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The Eleventh Circuit’s recent decision in Estate of Spizzirri v. Comm., No. 23-14049 (11 Cir. 2025) offers tax practitioners a comprehensive roadmap for evaluating when transfers to family members qualify as deductible estate claims under Section 2053. The court’s systematic application of the “bona fide” analysis provides valuable guidance for advisors structuring family arrangements and litigating estate controversies.
A Prenuptial Promise Gone Awry
Richard Spizzirri’s story reads like a cautionary tale of estate planning complexity. When the 64-year-old entrepreneur married Holly Lueders in 1997—his fourth marriage, her second. He brought substantial wealth to the marriage: a net worth between $24.7 and $27.7 million and annual income of $720,000. Lueders contributed over $1 million in assets and three children from her previous marriage.
Their prenuptial agreement initially provided Lueders with 25% of Spizzirri’s gross estate in a marital trust upon his death, along with residence rights and other benefits. However, the couple modified this arrangement five times during their 18-year marriage. The pivotal third modification in 2005 dramatically altered the terms: Lueders relinquished her trust and residence rights in exchange for a $9 million cash payment—$6 million to her and $3 million to her three adult children.
The agreement’s language proved crucial to the later litigation. The modification stated these payments were “in lieu of any other rights which may be available to [Lueders] as [Spizzirri’s] surviving spouse.” Additionally, Spizzirri committed to “make, and keep in effect, a will” reflecting these terms.
Despite this contractual obligation, Spizzirri never updated his 1979 will, which left his estate primarily to his four children from his first marriage. The couple’s relationship deteriorated over time. After Spizzirri’s death, the stepchildren filed claims in Colorado state court and ultimately recovered $3 million from the estate. The estate treated these payments as deductible claims under Section 2053(a)(3), prompting the IRS to issue a notice of deficiency.
ARTICLE CONTINUES BELOW
Dissecting the "Bona Fide" Requirement
The court’s analysis centered on Section 2053(c)(1)(A), which permits deductions for claims that are both “contracted bona fide and for an adequate and full consideration in money or money’s worth.” Because the court found the payments failed the bona fide test, it didn’t reach the consideration requirement.
The Heightened Scrutiny Standard
The Eleventh Circuit emphasized that transactions between family members, including stepchildren as “lineal descendants” of the decedent’s spouse face “particular scrutiny.” This heightened standard reflects the reality that family transfers are more likely to constitute disguised gifts than genuine contractual obligations.
The Five-Factor Test
Treasury Regulation 20.2053-1(b)(2)(ii) provides five factors courts should consider when evaluating whether a claim was contracted bona fide:
- The transaction must occur in the ordinary course of business, be negotiated at arm’s length, and be free from donative intent. The court found this factor decisively weighed against the estate. Testimony revealed that Spizzirri agreed to the stepchildren payments to “keep [Lueders] happy” and “show largesse to her children.” His motivation was preserving his marriage and avoiding divorce costs—hardly the stuff of arm’s length commercial dealings.
- The court evaluated donative intent at the time of the 2005 modification, not when the couple later became estranged. The contemporaneous evidence of gift-giving motivation proved fatal to the estate’s position.
- Claims cannot be “related to an expectation or claim of inheritance.” Here, the stepchildren’s payments were explicitly negotiated “in lieu of” Lueders’ spousal inheritance rights. The court found this direct connection to inheritance expectations disqualified the claims, even though the stepchildren themselves had no personal inheritance expectation from Spizzirri.
- While claims should originate from agreements between the decedent and family member, the stepchildren had no direct agreement with Spizzirri. They were merely third-party beneficiaries of their mother’s prenuptial arrangement.
- The regulation requires that claimant performance stem from an agreement with the decedent. The stepchildren provided no services or consideration to Spizzirri—they were passive beneficiaries.
Strategic Implications for Practitioners
The Spizzirri decision offers several critical lessons for estate planning and controversy practice:
- Documentation Matters: The contemporaneous evidence of Spizzirri’s donative intent—witness testimony about keeping his wife “happy” and showing “largesse”—proved devastating. Practitioners should ensure clients understand that informal statements about family financial arrangements can later undermine tax positions.
- Timing Is Everything: Courts evaluate donative intent at the time agreements are made, not when circumstances later change. The fact that Spizzirri and Lueders eventually became estranged didn’t cure the gift motivation present in 2005.
- Third-Party Beneficiaries Face Uphill Battle: When family members serve merely as third-party beneficiaries without providing direct consideration to the decedent, the bona fide analysis becomes extremely difficult to satisfy.
A Reminder of Fundamental Principles
Estate of Spizzirri reinforces that estate tax deductions require genuine business substance, not merely sophisticated documentation. The decision doesn’t break new ground but provides a thorough application of established principles to a common fact pattern. For practitioners, the case serves as a reminder that prenuptial agreements—regardless of their complexity or legal enforceability under state law—don’t automatically create federal estate tax deductions. The Eleventh Circuit’s methodical analysis provides a valuable framework for evaluating similar arrangements and counseling clients about the tax risks inherent in family financial planning. In an era of increased IRS enforcement activity, such clarity proves invaluable for both planning and controversy work.
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