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What in the Name of Tony Oliva?

Carl Pohlad was the owner of the Minnesota Twins.  He died in early 2009.  His estate is currently embroiled in a $121 million dispute with the IRS about the value of his ownership interest and the commensurate estate taxes owed.  The IRS claims that his interest was worth $293 million while his executor claims it was only worth $24 million.  The executor’s value is much lower because it claims that even though Mr. Pohlad owned a majority interest in the team through several entities, he owned only 10% of the voting shares and he died when the stock market was at a 12 year low.
Several points:
1.  Fractional interests of privately held businesses are difficult to value.
2.  Voting control of an entity is worth significantly more the non-voting interests.
3.  Mr. Pohlad died when the financial markets had collapsed and the stock market was being pummeled. However, baseball teams with television contracts and other revenue streams have different business cycles than financial institutions, and should not be valued in the same manner.
4.  As if the Twins habitually losing to the Yankees in the regular season and the playoffs is not ignominious enough, it has be to be more galling to the Pohlads and Twins fans that George Steinbrenner’s estate did not pay any federal estate taxes on his $1.6 billion (yes, with a B) interest in the Yankees because he died in 2010 when there was no federal estate tax.

Blog Reconstruction

I have not posted in this forum for six weeks due to my web site being hacked (thanks Word Press) and then a vacation followed by a dead hard drive and other tech issues.  I have been posting in other venues such as Facebook, Google+, Blogger, and Tumblr.  I will upload those posts here.  Thanks for your patience.

Just the Team for the Job

Short and sweet (and no lessons) after last week’s Gandolfini treatise.  A Cleveland Browns fan requested six Browns players to serve as pall bearers at his funeral this week.  The reason?    “So the Browns can let him down one last time.”

Questionable Planning, Terrible Reporting

James Gandolfini  of Sopranos fame was survived by a 13 year old son, an infant daughter, and his second wife.  His estate is reported to be worth $70 million.

His will, prepared in December, was filed in probate court yesterday.  It leaves his property in Italy equally to his children in trust, his clothes and jewelry to his son, bequests totaling $1.6 million to various individuals, and leaves 30% of the remainder to each of his sisters and 20% each to his wife and daughter.   The share for his daughter will remain in trust until she reaches 21.  The will states he has provided for his son elsewhere.  However, almost all media outlets have incorrectly reported that his son is the major beneficiary of his estate.

Many points:

1.  He should have used a funded living trust to ensure privacy of his net worth and his intentions which avoids Cincinnati attorneys from critiquing it .

2.  Giving the daughter unrestricted access to her share at 21 is a recipe for disaster.  He should have staggered her distributions over 10 or 15 years with the earliest one at 25.

3.  The testamentary trust will be expensive to administer for the next 20 years.  A living trust would be easier, less costly, and private.

4. Estate taxes will be painful and could have been delayed/minimized. The federal tax bill will be nearly $20 million while the NY bill will be over $4 million.  He could have delayed the payment of taxes by leaving assets in trust for his wife and giving his daughter her share from the same trust after the death of his wife.

5.  Odd to leave 60% of the remainder to his sisters and none of it to his son.

6.  Unless the clothes/jewelry and  Italian property comprise the majority of the assets, all media outlets from Fox News to HuffPo and from ABC to NY Post, and all others, are incorrect in reporting that the son receives the bulk of the estate.

7.  The linked article also states that it is unclear who will receive the proceeds of other properties once they are sold.  It must be too difficult for reporters to ask an estate planning attorney to read the will and inform them that the proceeds are the remainder and will be distributed to his sisters, wife and daughter.

8.  When the mainstream media ignores big stories like Benghazi and Presidential debate moderators get their facts wrong when interjecting themselves into debates (i.e. Candy Crowley), we should not be disappointed when they can not accurately report the contents of a will.  We should trust them less, though.

9.  I hope that Mr. Gandolfini provided generously for his son in a life insurance trust or some other vehicle.  Otherwise, the son’s trauma of finding his dying father will be compounded by receiving much less than his sister, step mom, and aunts.   Maybe someday he will grow into the clothes if he uses food as comfort.

King of Pop Still Reigns

When Michael Jackson died 4 years ago, his net worth was negative $500 million.   Since then, his estate has earned $1.1 billion and grows larger daily.  A new Vegas show, Michael Jackson One, opened last week and is expected to run for 10 years.  A prior show, Michael Jackson – the Immortal World Tour,  has run for 2 years and is expected to run for at least 2 more.  Jackson has earned more money since he died than during his life and is the biggest selling artist on iTunes.  He is survived by 3 children of  either debatable paternity or unknown maternity, all of whom have unusual or odd names.

