculated, ruled the Court, based on how the decedent’s estate actually is constructed, and the courts are not permitted to rewrite the estate plan just to reduce the taxes. Estate of Koester v. Commissioner, March 28, 2002.

What might the Koesters have done if they had gotten better advice? Mrs. Koester could have left her estate in a trust for Mr. Koester’s benefit, giving him the right to receive all the income and access to the principal in some circumstances. This kind of trust, often called a “bypass” trust, causes the first spouse’s assets to escape taxation at both the first and second death. That simple plan would have saved their heirs over $150,000.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.