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The Art of Estate Planning

Wednesday, 27 March 2013 12:46

Merton Simpson – a NY artist , pre-eminent collector of African art, and gallery owner – died 2 weeks ago.  His body remains unburied at the funeral home due to a family dispute.

Prior to his death, a guardian was appointed to manage Mr. Simpson’s affairs.  His estate is valued “in the millions” but the assets are illiquid.   The guardian does not have enough funds to pay for a funeral and the executor of the estate has not been appointed yet and will likely also have insufficient liquid funds in the near term.

The primary lesson is that Mr. Simpson should have included a trust in his planning and transferred his assets to it prior to his death.  The trustee could have sold art pieces as necessary without outside supervision.  Mr. Simpson would have avoided avoided the guardianship, the delay caused by waiting for the court to officially appoint an executor, and the Sherman Hemsley-esque burial fiasco.

Even without estate taxes, trusts are still necessary.

Mother From Hell

Saturday, 09 March 2013 17:31

Viciously cruel mothers exist outside of Disney tales.  An NY couple with a net worth of $250 million adopted an infant girl, Emily, from China in 1996.  As part of the adoption, they promised to provide for her in their estate planning documents and to create a separate trust for her.  Sadly, the adoptive father died soon thereafter, leaving his much younger wife with Emily and their 5 biological children.

The widow, who has gained notoriety by spending $33 million dollars to purchase 10 of the Thimble Islands in Long Island Sound, claimed to have difficulty with Emily’s behavior and enrolled her in a special needs school.  This was after allegedly making her sleep in a tent outside for a week for misbehavior and not including her win family dinners with the other children (and after adopting and giving up another son).  Eventually, the widow allowed Emily to be adopted by a different family.

Te new adoptive parents eventually learned about the trusts created when Emily was adopted and sought a court order enforcing them.  The widow fought the order but an NY court held that the father had intended to include her in his estate.

Several points:

1.  The widow must have taken parenting classes from Cinderella.

2.  The Thimble Islands are story book-esque (see the pictures).

3.  Emily’s $40+ million future inheritance should buy her a lot of therapy.  I suspect she will need it.

Someone Will Cry, Cry, Cry

Friday, 01 March 2013 13:32

It has been a busy month for the James Brown estate.  First a federal court rejected the attempt of his former manager to insert herself into his estate affairs.  Now, the South Carolina Supreme Court has rejected a settlement regarding the division of his estate that was brokered by the SC Attorney General and said that the estate must be distributed per Mr. Brown’s will (i.e. most to the trust for its charitable beneficiaries).

Quick facts.  The Godfather of Soul left most of his estate to a trust for the education of needy children.  His relatives asked the probate court to remove the trustees of the trust after the trust assets dissipated to almost nothing.  I suspect that they also challenged the terms of his will.  The SC Attorney General (on behalf of the trust) convinced the parties to settle the dispute with  the trust receiving half of the assets, Brown’s widow 1/4, his adult children the final 1/4 and the trustees replaced by other trustees who made lucrative licensing deals for the trust.

Several points:

1.   The SC Supreme Court is correct – the terms of the will should be followed.  Estates are not like other business deals or disputes where the intent of the deceased can be negotiated.  The intent as expressed in the will must be followed.  Otherwise, people would not have confidence in making wills or leaving assets to charity.

2.  The settlement does seem to have been beneficial to the estate because the new trustees were able to increase its value from near zero to somewhere between $5 million and $100 million (nice specificity on that).

3.    The estate owed $20 million to a bank borrowed for a European tour.  Apparently lunacy in the lending markets in 2006 was not confined only to the sub-prime housing market.

Talking Loud and Saying Nothing

Wednesday, 06 February 2013 13:59

James Brown died in 2006.  His estate moved a step closer to settlement this week after  a federal lawsuit filed by his former business partner was dismissed.  After years of litigation, the estate was to be divided between his wife, his heirs, and his “I Feel Good Trust.”

However, his former pr woman and song writer claimed to have worked with him on the child welfare trust in the 1980s and that his intent was to leave all of his assets to it.  She claimed that the South Carolina attorney general had ignored her, that 100 attorneys had refused to take her case because they were politically intimidated, and that she has a right to be heard and to exert control over the distribution of funds.

Several points:

1.  The court was correct to dismiss the case.

2.  How a probate related case which is handled at the state level lasted 16 months in a federal court is perplexing.

3.  An estate plan can easily change multiple times over 20 years so what James Brown wanted in 1980 could differ greatly from what he wanted in 2006.

4.  It is advisable to ensure that estate planning documents reflect current wishes.

5.  Sorry, sweetheart, but no one has “a right to be heard”  nor do they have the right to exert control over funds unless they are the trustee.   You were simply channeling one of James Brown’s hits.

 

 

 

 

Delayed Parenthood and Estate Planning

Monday, 17 December 2012 14:48

With no fiscal cliff resolution imminent, it has been slow in the estate planning news world (but slammed in the estate planning practice). The New Republic had a great article on delayed parenting and the possibility of developmental issues for the children.

Viewing the article through the estate planning prism, I noted the following potential issues:

1. Parents need wills and trusts immediately. The risk of sudden death or terminal illness is greater for a 40+ year old than someone in their late 20s.
2. The trusts might need special needs provisions to protect the children’s governmental benefits.
2. Selection of a guardian to handle a child with even minor developmental disabilities is tremendously important.
4. Because the children are younger when the parents are older, parents need to rely on siblings and friends to handle their affairs until their children become old enough to assist the parents with their affairs.

Of course, estate planning assumes a certain level of personal responsibility and rational thought. I am not sure than anyone desiring children in their 60s and 70s is being responsible or acting rationally with respect to their children.

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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.