Several points:

1.  Estates can continue to earn money after the death of the individual.

2.  Estate administration can be simplified if the earnings rights are transferred to a trust.

3.  Biggest selling artist on iTunes?  Do baby boomers still not know how to rip their CD collections, nor share them with their children?

4.  Negative $500 million net worth?  A personal amusement park and zoo are expensive.

 

Priorities When Expecting a Child

Zoey Perkins is the 1 year old daughter of former Kansas City Chief Jovan Belcher and Kasandra Perkins.  Belcher killed Kasandra last December before killing himself.  As the daughter of a former football player, Zoey will receive $1 million in structured payments over the next 22 years.  A Missouri probate court recently awarded custody to Kasandra’s first cousin instead of Belcher’s mother after a 3 day hearing.

Three points:

1.  When a couple is expecting a child, they should prepare wills to designate a guardian for their children so their wishes are followed instead of  giving the  decision to a stranger.

2.  When a couple dies without designating a guardian, sometimes the potential guardians are motivated by the financial status of the child.

3.  It is easy to overlook a will in the excitement of having a child, but the impact of designating a guardian is far more important than decorating a baby’s room.

This Was a Good Idea?

Claudia Cohen was an NYC gossip columnist whose family owned Hudson News outlets.  She was married to Ron Perelman, an NYC business tycoon, from 1985-1994.   Their daughter was born in 1990.  Claudia died of cancer in 2007.   Shortly before her death, she changed her will to name her ex-husband as executor of her estate which was estimated to be worth $68 million.

As executor of her estate, Claudia’s ex-husband has been locked in battles with her brother and now deceased father for the past five years.   The battles range from the valuation of Claudia’s interest in the family business which was set by a partnership agreement, an alleged broken oral promise to leave Claudia half of her dad’s estate, and whether Claudia’s dad needed a guardian.  The estate has lost all of these battles and incurred at least $5 million in legal fees, if not more, plus had to repay a $10 million loan to Claudia’s father.

Several points:

1.   A value set in a partnership agreement or buy sell agreement will be enforced, even it is not the true value of the interest.

2.  It is nearly impossible to win a law suit to enforce a promise to leave someone an inheritance.

3.  It is never a good idea to name a former spouse as executor or trustee, much less one embroiled in litigation with 2 ex-wives at the time of the designation and known for being disputatious.

4.  Claudia’s daughter will be fine financially even if her inheritance from her mother is entirely consumed by legal fees.  Her father is reportedly worth $1.8 billion.

 

Even Rappers Need Wills (and Life Insurance, Trusts, and Condoms) Pt. 3

I previously blogged about rapper Nate Dogg who died in 2011 survived by 6 children of unascertainable ages and different mothers.  His estate is back in the news again because the mother of one of his children filed a claim against his estate for unpaid child support from the date of the child’s 2006 birth, plus support since Dogg’s death in 2011.   Two other women, one of whom also has  a child Dogg fathered in 2006, are arguing in court over the amount of support they are supposed to receive from his estate.

Several points:

1.  In Ohio, claims against an estate must be filed within six months of the date of death.  The claim for Dogg’s unpaid back support would be invalid due to untimely filing.

2.  In Ohio, child support obligations terminate at death.  Adding money for post-death support to an already late claim just makes the claim doubly improper.

3.  Dogg’s children are entitled to social security payments until they turn 18.

4.  For divorced couples, a life insurance policy is recommended to cover any future child support payments.

5.  Dogg could have established a trust to provide for his children upon his death.   However, that would have required foresight and planning.  For a guy who did not make child support payments nor who wore a condom, such planning would be inconceivable.

Double Indemnity Fail

A SC woman murdered both of her 20 something sons, her ex-husband who lived next door, and her step-mother.  She tried to blame the crime on her oldest, murdered son.   She was the beneficiary of insurance policies on the victims in the amount of $680K.  She had previously killed an alleged intruder and kept 3 guns in the house.  She recently plead guilty but mentally ill and was sentenced to life in prison.

What are the estate planning and other issues in this crime?

1.  The killer is precluded from inheriting under the state slayer statute which prevents a murderer from benefiting financially from her crime.

2.  Without valid wills, the sons’ policies will benefit their grandparents, or aunts and uncles if the grandparents are deceased.

3.   If a mother takes out a large life insurance policy on a child, the child should sleep with one eye open.

4.  It is never a good idea to live next door to a mentally ill ex-wife, much less one who has already killed a man and who has a life insurance policy on one’s life.

Beneficiary Designations and Pyrrhic Victory

A Virginia man died of a rare leukemia survived by his 3rd wife.  One of his assets was a $125K insurance policy he received while employed by the federal government.  The policy listed his second wife as the beneficiary.  The surviving spouse contested the former wife’s right to the policy proceeds.

