Taking Tax Planning Too Far

Even though tax planning is a crucial part of estate planning, a taxpayer should not make avoiding taxes dictate his or her estate planning goals. This does not mean that a person should not completely remove tax considerations from his or her plan. A person should try to set his or her estate planning goals and then select the most tax efficient way to make those plans a reality. For example, if a person needs to pay $100 to save $150 in taxes and meet his or her goal, then this profitable and logical use of that person’s money. However, if that same person is willing to pay thousands to save the same amount in taxes and that is his or her only goal, then that is problem.

This is analogous to a situation that the Estate of Marilyn Monroe found themselves in. The Ninth Circuit Court of Appeals in Milton H. Green Archives, Inc. v. Marilyn Monroe LLC was asked to determine whether her publicity rights had passed under her will.The main issue in that case turned on where Marilyn Monroe was domiciled when she died, New York or California. In addition to the publicity rights issue, her domicile would also control whether the estate would need to pay estate taxes. Now, the executors of the estate constantly argued that Monroe was domiciled in New York when she died so that the estate did not have to pay the Californian estate tax. This turned out to be disastrous for the publicity rights issue because the State of New York does not have a law that states that publicity rights should pass under the will. On the other hand, the State of California has such a law and would have probably changed the ultimate outcome of the case. The Ninth Circuit Court of Appeals held that the estate was “estopped from claiming rights under California’s posthumous right of publicity.”

See Robert W. Wood, Tax Savings Aren’t Everything, Not Even for Marilyn Monroe, Forbes, Aug. 31, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) and Brian J. Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.