Rebel sisters await judgment on inheritance tax appeal
As reported in the Daily Post
Last updated at 12:50pm on 28th April 2008
Two elderly sisters fighting for the same rights as married and gay couples will tomorrow hear the outcome of their last-ditch appeal for equal treatment.
Ninety-year-old Joyce Burden and her 82-year-old sister Sybil have lived together in Marlborough, Wiltshire, all their lives.
The spinsters have willed their jointly owned house to each other, but when one dies the other faces crippling inheritance taxes because UK inheritance laws only exempt property passed between spouses or civil partners.
The Burdens have been battling against inheritance discrimination for more than 30 years - writing to the Chancellor of the day before every budget since 1976 urging exemption from inheritance tax for family members.
Finally, when the UK Civil Partnership Act of 2004 recognised gay and lesbian couples for inheritance tax purposes, the sisters turned to the European Court of Human Rights, claiming the Act violated Human Rights Convention articles outlawing discrimination and guaranteeing the 'protection of property'.
But in 2006 they lost by a 4-3 majority vote of the seven judges. The verdict declared that any workable tax system was bound to create "marginal situations and individual cases of apparent hardship or injustice".
The verdict said it was up to national authorities to decide how to strike the right balance between "raising revenue and pursuing social objectives".
Afterwards, Joyce Burden said: "If we were lesbians we would have all the rights in the world. But we are sisters and it seems we have no rights at all."
An appeal to a 17-member Grand Chamber of the Human Rights Court was heard last year - and whatever the appeal verdict tomorrow, it marks the end of the legal road for the sisters.
If they lose, Joyce and Sybil know that, when one of them dies, the surviving sister will have to sell their four-bedroom house, valued in 2006 at £875,000, to pay the 40 per cent inheritance tax on its value above £300,000.
They hope the appeal will reject the original four-judge majority view that the difference in inheritance tax treatment faced by co-habiting siblings compared with married couples or civil partners is "reasonably and objectively justified".
That view was shared by the UK Human Rights judge Nicholas Bratza.
The sisters hope a majority this time will side with the three judges who vehemently opposed the original result.
Polish judge Lech Garlicki and Maltese Giovanni Bonello issued a joint 'dissenting opinion' in 2006 describing the current UK inheritance tax discrimination as 'particularly striking' in the case of the Burdens.
The judges wrote: "Both sisters have already attained a rather advanced age, they have been together for several decades and neither has children. It is obvious that the state will be able to collect its tax in full upon the death of the surviving applicant. But the state wants to do it twice".
And judge Stanislav Pavlovschi, from Moldova, declared: "It strikes me as absolutely awful that, once one of the two sisters dies, the surviving sister's sufferings on account of her closest relative's death should be multiplied by the risk of losing her family home because she cannot afford to pay inheritance tax in respect of the deceased sister's share of it. I find such a situation fundamentally unfair."
This is one of the worst inheritance tax situations I have seen. Under the U.S. Federal Estate tax rules, the Burden sisters would also be out of luck, but only if the estate of the deceased sister exceeds the Exemption Equivalent Amount ($2M this year). While the marital deduction allows for the deferral of payment of estate tax until the surviving spouse dies, this benefit would not apply to sisters.
It would be tax advantageous for the Burden sisters to move to the United States. The exemption equivalent amount from U.S. Federal Estate Taxes for 2008 is $2,000,000, which if converted to the British Pound would be the rough equivalent of 1,004,621 GBP, as of today. In 2009, the Exemption Equivalent amount will equal $3.5M, and in 2010, there is no U.S. Estate Tax for one year.
The U.S. Federal Estate Tax exemption amount from 2008 to 2010 is therefore sufficient to completely exempt their 875,000 GBP house from inheritance tax if they move to the United States. Assuming there are no other assets, this would give the sisters a large enough exemption not to worry about losing the house to taxes. I urge the Burdens to think outside the box and move. If they actually end-up taking their assets and leaving the UK in their 80's and 90's, it may actually inspire the British law makers to rethink their tax law. I am sure Uncle Sam would be happy to have them!
Mina N. Sirkin is a Family Wealth Lawyer, who is Board Certified Specialist in Estate Planning, Probate and Trust Law by the Board of Legal Specialization of the State Bar of California. Ms. Sirkin practices in Los Angeles County, California. MSirkin@SirkinLaw.com. http://www.SirkinLaw.com.