A common misconception is that estate tax planning can be easily completed at any time before a decedent’s death. However, estate tax planning that is not completed until just before a decedent’s death, so-called “death bed” estate tax planning, can be more likely to be scrutinized and challenged. A recent court decision that evidences a limit on “death bed” estate tax planning is Estate of Fields v. Commissioner, No. 25-60403 (5th Cir. 2026). This article discusses the Estate of Fields decision and its implications for estate tax planning.

Anne Milner Fields was a businesswoman who ran her husband’s oil business after he died in 1963. On January 29, 2010, Mrs. Fields executed a power of attorney appointing her great-nephew, Bryan Milner, as her agent. In 2011, Mrs. Fields was diagnosed with Alzheimer’s disease. Her health condition progressively declined over the next five years.

In May, 2016, Milner was referred to an estate planning attorney, Jamie Katzen, who recommended forming a limited partnership to hold Mrs. Fields’ assets. On May 20, 2016, Katzen filed a certificate of formation for a new limited partnership, AM Fields, LP (“AM Fields”). Katzen also emailed an appraiser seeking advice on “obtaining a deeper discount”.

Under the partnership agreement for AM Fields, Mrs. Fields was the limited partner, with a 99.9941% interest, and another newly formed entity, AM Fields Management LLC (“Management”), was the general partner, with a .0059% interest. Milner was the sole member of Management. Milner executed the partnership agreement and signed all relevant documents both individually and on behalf of Mrs. Fields as her agent.

On May 27, 2016, June 6, 2016, and June 13, 2016, Milner transferred most of Mrs. Fields’ assets to AM Fields. These transfers resulted in AM Fields holding assets valued at approximately $17 million (and left Mrs. Fields with approximately $2.15 million in assets outside of AM Fields).

On June 15, 2016, Mrs. Fields was placed in hospice, and on June 23, 2016, Mrs. Fields died. On the estate tax return for Mrs. Fields’ estate, the gross estate included Mrs. Fields’ limited partner interest in AM Fields, which was valued at $10,877,000. The estate tax return did not include the value of Mrs. Fields’ assets that were transferred into AM Fields – approximately $17 million at the time of Mrs. Fields’ death. Thus, the estate tax return reduced the value of Mrs. Fields’ gross estate by approximately $6 million.

The Internal Revenue Service audited the estate tax return and determined that there was an estate tax deficiency. The Internal Revenue Service found that under Internal Revenue Code Section 2036, the estate tax return should have included in the gross estate the value of Mrs. Fields’ assets that were contributed to AM Fields, rather than the value of Mrs. Fields’ limited partner interest in AM Fields. The Internal Revenue Service also assessed a 20% penalty for the estate tax deficiency.

Mrs. Fields’ estate filed a petition with the Tax Court for a redetermination of the estate tax deficiency. However, the Tax Court agreed with the Internal Revenue Service that the estate tax return had undervalued the gross estate for Mrs. Fields and that a penalty should apply.

Mrs. Fields’ estate then filed an appeal to the United States Court of Appeals for the Fifth Circuit. In an opinion written by Circuit Judge Stuart Kyle Duncan filed on June 8, 2026, the Fifth Circuit affirmed the decision of the Tax Court.

The key statutory provision in the Estate of Fields case is Internal Revenue Code Section 2036(a). It provides:

“The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money’s worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death –

(1) the possession or enjoyment of, or the right to the income from, the property, or

(2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.”

The Estate of Fields opinion interpreted Internal Revenue Code Section 2036(a), and its applicability to the Estate of Fields facts, as follows:

“In other words, property is included in a decedent’s gross estate if the following three elements are met: (1) the decedent transferred property before death; (2) the decedent retained an interest in the property that was relinquished only at death; and (3) the transfer was not a bona fide sale for adequate and full consideration. . . . The Estate raises only one issue on appeal in relation to § 2036(a): whether the transfers of Fields’s assets to AM Fields were a bona fide sale. . . . This issue is ‘a purely objective inquiry’ requiring the finder of fact to determine whether, ‘as an objective matter, [the transfer] serves a ‘substantial business [or] other non-tax’ purpose.’ . . . The objective evidence must show a ‘real, actual or genuine’ transfer motivated by more than just tax planning. . . . In the context of transferring assets into limited partnerships, ‘[t]he objective evidence must indicate that the nontax reason was a significant factor that motivated the partnership’s creation. . . . A significant purpose must be an actual motivation, not a theoretical justification.’”

