Zombies and Estate Planning

08/06/2012

It is said that the only certainty in life is death and taxes.  But what about zombies when death is kinda uncertain.  Can we tax the "undead?"  This is the subject of a rather humorous law review article by Law professor Adam Chodorow.  In the article, Professor Chodorow looks at estate planning for the undead in perhaps the only legal paper I have ever seen which cites both the Internal Revenue Code and Weekend at Bernie's II.

In his law review article, Professor Chodorow lays out the differences between different kinds of zombie.  He also examines the various tax implications of zombification and notes, as quoted below, that some people might specifically try to become a zombie — or avoid becoming a zombie — for estate planning purposes:

If people who become zombies are considered dead for federal estate and income tax purposes, little will have changed. Becoming a zombie will be no different than dying from pneumonia, aside from the part where you eat your friends and loved ones. However, other outcomes are possible. For instance, if someone who becomes a zombie is considered not dead (as opposed to undead) for estate and income tax purposes, neither the estate tax nor the basis reset would be triggered. We would be in a situation similar to the one Congress negotiated as part of the Bush tax cuts, which relaxed the basis reset rules in conjunction with eliminating the estate tax. This could turn out well for those intending to hold on to their property for a long time. Alternately, both the estate tax and basis reset could kick in only when a person's zombie was dispatched. Were this the rule, people might have incentives to become zombies to delay the application of the estate tax.

However, these are not the only two options. Until now, the estate tax and income tax have been construed consistently with regard to who is a decedent. This need not be the case. In other words, it is possible that the transition from alive to undead could trigger the estate tax but not the basis reset. Were this to happen, taxpayers who become zombies would be hit twice, and years of tax planning could go out the window. Alternately, becoming a zombie could be deemed not to trigger the estate tax but to allow basis reset. Under this scenario, the government would forego two opportunities to raise revenue, significantly increasing whatever the then current deficit would be, especially if the outbreak were severe.

He also tackles other tricky zombie issues, like whether a person is still considered married if their spouse has become undead, the administrative problems of resurrecting dead social security numbers, and the difficulty many zombies would likely have in filling out income tax forms.

I found this article very funny.  If you would like to read it, click on the following link:  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2045255