At Thanksgiving dinner in 2018, Rembrandt promised his sister Theodora $500,000 if she would move in and take care of him. All the family members heard his statement. Theodora sold her house, closed her business, and moved in with Rembrandt. Rembrandt’s health rapidly declined, and he died in late 2020. Theodora periodically asked him about her $500,000 and he told her all his money was tied up in wealth, but that he would take care of her in his will. However, he did not make any changes to his will, and Theodora was only included with the rest of his 7 siblings in a $1,000,000 bequest. Theodora sued the estate and won $500,000 for breach of contract. It is now time to prepare Rembrandt’s estate tax return. He has a taxable estate. How should we treat the $500,000 lawsuit verdict and the legal fees associated with the lawsuit?
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