Mrs. Fields’ estate argued that there were three “non-tax reasons” for the transfer of Mrs. Fields’ assets to AM Fields – “(1) to remedy insufficiencies of Fields’s POA as to succession and management; (2) to consolidate and streamline management of Fields’s assets; and (3) to protect against fraud and abuse”. However, the Estate of Fields opinion approved the Tax Court’s rejection of these arguments, stating, “The Tax Court rejected each [of these arguments], highlighting the suspicious timing between the transfers and Fields’s age and health. . . . We conclude that the Tax Court did not clearly err in finding the creation of and contributions to AM Fields did not serve a substantial non-tax purpose”. First, the Estate of Fields opinion found that there were no problems with “Fields’s POA” that would have supported the formation of AM Fields, and “the Tax Court did not clearly err when it rejected this argument, finding it a ‘post hoc ‘theoretical justification’’ rather than an ‘actual motivation.’” Second, the Estate of Fields opinion found that there was no need for “consolidation or streamlining” with respect to the assets being transferred into AM Fields, and “[t]he Tax Court did not clearly err in rejecting this purported non-tax purpose”. Third, the Estate of Fields opinion found that while there was evidence that Mrs. Fields had experienced two instances of elder abuse in 2011 and 2013, because “Milner waited several years after the elder abuse occurred to create AM Fields”, “[t]he Tax Court gave little weight to this purported non-tax justification”; “[i]t did not clearly err in doing so”.

On the issue of an estate tax deficiency under Internal Revenue Code Section 2036(a), the Estate of Fields opinion concluded:

“The Tax Court offered six additional reasons in support of its findings. First, the timeline of events. After Fields fell in early May, Milner began the process of creating a partnership. By late May, AM Fields was created, and it was funded with $17 million of Fields’s assets by June 13. Fields died only ten days later. . . . This timeline ‘casts significant doubt on Mr. Milner’s avowal that he was actually motivated to undertake the AM Fields transactions for any reason other than reducing estate tax (by virtue of obtaining a discount on Mrs. Fields’s partnership interest . . . . ).’ . . . Second, there is no evidence that anyone discussed transferring Fields’s assets into a partnership until after her health was in serious decline. . . . Third, there were no significant changes to Fields’s assets leading up to the transfers that may have raised a non-tax reason to effectuate the transfers. . . . Fourth, Milner’s estate-planning attorney sent an email to an appraiser seeking a ‘deeper discount.’ . . . Fifth, Fields was incapacitated during the creation of AM Fields and transfer of assets. Milner appeared on both sides of every transaction, representing ‘both her interests and his own.’ . . . And finally, the asset transfers depleted Fields’s liquid assets such that the Estate could not pay her bequests upon her death. . . . We agree with the Tax Court that these facts are ‘troublesome.’ . . . They support the Tax Court’s ruling that it is far more likely that the Estate’s three proposed non-tax purposes are after-the-fact justifications, not actual motivations. . . . In sum, we hold that the Tax Court did not clearly err in finding that the transfer of Fields’s assets to AM Fields lacked a substantial non-tax purpose. Accordingly, § 2036(a) mandates inclusion of the value of the transferred assets within the gross estate rather than the value of the partner interest.”

The Estate of Fields opinion also agreed with the Tax Court regarding the assessment of a 20% penalty for the estate tax deficiency. The Estate of Fields opinion stated:

“Section 6662 imposes a 20% tax on the underpayment of taxes due to ‘negligence or disregard of rules or regulations.’ . . . But no penalty applies if the taxpayer can show ‘reasonable cause’ and ‘act[ing] in good faith.’ I.R.C. § 6664(c). . . . The Tax Court found that the Estate lacked reasonable cause for its underpayment because a $6 million reduction of reportable assets (from a $17 million asset valuation to an $11 million partnership interest valuation) should have struck ‘a reasonable person in Mr. Milner’s position as very possibly too good to be true.’ . . . We find that the Tax Court did not clearly err in finding that the Estate was negligent in underpaying estate tax. Arguing to the contrary, the Estate emphasizes the effort Milner expended to assess the Estate’s proper tax liability. But the Estate does not explain how, despite Milner’s efforts, he did not question the feasibility of a $6 million difference in reportable assets, especially given his education and background in finance. The Tax Court did not clearly err when it determined Milner should have recognized that such a ‘fabulous opportunity to avoid tax obligations’ was ‘too good to be true.’ . . . We also find the Tax Court did not clearly err when it held the reasonable cause and good faith exception did not apply. . . . [M]erely engaging tax and legal professionals does not, by itself, demonstrate reasonable cause. Indeed, as the Tax Court stated, the Estate did not prove that any lawyer or accountant advised Milner that including Fields’s partnership interest instead of the asset values in the gross estate was proper. . . . To the contrary, Milner testified that his attorney, Katzen, advised him on the potential tax benefits of creating AM Fields. . . . For these reasons, the Estate did not establish reasonable and good faith reliance on a tax adviser’s professional judgment. . . . AFFIRMED.”

