Paul Daugherty of the Cincinnati Enquirer allowed me to write his The Morning Line Blog again today.
Paul Daugherty of the Cincinnati Enquirer allowed me to write his The Morning Line Blog again today.
A Columbus widow is suing L Brands, the parent company of Victoria’s Secret and Bath and Body Works (and originally known as The Limited, Inc.), claiming that she inherited $1.5 million of stock that L Brands refuses to acknowledge. Her late husband,a bricklayer, allegedly purchased 50 shares of The Limited Stores in 1976 after receiving a stock tip from a client. His widow claims his stock certificate for 50 shares is an original certificate and is now worth $1.5 million after 7 stock splits and 40 years of unpaid dividends. The company has not yet responded in court.
Several practical points:
1. I detest stock certificates – they are easily lost during the client’s life and difficult to transfer after the client’s death. I always advise my clients to own stock in a brokerage account rather than in certificated form.
2. I also always advise my clients to list all of their financial accounts/assets and place the list with their estate planning documents. This assists their children with settling their estates by providing them knowledge of which assets they own and must locate.
3. If the stock market continues on its current trajectory, this battle might be moot because the shares will be worthless.
A Minnesota woman signed a will in 2006 naming her grandson and a former employee as equal beneficiaries of her estate. She tried to revoke the will in 2008 and leave her entire estate to her grandson by writing and initialing several changes on a photocopy of the will. In 2010, she downloaded a DIY will from a website and hand wrote her intent to leave her entire estate to her grandson, but she did not have it properly witnessed. She died in 2013 and all 3 wills were presented for probate. The local probate court held that the 2006 will was still in effect because the 2008 notes on a photocopy did not validly revoke the prior will and that the 2010 downloaded form was not validly executed.
Several quick points:
1. In Ohio, a will can be revoked with a statement of revocation or physical destruction (i.e. shredding or tearing) of the prior will.
2. I generally retain the original wills of my clients to prevent them from trying to alter their wills by writing on them.
3. I will once again quote the mechanic from the ’70’s Fram oil filter commercial (because I am from Greenville, Ohio and we had a Fram oil filter plant in my long ago youth): “You can pay me now or pay me later.” I would have billed her $600 to implement her wishes. Instead, her estate spent thousands and her wishes were not followed because she did not follow the simple formalities for signing a will. The now long ago former employee is forever grateful for her short sighted thriftiness.
When Tom Clancy died two years ago, he distributed his real estate to his 2nd wife, then left the remainder of his $83 million estate in equal thirds as follows:
1. In trust for his wife,
2. In trust for his wife and adult children from his first marriage, and
3. In trust for his adult children from his first marriage.
The primary asset was his 12% interest in the Baltimore Orioles which was valued at $65 million. The last codicil signed by Clancy directed that his wife should receive her inheritance “estate tax free.” His wife and adult children then proceeded to fight over whether the trust for her and them (Trust No. 2) should pay any estate taxes. A Maryland court recently decided that the trust for the children (Trust No. 3) should pay the entire estate tax bill.
1. Poor drafting leads to expensive disputes. I have never used the vague term “estate tax free” in any document I have drafted.
2. If a trust for a surviving spouse is carefully drafted, it can postpone the taxation of its assets until the death of the surviving spouse which is what seems to have occurred here at least with respect to the trust for the spouse only (Trust No. 1).
3. Shed no tears for anyone in this dispute. Clancy’s adult children will presumably also inherit the substantial assets his first wife received upon their divorce while his 2nd wife is reportedly an heiress to a Pepsi bottling fortune. Even the IRS receives nearly $12 million with significantly more millions coming when the 2nd wife dies.
4. The second wife aka Evil Step-Mom likely cannot die soon enough for his adult children.
(Thanks to Chip Workman for bringing this to my attention).
An older woman adopted her younger girlfriend/partner in the 1970’s so the girlfriend could inherit the trust fund created by the older woman’s father. When the older woman died in 1997, the girlfriend inherited a substantial sum from the trust. The younger woman died in 2009 without a will. Her brother staked a claim to her $25 million estate as her closest living relative. However, NY law (and Ohio law) provides that once someone is adopted, they lose all relationships with their prior family, including the ability to inherit from them, and the ability to leave them assets without a will. The woman’s estate will escheat to the State of NY because she has no relatives.