Virginia has a statute which precludes divorced spouses from inheriting from a   deceased former spouse.  Nonetheless, the US Supreme Court unanimously ruled that the former spouse was entitled to the proceeds because the 1954 federal law establishing the insurance program and providing that beneficiary designations must be followed trumped the Virginia statute which omits former spouses.

Several points:

1.  Ohio has a similar statute to Virginia.

2.  After a divorce, individuals MUST revise all of their estate planning documents and update their insurance and retirement plan beneficiary designations.

3.  After a leukemia or cancer diagnosis, no matter how positive the treatment options, individuals need to review their estate planning documents and their beneficiary designations.

4.  I suspect this was a Pyrrhic  victory for the former wife with most of the policy proceeds being consumed by legal fees during the 5 year dispute.  But then, most disputes between former spouses are Pyrrhic.

Into the Ground, Then into Thin Air

A Pennsylvania attorney and his wife, a successful dentist, perished in a private plane crash in 2007. They had no children so they left their assets to various relatives in their wills.  The estates were comprised of a law practice, dental practice, various real estate holdings, and medical businesses in South Carolina and initially estimated to be worth $40 million.  After six years and a will contest action, the estate has incurred administrative fees of $3.75 million and has $3 million remaining.

Several points:

1.  With their varied investments, the couple should have used a trust to minimize probate administration expenses.

2. Legal and medical practices are personality dependent and are not worth much without the contribution of the individual who built the practice.

3.  $3 million left after an initial $40 million estimate?  The 2008 financial crash was brutal on everyone.

4.  Private planes are known as doctor and lawyer killers for a reason.

Charitable Conflict

The estate of an elderly, childless  Fresno woman was officially closed this week when the bulk of her $2.4 million estate was distributed  to Fresno State and a smaller percentage including personal items was distributed to the retirement community in which she resided.   The estate is newsworthy because she had promised in 2001 to leave her entire estate (then valued at $4 million)  to Fresno State in exchange for it naming the education school after her and her late husband.  She changed her will multiple times with the final will leaving some assets to her retirement community and naming its foundation as her executor.

Several points:

1.  She would have been well served by a living trust to ensure privacy for this matter.

2.  Couples make planned gifts, but after the death of one of them,  the survivor is pressured by other charities to leave money to them.

3.  Fresno State seems to have conducted itself honorably by not contesting the will and executor appointment and not removing her name from the education school.

4.  The retirement home will receive 40 mens’ shirts, 70 ties, and 5 sport coats.  Apparently no one  cleaned out the husband’s belongings after his 1995 death.

5.  The retirement home will also receive 35 turtlenecks and 33 pairs of gloves.  I did not think that the weather in Fresno necessitated such a large collection of cold weather gear.

6.  I hope no one wants the 60 pairs of undergarments.

7.  See point 1.

Even Rappers Need Wills Pt. 2

Rapper Heavy D died in late 2011 survived by a now 13 year old daughter, parents, and siblings.   His brother, Floyd, recently filed a copy of  1999 will which unsurprisingly left the entire estate to Floyd.  The original was allegedly lost years ago.

Several points:

1.  Missing and lost wills are presumed to have been destroyed.

2.  Always tell your executor where the original will (and copy) are located.  I keep the originals for my clients and provide them copies with instructions to notify their executor of the location of the copy (which is stamped with my name).

3.  Without a will, Heavy’s daughter would inherit the entire estate.

4.  Birth of children should be the primary reason for executing a will

5.  One report said the rapper died before he could revise his will to include his daughter.  It stinks when 11 years sneak up on you.

All Cats (and Shelters) Look Gray in the Dark

An animal shelter in Collinsville, Oklahoma which always struggled financially received a $188K check from the estate of an unindentified deceased animal lover.  Two weeks later, it received a request from the law firm administering the decedent’s estate to return the check because the bequest was intended for a shelter with the same name in Collinsville, Illinois.  The shelter has not yet returned the check, although it has said it will.

Several points:

1.  In making charitable bequests, I always list the address of the charity to prevent this type of confusion.

2.  Because of its error, the law firm has stated it will donate $12K to the Oklahoma shelter, which is 6x more than the shelter usually has in the bank.

3.  Apparently the Oklahoma shelter spent some of the $188K, perhaps $12K, or else it would have returned the funds last month.

Selling the House From Under Her Feet

An LA woman might lose the house she shared with her common law husband of 27 years.  He allegedly hand wrote a will leaving the house to her.  Nonetheless, the Los Angeles County Public Administrator is proceeding with a sale of the house for non-payment of debts and potential buyers traipse through the house while she is present.

