The Ninth Circuit U.S. Court of Appeals recently addressed whether a contract claim arising from a palimony agreement can be deducted from the estate for tax purposes. (Estate of Shapiro v. U.S., 11 C.D.O.S. 2293)
For 22 years, Bernard Shapiro and Cora Chenchark lived together in Nevada, but never married. Throughout that time, Bernard paid Cora’s living expenses and provided her with a weekly spending allowance. Cora cooked, cleaned and managed their household, but otherwise did not contribute any financial assets to the household. The couple split in 1999 when Cora learned that Bernard was involved with another woman. Cora sued Bernard in Nevada state court for breach of contract, claiming that they had agreed to pool their resources and share equally in each other’s assets while living together. In 2000, while the lawsuit was pending, Bernard died, but his estate continued to defend against Cora’s claims and ultimately won a jury verdict which found there was no contract between them. Cora appealed, and while the appeal was pending, she and Bernard’s estate settled for approximately $1 million.
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