1. Lawyers in this case are arguing that the older woman adopted her girlfriend because same sex couples did not have the same rights as traditional couples in the 1970s. However, that argument is a red herring because the funds were in a trust which could only be left to a descendant which caused the woman to adopt her girlfriend. Funds not in trust could be left to anyone she pleased – girlfriend, charity, or relatives.
2. I draft trusts to prevent this type of adoption chicanery by including only children who were adopted prior to the age of 18.
3. In an era of Obergefell and Kaitlyn Jenner’s reality show, it is easy to create a legal smokescreen by arguing discrimination from 40 years ago, when the real culprit is simple neglect by a wealthy person to create a will.
Google recently updated its terms of service to make it easier for the relatives of a deceased owner of a Google account to deal with the account. By checking a box, an individual can request that Google close an account, notify Google that a user is deceased, request the payment of funds from a deceased user’s account, and obtain data from a deceased user’s account. The request page is here.
Three brief points:
1. This is a a rare example of Google acting uncharacteristically altruistic instead of operating solely in its own self interest.
2. The wills I draft always have provisions permitting an executor to access the digital accounts and digital assets of a deceased individual.
3. The request to obtain data from a deceased user’s account does not apply to the NSA – they already have it.
Amy Blumenthal moved to NYC and started seeing a psychiatrist, Dr. Susan Turner, to fulfill her prescriptions. Six months later Turner allegedly dropped Blumenthal as a patient, started dating her, and soon moved into her apartment. Blumenthal eventually re-wrote her will to leave her $7 million estate to Turner. Blumenthal died 3 1/2 years after starting the romantic relationship with Turner. Blumenthal’s brother, a hedge fund manager and owner of a swimwear line, is challenging the will on the grounds that Turner unduly influenced his sister in the preparation of her will.
Several quick points:
1. Although it is unethical for a psychiatrist to date a patient whom the psychiatrist is treating, it is not unethical for the psychiatrist to be named as a beneficiary of the patient’s will although an argument can be made that the psychiatrist unduly influenced the patient.
2. When a woman leaves her estate to her girlfriend of 3 1/2 years while ignoring her brother the hedge fund manager who is presumably well off, it is difficult to prove undue influence.
3. I thought that hedge fund managers only cared about billions, not single digit millions. I also did not think that they had sideline swimwear businesses.
Maurice Laboz was a NYC real estate investor worth $37 million when he died earlier this year. He left $10 million in trust for each of his daughters and provided that they will receive their inheritance when they reach 35. However, they may receive funds earlier if they abide by his wishes of signing a pre-nuptial agreement prior to marriage ($500K) and graduating from an accredited college and describing the use of trust funds distributed early ($750K). They will also receive a distribution of 3x their annual salary each April 15 and distributions for staying at home with children born in wedlock (3% of the trust value annually). He also disinherited his wife whom he was in the process of divorcing.
Several quick points:
1. Funded trusts are a great vehicle for disinheriting a spouse in the midst of a divorce proceeding. Otherwise, the estranged spouse is entitled to a percentage of the estate at death (1/3 in Ohio).
2. Incentive trusts such as Mr. Laboz’s are good for imposing one’s wishes and values from the grave upon one’s descendants.
3. Personally, I favor a trust clause that distributes 10% of my children’s inheritance to charity for each tattoo that they have, visible or not.
Now that Bobbi Kristina Brown has died after six months in a coma, let’s revisit what will happen to her estate and her mother’s estate, while also covering what she should have done differently. To recap, Bobbi Kristina was a month shy of 19 years old when Whitney died. Whitney’s 1993 will created a trust solely for the benefit of Bobbi Kristina. The trust distributed 10% of Whitney’s estate to Bobbi Kristina when she was 21 with the remainder to be distributed at the ages of 25 and 30. Bobbi Kristina received approximately $2 million on her 21st birthday. After Bobbi Kristina was found unconscious, her father (Bobby Brown) and grandmother (Cissy Houston) made her medical decisions for her somewhat contentiously.
What should have happened?
