Thursday, March 10, 2016

That Is Not Amore

Madeline Castellotti was the co-owner of famed NYC pizzeria, John's Pizzeria. Prior to her death in 2004, she changed her will to leave her entire interest in the restaurant to her daughter, Lisa. She allegedly did so because her son, Peter, was going through a divorce and she did not want his estranged wife to receive any interest in the restaurant. Lisa was supposed to transfer half of her inheritance to Peter after the divorce was finalized. When she did not, Peter sued Lisa. An NY appeals court recently ruled that his 3 year old lawsuit may proceed.

Several points:

1. Typically inherited assets are not subject to division in a divorce proceeding. They remain with the person who inherited them unless they are commingled.

2. The mother would have been wise to use a trust to hold assets intended for her son rather than relying on her daughter to transfer the assets to him.

3. The transfer by Lisa to Peter of assets in excess of $1 million prior to 2011 would have resulted in Lisa paying a gift tax. 

4. Ironically, John's Pizzeria only serves entire pizzas and does not serve pizza by the slice.