At a glance
- Five weeks before Anne Fields died of Alzheimer’s disease, her agent moved about $17 million of her assets into a family limited partnership.
- The estate reported her partnership interest at $10.9 million, a discount of roughly $6 million.
- The Tax Court and the Fifth Circuit pulled the full $17 million back into her estate under IRC § 2036(a). The result was a $1.8 million tax deficiency, a $270,000 penalty, interest, and years of litigation.
- The estate’s nontax reasons failed because the facts didn’t support them. Hiring professionals did not avoid the penalty.
- The lesson reaches beyond partnerships: planning done in the shadow of death or long-term care gets the hardest look, including Medicaid asset protection trusts.
Five Weeks
On May 20, 2016, Anne Fields was in the end stage of Alzheimer's disease. She had fallen repeatedly, broken her hip twice, and been in and out of the hospital. That day her great-nephew, acting under a power of attorney she had signed six years earlier, formed a limited partnership. Over the next three weeks he moved about $17 million of her assets into it. She went into hospice on June 15 and died on June 23.
On paper, she now owned a 99.9941% limited partnership interest instead of the assets themselves. Because a limited partner can't control the partnership or easily sell the interest, the estate valued her interest at $10,877,000. The paperwork had made roughly $6 million of value disappear for estate tax purposes.
The IRS disagreed. So did the Tax Court (T.C. Memo. 2024-90), and on June 8, 2026, so did the Fifth Circuit in Estate of Anne Milner Fields v. Commissioner. The full $17 million went back into her estate. The estate owed an additional $1,828,594 in tax, plus a 20% accuracy-related penalty of $270,417, plus interest, plus the cost of years of litigation. The strategy meant to save tax cost the beneficiaries far more than it could ever have saved.
The Timeline
| When | What happened |
|---|---|
| 2010 | Fields signs a will and a power of attorney naming her great-nephew, Bryan Milner, as executor and agent |
| 2011 | She is diagnosed with Alzheimer’s disease |
| 2011 and 2013 | Two incidents of financial elder abuse occur |
| May 20, 2016 | Milner forms AM Fields, LP; his own LLC is the general partner, with a $1,000 contribution |
| May 25 – June 13, 2016 | About $17 million of her assets move into the partnership |
| June 15, 2016 | She enters hospice |
| June 23, 2016 | She dies |
| Estate tax return | Her partnership interest is reported at $10,877,000 |
| 2024 | The Tax Court includes the full $17 million; deficiency of $1,828,594 and penalty of $270,417 |
| June 8, 2026 | The Fifth Circuit affirms |
Why the Partnership Didn't Work
There is one exception: a "bona fide sale for an adequate and full consideration." For a family partnership, courts generally require a legitimate and significant nontax reason for forming it. As the Fifth Circuit put it, "A significant purpose must be an actual motivation, not a theoretical justification."
The estate offered several reasons. The courts tested each one against the facts.
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Why the Penalty Stuck
- First, there was no evidence that any professional had advised reporting the partnership interest at a discount, or that the treatment was proper. Hiring professionals is not the same as relying on their advice about the specific position.
- Second, the court said a $6 million reduction in value should have struck someone with the agent's background in finance and banking as "very possibly too good to be true."
Late-Life Planning Draws the Closest Look
Fields reinforces a point we have discussed before in connection with late-life will changes and the "magical mystery tour" of litigation. Planning done in the shadow of serious illness or imminent death is examined more critically. Courts and agencies look past the documents to the substance of the transaction: the timing, who really controls the property, how it actually operates, and whether the stated purpose is believable. A structure that might hold up if set up years earlier can unravel when it is set up in the final weeks of life.
Medicaid asset protection trusts and other irrevocable trusts face similar questions under different law. A Medicaid agency is not applying section 2036. It applies a five-year look-back, a transfer penalty, and a test of whether the trust's assets are still an available resource. But the questions rhyme. A comfort clause that lets the trustee pay for the settlor's needs, or a pattern of using the trust as if nothing had changed, will be read the same way these courts read the partnership. A carefully drafted document is necessary, but rarely enough. Planning done when nursing-home care is near gets the hardest look.
The Agent's Exposure and the Family's Cost
When a strategy produces a large deficiency, a penalty, and big professional fees, disappointed beneficiaries look for someone to hold responsible. An agent who engineers a late-life transaction that fails can face claims that the strategy was imprudent, that it raised rather than lowered the estate's costs, or that it exposed the estate to avoidable interest and penalties.
Even an agent who acted on advice can be drawn into disputes over who pays the fees, how the extra tax is shared, and whether the agent should bear part of the loss personally. Those disputes generate their own legal bills, and they can fracture a family. It is the same unpredictable, expensive "magical mystery tour" that follows a contested deathbed will.
What to Do Instead
- Plan while capacity is clear and health is stable. Time is the best evidence of a real purpose.
- Write down the nontax reasons when you act. A reason documented at the time carries weight. A reason assembled for trial usually doesn't.
- Make the change real. If an entity or trust is supposed to change who controls or benefits from property, it has to actually operate that way.
- Keep enough outside the structure. Leave the person enough to live on, and the estate enough cash to pay its bills and bequests.
- Be wary of numbers that look too good. If a valuation discount seems like a windfall, get a second opinion before relying on it.
- Agents: get written advice on the specific step. Ask whether the power of attorney authorizes it, and whether it fits the principal's plan and best interests. General engagement of professionals is not enough.
Bottom Line
The most reliable protection is the one we return to throughout this blog: thoughtful planning done early, documented carefully, and carried out so that the substance matches the form.