1. Whitney should have provided that her estate be distributed to her daughter at an age later than 21. I never draft trusts with such a young age for principal distribution.
2. When Bobbi Kristina received her first distribution from her trust, she should have created a will of her own which would have enabled her to leave her $2 million to her “husband”/adopted “brother”, Nick Gordon.
3. Upon turning 18, Bobbi Kristina should have executed a health care power of attorney, living will, HIPAA release, and financial power of attorney designating a specific family member to handle her affairs if she were disabled. I always recommend this for my clients whose children are heading off to college.
4. None of this was done. Of course, I doubt that basic estate planning was a priority for a family prone to alcohol and drug use while bathing.
A 22 year old rising college senior recently called into a radio advice show because she had exhausted the $90K college fund her grandparents had left her. She does not have funds to pay for her senior year after using some of the funds for a trip to Europe, college breaks, and clothes. Some of her comments included the following:
1. “Maybe [my parents] should have taught me to budget or something. They never sat me down and had a real serious talk about it.”
2. “[My parents] said there was nothing they could do for me. They’re not being honest with me saying they don’t have [money] because my dad has worked for like a million years and they have a retirement account.”
3. “Then my parents suggested I go take out a loan at a credit union and I’m, like, how am I supposed to do that?” coupled with “I have to go inside a bank to get a loan?”
4. “I know they’re trying to teach me a lesson and blah blah blah and character building but, like, I hope they realize [working part-time] could have such a negative effect on my grades and as a person.”
Several quick estate planning points:
1. The grandparents would have better served their delicate (and irresponsible) granddaughter by funding a 529 plan which would have allowed them to ensure that distributions were only made for tuition and other direct college expenses.
2. If she received the funds as an inheritance, the grandparents should have left them in trust for her and provided that the funds could only be disbursed for education related expenses.
3. This young woman is emblematic of many contemporary college students who are supporters of Obamacare, Big Government, and campus speech and sex codes because they are incapable of providing for themselves and need an authority figure to do that for them.
William Davidson was the owner of the Detroit Pistons, Tampa Bay Lightning, and Detroit Shock (WNBA). When he died in 2009, he was listed as the 62nd richest man in the U.S. His estate recently settled litigation with the IRS over the amount of estate taxes owed. The IRS claimed that the estate owed an additional $2.8 billion (yes, with a B) in estate taxes. The dispute involved the value of closely held stock transferred to various trusts. The estate settled for $388 million.
Points, if I must:
1. I would call this a victory for the estate given that the IRS was seeking 7X more than the settlement amount.
2. Of course, it is never a victory for the family when they had already presumably paid more than $1 billion in estate taxes and were fighting over the incremental taxes.
3. All of this begs the question about how much estate tax is enough from one individual. If Democratic candidate nee Socialist Bernie Sanders were president, Davidson’s tax bill would have been $1 billion more.
4. Last, if one owns a professional sports team, or three, good estate planning advice is essential.
Paul Daugherty of the Cincinnati Enquirer allowed me to guest write his The Morning Line blog today. I wrote about his book “An Uncomplicated Life” in addition to the usual sports topics. I hope you enjoy it.
On Father’s Day, let’s briefly recap the will of fashion designer, Oscar De La Renta, who died last Fall. It was recently reported that he snubbed his adopted son, Moises, in his will because he was upset that his then 20 year old son had tried to compete with him in the fashion design business by producing five or six pieces under his own name 10 years ago. De La Renta left $18 million of real estate to his second wife of 25 years, then put the rest in trust for her, her children, and his son. That amount likely was $5.34 million.
1. Funds left to his wife will not be subject to estate taxation until her death while leaving anything in excess of $5.34 million in trust or to his son will be taxed at a rate of 40%.
2. Context is everything. I doubt De La Renta was so insecure as to have been threatened or annoyed by his son’s attempt to follow him into the business. Reporting that the son was disinherited for that reason makes for a nice narrative, albeit false.
3. After 25 years of marriage, it is not unusual to leave a significant portion of an estate to a spouse, even if there are children from a prior marriage. Leaving a football team worth $1 billion to a third wife of 10 years is questionable, though, Tom Benson.