The use of limited partnerships and limited liability companies to claim “valuation discounts”, and reduce estate tax liabilities, has been a longstanding practice in estate tax planning. In the Estate of Fields case, Mrs. Fields’ estate sought to achieve such a “valuation discount” of approximately $6 million. However, the Estate of Fields opinion is authority that it can be very difficult to achieve a “valuation discount” in a “death bed” situation. Expressly, this authority is evident in the Estate of Fields opinion with such language as “the suspicious timing between the transfers and Fields’s age and health”, “there is no evidence that anyone discussed transferring Fields’s assets into a partnership until after her health was in serious decline”, and “Fields was incapacitated during the creation of AM Fields and transfer of assets”. Implicitly, this authority is evident in the Estate of Fields opinion from its focus on finding a “non-tax reason” for the transfer of assets to a limited partnership. When there is no “death bed” situation, and the taxpayer has a projected life expectancy of a reasonable period of time, such commonly asserted “non-tax reasons” for transferring assets to a limited partnership as management of assets or asset protection can appear plausible. On the other hand, when there is a “death bed” situation, and the taxpayer is unlikely to survive for any reasonable period of time, it does not appear believable that there is a concern with management of assets or asset protection that leads to the transfer of assets to a limited partnership; these concerns are unlikely to be motivating when death is imminent. Instead, the motivation in a “death bed” situation appears to be the “tax reason” of reduction of estate tax liabilities.

The antidote to the authority of the Estate of Fields case is advance planning. If you anticipate that you will be subject to Federal and/or state estate tax liabilities, the time to begin gifting or other “estate tax planning” strategies is well before you are in a “death bed” situation. Your circumstances could be even worse than those that were applicable to Mrs. Fields. She had at least a power of attorney in effect that enabled an effort to transfer assets to be attempted after she was incapacitated. You may not even have a power of attorney in effect and then no effort to transfer assets can even be able to be attempted if you are incapacitated.

When you go on a trip, do you plan it the day before you leave or in advance? Successful estate tax planning can be achieved, and the adverse authority of the Estate of Fields case can be avoided, by similar advance planning. You should not wait to be in your own “death bed” situation before you commence proper estate tax planning.

If you have any questions concerning the Estate of Fields case, including how to avoid its adverse authority, please discuss these issues with your advisers.

Note – Eiler Case and FCRA Litigation Settlements

The Fair Credit Reporting Act (the “FCRA”) is a Federal law that protects the accuracy, fairness, and privacy of information in consumer credit bureau files. However, the benefits that can be realized by consumers under the FCRA are limited based on the recent Tax Court decision in the case of Eiler v. Commissioner, 167 T.C. 3 (2026). In the Eiler case, the Tax Court held that (a) the settlement proceeds received in litigation under the FCRA can be fully includible in income (creating a “phantom income” problem to the extent that these settlement proceeds represent legal fees that are not received by the consumer plaintiff), and (b) the legal fees relating to the settlement proceeds in FCRA litigation do not qualify for an “above-the-line” income tax deduction (offering more tax benefit than a “below-the-line” income tax deduction) under Internal Revenue Code Section 62(a)(20). As with any litigation settlement, the Eiler case shows the importance of understanding the after-tax consequences of any litigation settlement under the FCRA before deciding to accept it.

If you have any questions concerning the Eiler decision, or the after-tax consequences of any litigation settlement under the FCRA, please discuss these issues with your advisers.

If you wish to discuss any of the above, find Pen Pal Gary’s contact info here.

Disclaimer: please note that nothing in this article is intended to be, or should be relied on as, legal advice of any kind. Neither LHBR Consulting, LLC nor Gary Stern provides legal services of any kind.