Several points:

1.  Even with a handwritten will, the will must be probated.  Leaving it in a drawer does not transfer any assets.

2.  The common law husband could have added her to the deed as a joint tenant to immediately transfer the house to her upon his death.

3.  Some like to decry notions of traditional marriage, but spouses have more rights and protections under law than non-spouses including the right to inherit when there is no will and the right to remain in a house.

4.  Even people of modest means and limited assets need estate planning.

5.  Newton’s First Law applies to government – a government procedure in motion stays in motion. Someone should pause the bureaucratic machine until the woman’s rights can be ascertained.  If banks were behaving this way, there would be an outcry, protests, Congressional hearings, and a class action suit.  Because it is a governmental agency, people shrug and figure “that is government.”

 

 

Agatha Christie Revisted

Urooj Khan is the Chicago man who died of cyanide poisoning after winning $1 million in the lottery.   He had dinner with his wife, father in law, and his teen daughter from a previous marriage the night before he died although his wife and father in law did not allegedly eat the meal.  He did not have a will.  The Cook County Probate Court has frozen his dry cleaning businesses while it determines whether they are part of his estate or were transferred to his widow via other agreements.

Several points:

1.  A document disposing of assets at death would have to comply with the requirements for executing a will.

2.  Exceptions to the will requirement would be a buy sell agreement or provisions within an LLC operating agreement.  However, in this case that would suppose that Mr. Khan’s wife was a business partner with him.

3.  It has been more than six months and no arrests have been made in the death by cyanide where the wife and father in law did not eat the same meal and stood to benefit from the new windfall?  Agatha Christie novels are not this obvious.

Made for Hollywood – Wealth, Murder, Gangs, and Prostitutes

I wish I had the screen rights for this story.  A wealthy tech investor was murdered by gang members who were related to the harem of prostitutes who spent considerable   time in the house he shared with his ex-wife.  In addition to 2 adult children, he had 2 children with a former prostitute who are now seeking support and half of his estate.

Two points:

1.  The claims of the prostitutes’s daughters will depend on how he defined children in his will.

2. Not to be Puritanical, hanging with unsavory characters and living a hedonistic life might be fun, but it rarely ends well.

Smart Man “Dies Like an Idiot”

A Holocaust survivor who created a $40 million fortune in real estate died without a will last year. Because a world wide search for relatives has turned up none, New York state will receive his fortune.

Several points:

1.  Escheating to the state is incredibly rare because the laws of intestacy look for any living relative, including cousins and their descendants and any one who falls under the nebulous term “next of kin.”

2.  A 97 year old man who is in failing health should not procrastinate in his will preparation.

3.  His fellow Holocaust survivor who said  “He was a very smart man but he died like an idiot” is accurate.

 

If I Read It In the National Enquirer, It Must Be True

Lois Pope, widow of the founder of the National Enquirer, is seeking a restraining order against her son for allegedly stalking her while demanding money.  When the family sold the tabloid in 1988, Mrs. Pope received $200 million and her son received $20 million which she claims he spent by 2008.  She gave him another $16 million which he has allegedly spent.  In a television interview, he complained that she has spent $40+ million on 2 private jets, $2 million on international vacations, and made large gifts to nieces and nephews.

Several points:

1.  A trust would have helped the son manage and preserve his funds.

2.  The trust could have tied distributions to income earned by him which would have forced him to get a job, which apparently he has never held.

3.  If the mom gave her son $16 million, she was obligated to file a gift tax return and pay taxes at a 35% – 45% rate.

4.  If mom wants to buy planes and use them for flying her dogs around the country, she may do that and the son is powerless to complain.

5.  If the son wants more money from his mom, he should refrain from criticizing her on television.  The old axiom about not biting the hand that feeds would seem to apply.

 

Nancy Lanza Will

No snark, today.  Just advice.

Nancy Lanza, mother of the Newtown shooter, left her entire estate to her sons under the terms of a 1994 will which was executed 15 years prior to her divorce.  The preliminary filings show an estate with $60K liquid funds and presumably the house she resided in.

Several points:

1.  At some point she and her husband should have revised their estate plan to include a trust for the care of their son (and to minimize estate taxes).

2.  Post-divorce, she should have revised her estate plan to remove the ex-husband from her documents and to include a trust for her son.

3.  After a divorce from a director/VP at GE Energy Financial Services, and receiving $26K/month alimony, there will be substantially more than $59K in assets.  All the more reason to leave the assets in a trust for her son rather than giving it to him directly assuming he would have survived her.

4.  All parents with children who are unable to manage finances, whether due to young age or a disability, need to have a trust as part of their estate plan.

5.  Anyone who is recently divorced should revise their documents to remove the former spouse and to ensure that the documents reflect their current wishes.

Contact Me

All Posts By Jay Brinker

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.