Anthony Marshall was the son of socialite Brooke Astor. He was convicted of elder abuse of his mother and served two months in jail for stealing $14 million from her. In his will, which was recently admitted to probate court, he left all of his assets to his second wife and her children. He specifically excluded his son, Philip Marshall, who was the individual who notified authorities of his father’s treatment of Ms. Astor. The younger Marshall will not contest his father’s will.
Three quick points:
1. The will would be difficult to challenge unless the younger Marshall could prove that his father lacked mental capacity to execute the will.
2. The purposeful omission of the younger Marshall for ratting out his father is evidence that the father was mentally competent.
3. If a man steals from his mom, it is not beneath him to vengefully disinherit his son.
The children and widow of Robin Williams are continuing to fight over his estate. His widow is seeking items left in the house even though Mr. Williams’ will left his jewelry, clothing, memorabilia, and awards to his children. The list of 300 disputed items reportedly includes underwear, slipper, and t shirts. More importantly, the widow will receive in trust an undetermined amount of money to care for the house he left her. Of course, the parties cannot agree on this amount.
1. Williams and his attorney should have determined a specific amount for the upkeep of the house and erred on the high side. Vagueness in a will/trust only leads to disputes.
2. Fighting over underwear etc. proves that some people want to fight simply because the probate process is their last chance to fight with their siblings or step-parent.
3. Even though the parties both claim the underwear, rumor has it that they left the Patch Adams memorabilia at the curb for the garbageman.
Since BB King died two weeks ago, some of his family members have accused his manager of poisoning him and have also threatened to challenge his will. King allegedly left his 13 children $5,000 each and left $3,000 to his grandchildren. He left the balance of his estate in trust for the education of future descendants.
1. When children make ludicrous accusations against a long time friend and confidante, it is easy to see why Mr. King would want to leave them a nominal amount from his estate.
2. To ward off a will contest, Mr. King could have left them a larger sum i.e. $50K and tied the acceptance of it to not contesting the will. If someone contested the will, she would not receive her inheritance.
3. With their educations funded by Mr. King, perhaps his future descendants will realize that 89 year old diabetics in hospice care die naturally and not from poisoning.
Taking a break from people fighting over estates, let us remember those who fought for us and our country. I read the following for the first time this weekend and found it to be poignant about the sacrifices of our military men and women.
“It is, in a way, an odd thing to honor those who died in defense of our country, in defense of us, in wars far away. The imagination plays a trick. We see these soldiers in our mind as old and wise. We see them as something like the Founding Fathers, grave and gray haired. But most of them were boys when they died, and they gave up two lives — the one they were living and the one they would have lived. When they died, they gave up their chance to be husbands and fathers and grandfathers. They gave up their chance to be revered old men. They gave up everything for our country, for us. And all we can do is remember.”
President Reagan, 1985
Late NYC art dealer, Robert Ellsworth, was in the news recently because he left $50,000 in his will to two waitresses at his favorite restaurant. He also left $10 million, a house in Connecticut, and $5,000/month to his boyfriend of 50 years who was 17 when he moved in with Ellsworth The boyfriend is challenging the will because of bequests made in trust to various charities, including Harvard, which would result in the estate planning attorney earning fees for serving as trustee of the trusts. The boyfriend alleges that Ellsworth was suffering from dementia when he revised his will to include the charities.
1. Presumably a prior will made by Ellsworth was more favorable to the boyfriend because it would be reinstated if the most recent will is declared invalid.
2. $10 million and $5K/month seems generous, but is barely 5% of Ellsworth’s $200 million estate.
3. Regarding the attorney serving as trustee of the charitable trusts, I generally decline to serve as executor or trustee for my clients because of perceived conflicts of interest.
4. If Cher could live with Sonny when she was 16, I guess it was then socially acceptable for the 17 year old boyfriend to move in with the then 37 year old Ellsworth. Now, Ellsworth would be arrested for being involved with a minor, unless he was Doug Hutchison and she was Courtney Stodden.
5. With its $32 billion endowment, can we all agree that Harvard does not need a nickel more and should use its endowment to lower its tuition?
I am an attorney located in Cincinnati, Ohio who practices in the areas of estate planning, probate, asset protection, and small business advice. I make a difficult and bewildering process as simple as possible. Most importantly, I provide "more for less" for my clients.