The merits of the claims typically drive the negotiations to resolve a trust or estate dispute. Tax issues often are a secondary focus. It is not uncommon for the litigator to wake up the morning after reaching a settlement wondering if she or he neglected to appreciate a significant tax issue. The purpose of this article is to help trust and estate litigators identify the tax issues most likely present in a trust or estate dispute, so they can be sensitive to these issues when guiding their clients through settlement. The trust and estate litigator advising on a settlement strategy should always consider the impact that taxes may have on the value of a claim. If a property right or interest is transferred, modified, or terminated in a settlement, the client may be subject to unanticipated tax exposure.
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