Paul L. Caron

Friday, January 29, 2010

Death of Two Heiresses Highlights Absurdity of Estate Tax Repeal

Daily Finance, Casey Johnson and Ruth Lilly: A Tale of Two Heiresses, Tax Loopholes, and Tequila, by Sarah Weinman:

At first blush, Casey Johnson and Ruth Lilly, who died within days of each other around the new year, could hardly have been more different. Johnson, who died at 30, was a party animal who lived her life in the public eye, most recently as the fiancée of D-list celebrity Tila Tequila. Lilly, 94, made her biggest waves not on with clubbing but philanthropy -- most famously with her $200 million donation in 2002 to the Poetry Foundation....

But scratch the surface, and similarities emerge. Johnson and Lilly were both heiresses to major corporate fortunes: Johnson & Johnson and Eli Lilly & Co. Both had massive personal wealth tied up in trusts they couldn't access directly. And both fortunes illustrate a yearlong Congress-induced quirk that could greatly benefit the heirs to anyone who dies this year, cost the U.S. billions of tax revenue, and drive estate-planning lawyers crazy.

When Casey Johnson died, the frenzied tabloid coverage of her death overlooked a detail of crucial importance to her family's lawyers and accountants: time of death. Johnson was found at her West Hollywood home on January 4, apparently a few days after she died. Her last Twitter post was December 29. No one, not even Tequila (née Nguyen), reports having seen Johnson since then.

In accordance with California law, the date of death is certified as the day the body is found. Determining an exact time of death is a highly unreliable science, especially if several days or more have passed since someone's last appearance. Had Johnson been found at the end of 2009, her estate -- a trust that her family had recently cut off -- would have been subject to a tax that is suspended this year.

But Lilly died on December 31, so her estate, estimated at more than $1 billion, is subject to significant taxation. Aside from the Poetry Foundation bequest, Lilly gave away some $800 million -- almost as much as she was finally worth -- the bulk of it put in trust and administered as a foundation named after her.

(Hat Tip: Christine Lipman, Jim Maule.)

Celebrity Tax Lore, News, Tax | Permalink

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