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Even Rappers’ Estates Need to Pay Their Debts

I have previously blogged about rapper Nate Dogg and the financial issues surrounding his estate.  He died in 2011 without a will but with 6 children of unascertainable ages and different mothers and unpaid child support and medical bills of $290K.  His primary asset was a house with $200K of equity.  The administrator of his estate has a contract to sell the house for $340,000 but his children are opposing the sale because it will not leave them enough money.

Several points:

1.  A decedent’s debts must be paid before estate beneficiaries receive any proceeds of the estate. It is unfortunate for his children that there will likely be no assets left for them after the payment of debts, but an administrator cannot magically make a house worth more than the market is willing to pay nor make the debts less.

2.  If Mr. Dogg had wanted to provide for his children and not worry about his debts, he could have purchased a life insurance policy to benefit them.

3.  His house was worth $340K?  I doubt it was featured on MTV’s “Cribs.”

Nate Dogg

 

Last Will and Embezzlement

Diminutive actor Mickey Rooney died this week at age 93. In recent years, he was in the news for his allegations of elder abuse against his step-son and step-daughter-in-law and for his Congressional testimony about the abuse. Last Fall, he symbolically settled the case against his step-son and his step-daughter-in-law for a $2.8 million judgment that will not be paid by them. He re-wrote his will last month to exclude his wife of 35 years, from whom he had separated a year ago after allegations of physical abuse, and his 11 natural children. He left his entire $18,000 estate to his other step-son who has been his care giver for the past 3 years.

Several points:

1. Elder abuse is more common than realized. Although it is rare when a spouse of 36 years is somewhat complicit in the abuse, mothers will go to great lengths to “protect” and enable their children’s bad habits.

2. Under Ohio law, his estranged wife would receive the entire $18,000 despite what the will states because a spouse is entitled to at least the first $20,000 of assets.

3. Eight wives? Someone should have told him he did not need to marry every woman he dated.

 

 

Shooting an Airball

Lorenzen Wright played in the NBA for 13 years and earned $55 million.  Shortly after his retirement, he was the victim of an unsolved murder in a suspected drug deal.  He was survived by his ex-wife, Sherra Wright,  and their 6 children.  After his death, his ex-wife received $1 million in insurance proceeds in trust for the children.  Within 10 months of receiving the proceeds, she was accused of having spent nearly all of them on housing, furniture, cars, and travel.  She is now subject to probate court action to remove her as trustee.

Several points:

1.  It is never a good idea to have a former spouse serve as trustee for the children.  A financially savvy third party is a much better choice.  Newly divorced individuals should quickly revise their wills and trusts to remove the former spouse and to keep him/her away from assets for the children.

2.  In some defense of Sherra Wright, purchasing real estate with trust assets is not spending them, it is re-allocating the type of investment.

3.  I suspect that Mr. Wright is not the only former NBA player to have significant career earnings and to die with less than 2% of them remaining.  Annual child support and alimony payments of $330,000 tend to rapidly diminish one’s net worth.

 

 

Love or Exploitation?

A couple, who resided together for 4 years, met with a lawyer to discuss executing wills.   The lawyer allegedly advised them it would be cheaper if they simply married.  Seven months later, after the woman had suffered her second stroke and had been declared incompetent by her physician, the man removed her from the nursing home and married her in a civil service.  When the woman died intestate 3 months after the wedding, her sister and step-children from her first marriage contested the validity of the marriage due to her alleged lack of capacity.  If the marriage were invalid, the sister would inherit the $450,000 estate.  If the marriage were valid, the husband would inherit.  The step-children were listed as the beneficiaries of an unsigned  1999 will.  After the Wisconsin Supreme Court held that the marriage could be challenged on the grounds of legal incapacity, the husband and relatives agreed to split the estate.

Several points:

1.    There are many “will substitutes” which include trusts, beneficiary designations, and jointly owned assets.  Marriage is not one of them.  In 27 years of practice, I have never advised a couple to get married instead of executing wills.

2.  Carpe Diem!  If you pay for a will in 1999, sign it and let your family know where the original is.  If you want to prepare a will in 2008, follow through.  If you want to get married instead, get married then not seven months and two strokes later.

3.  The Wisconsin marriage statute does not address the ability to void a marriage after someone has died.  However, in an era where courts interpret statutes to permit same sex marriage it was easy for the Wisconsin court to create its own rule on voiding a marriage.

Philip Seymour Hoffman Will

The will of Philip Seymour Hoffman was admitted to probate this week.  Despite sloppy media reporting about a trust for his son (I am looking at you Reuters and New York Daily News), the will left all of his $35 million estimated estate to his girlfriend, and mother of his 3 children, Mimi O’Donnell.  The will also had an unusual request that his son be raised in NYC, San Francisco, or Chicago.  The will was signed before the birth of his 2 daughters.

Several points:

1.  Wills should be reviewed after the birth of a child to ensure that the new baby is included and to ensure that the proposed guardian can adequately care for the additional child.

2.  Hoffman’s estate will owe approximately $12 million in federal estate taxes on the 9 month anniversary of his death.  The tax could have been delayed until the death of Mimi O’Donnell due to the use of the marital deduction if they had been married.

3.  If the mainstream media will not employ fact checkers, I am available for $300 per hour to review and advise them on wills of famous people.

4.  The 55 unused bags of heroin in his apartment were not addressed by the will.

5.  NYC, Chicago, and San Francisco?  Apparently diversity is good, but does not include being exposed to Republicans.

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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.