Do-It-Yourself Will Succeeds in Spite of Itself

BY SHARON BURNETT AND DARLENE PULLIAM

The Ninth Circuit Court of Appeals recently upheld a district court’s decision that a self-prepared will’s bequest qualified for the marital deduction, even though its literal wording created a disqualifying terminable interest. The courts found the decedent’s handwritten notes of planned revisions to the will and an article he saved on the deduction demonstrated he intended for his estate to claim the deduction.

When Tony Sowder died in 1995, he was survived by his wife, Marie Sowder, and three adult children. Sowder had prepared his own will in 1983, leaving his children a total of $600,000—the amount that could be passed tax-free to a non-spouse at the time. The will required that the remainder pass to Marie “if she survives me, and if she does not survive me, or dies before my estate is distributed to her, to my issue me surviving, in equal shares per stirpes.” Later handwritten notes to the will by Sowder did not contain the language “if she does not survive me, or dies before my estate is distributed to her.”

Code section 2056(b) denies the marital deduction for terminable interests, which include conditioning a bequest on the spouse’s survival until distribution. Under § 2056(b)(3), however, that rule does not apply where the period is limited to not more than six months and the spouse in fact survives such period. In the instant case there was no limitation of the period of survival. However, state law in Washington, where Sowder died, provides that if the testator is determined to have intended a marital deduction bequest, “the governing instrument shall be construed to comply with the marital deduction provisions of the Internal Revenue Code in every respect.”

Evidence that Sowder so intended included that he was a professional businessman who had demonstrated the desire and ability to complete careful tax planning. Four years before his death, the Sowder Family Trust had purchased “last-to-die” insurance on the Sowders, indicating a perceived need for cash to pay deferred taxes after the second spouse died. The court also was persuaded by the fact that Sowder did not change his handwritten will after the insurance was purchased.

The unlimited marital deduction was created by a 1981 change in the tax law. A 1981 article concerning the change was found in Sowder’s papers after his death, and the court decided that he probably read it.

Marie L. Sowder v. U.S. , 100 AFTR2d 2007-6379

Prepared by Sharon Burnett , CPA, Ph.D., lecturer of accounting, Oklahoma State University–Stillwater, and Darlene Pulliam , CPA, Ph.D., McCray Professor of Business and professor of accounting, College of Business, West Texas A&M University, Canyon, Texas.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: Economy and health care changes top CPAs’ list

CPA decision-makers’ economic outlook and the House Republicans’ proposed tax changes as part of replacing the Patient Protection and Affordable Care Act received attention recently. See how much you know with this short quiz.