Omar Firestone was the executor of the estate of Ghaida Firestone. On January 17, 2012, he was notified that the estate tax return had been selected for audit. A recomputed estate tax of over $1.8 million was communicated to Omar by the IRS on April 16, 2013.
Omar owned a valuable cello, crafted in 1816. On May 17, 2013, a month after getting the bad news about the additional estate tax due, Omar created “The Firestone Irrevocable Cello Trust.” He was the sole trustee. Ostensibly, ownership passed from him personally to him as trustee.
The estate stipulated to the additional estate tax liabilities in 2014, but Omar never paid them. By 2021, the tax debt had grown to over $2.5 million.
The IRS brought an action to foreclose on certain real property and to seize the cello to begin paying down the tax debt. Omar claimed he owned only a life estate in the cello now; it was no longer his property. Oddly, the trust did not name any beneficiary other than Omar, although he produced an unsworn e-mail from a rare instrument seller claiming to have the remainder interest.
The District Court was unpersuaded. Taking the trust at face value, Omar had both equitable and legal interests in the cello, and so is properly regarded as the real owner. The IRS may take it. In a footnote, the Court observed that it need not reach the issues of whether the Trust is merely Mr. Firestone’s nominee or alter ego, was created for unlawful purposes, or was self-settled in order to avoid creditors.
The case illustrates the risks of choosing an individual to settle an estate—risks to both the estate and the individual being asked to perform what may be an unfamiliar duty. The better course, for many affluent families, is to opt for professional estate settlement from an experience corporate fiduciary, such as a trust department or trust company.
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