Berge & Berge, LLP Blog

Friday, May 15, 2015

Death and Taxes

What Can We Learn from the Probate Challenges Faced by the Estate of Joan Rivers?

For many, a big step in estate planning is to simply jot down a will that reads something close to “I hereby leave my worldly possessions to ______” and to sign it and have it witnessed by friends. While such a document can accomplish several goals, it likely won’t address numerous important questions that a more sophisticated document can, such as:

• How will probate be handled?
• What could a simple trust have accomplished?
• Which state laws will apply (if the drafter has more than one residence)?
• Do will beneficiaries match the beneficiaries stated on insurance policies and investment and retirement accounts, and, if not, how will conflicts be reconciled?

The Estate of Joan Rivers offers a case in point. Ms. Rivers’ will was very specific yet contained a potential flaw that may result in confusion and, possibly, tax ramifications. Her will states unequivocally that Ms. Rivers was a New York State resident and, additionally, contains a provision stating that its validity, interpretation and administration “shall be governed by New York.”  However, this point is, unfortunately, marred, because the will also states that Ms. Rivers’ state of domicile (where she intends to “reside indefinitely on a permanent basis”) is California. 

It is impossible to know why the creators of the will failed to fully identify which state should handle Ms. Rivers’ will. By referencing New York, they may have wished to minimize estate taxes, as New York’s would likely be lower than California’s. Or by referencing California, they may have sought to minimize income taxes, as California’s is significantly lower than New York’s. Whatever the case, her estate’s attorneys face challenges that involve:

• Identifying which state of residence vs. domicile would result is the least taxes; and
• Proving Ms. Rivers’ true residence: her apartment in New York or a room in her daughter’s home in California (each are listed in her official documents).

As this case suggests, unforeseen questions and complications can arise in even the most well thought out estate plans. The estate planning law firm of Berge & Berge serves clients in San Jose and Santa Clara Counties.  To ensure your estate planning documents represent your full and best interests, contact us today at (408)985-9918.

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