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The Nest

Monday, 11 July 2016 23:21

The Nest hc cGosh, times are slow in the newsworthy estates and trusts area, except for the conga line of people claiming to be heirs of Prince. Reluctantly resorting to fiction for material, “The Nest” by Cynthia D’Aprix Sweeney is on many best books of summer lists. It has several estate planning lessons which can be gleaned from the following plot facts (all of which are in the first 40 pages so hopefully I not spoiling anything for anyone who wants to read the book).

A father created a trust for his four children. The trust was to be distributed when the youngest child reached the age of 40. His wife had the power to invade the trust in the event the children needed the funds earlier. One of the children had a power of attorney from his husband which allowed him to mortgage their vacation property without the husband knowing about the mortgage (trust me, I got the pronouns correct). Another child had a legal predicament which resulted in his mother lending him the entire proceeds of the trust to bail him out and hoping that he would re-pay the amount (called “the nest” by his siblings).

Points to be learned:

1. One should never give a power of attorney to a non-aged spouse unless it is contingent on disability. The potential for abuse is too great otherwise.

2. This trust should have divided into separate shares either at the conception or when the children were in their early 20s. Each child could have then borrowed from his or her share only, if necessary, rather than from the entire trust.

3. The wife/mother of the children should not have had the power to distribute all of the funds without being held to a prudent investor standard.

4. Of course, if there had been good estate planning there would not have been a novel, nor would I have a blog.

Unduly Influenced Boss (Sumner Redstone Pt. 5)

Thursday, 26 May 2016 21:24

sumner redstoneViacom and CBS President, Sumner Redstone, is back in the news this week. He removed Phillipe Dauman and George Abrams, who are directors of Viacom, as Trustees of one of his trusts. They are contesting their removal by alleging he is incompetent. In a huge twist of irony/self-preservation/whatever you want to call it, only six months ago they testified he was competent to remove a girlfriend as his health care proxy.

Three brief points:

1. The stakes in the previous battle involved who could make his health care decisions if he could not (while the real plot was whether he could change his will to disinherit his former girlfriend) while these stakes are who gets to control Viacom and CBS after Redstone’s death.

2. I think if Redstone is in a wheelchair, being fed by a feeding tube, and able to communicate only through an aide now, and was in the same condition six months ago, he was likely incompetent at both junctures.

3. Dauman and Abrams have reaped what they have sown. Being close to Redstone is like having an alligator as a pet – it might seem cool, but eventually it (i.e. he) will devour you.

 

Hillary and Hypocrisy Both Begin With H

Monday, 23 May 2016 21:55

clintondebate

Hillary Clinton’s recently released financial disclosure statement reveals that she and her husband both created a qualified personal residence trust in 2010 and transferred ownership of their NY home to it. They did not transfer their more expensive Washington DC house to a similar trust.

Several quick educational points:

1. A qualified personal residence trust allows them to transfer the house at a discounted gift tax value based on how long they wish to reside in the house and the current interest rates.

2. For example, if they decided to live in the house for the next 20 years (and not die), they would be able to transfer the entire $1.7 million house to Chelsea while only valuing it at $400K for gift tax purposes.

3. Future appreciation is also excluded from their estate.

4. They would have been wise to transfer the DC property via this technique because that house has doubled in value while the NY property has only increased nominally.

5. While this estate planning technique is available to everyone, I find it hypocritical that a woman campaigning for higher estate taxes and other taxes in the name of the greater good does everything she can to avoid those taxes.

You Can’t Do That On Stage Anymore

Tuesday, 03 May 2016 21:47
zappa 30ZAPPA4-master768Frank Zappa was an eccentric musician who died in 1993. He was survived by his wife and four children – Ahmet, Diva, Dweezil, and Moon. (ed note: he was early in on odd names for celebrity children). For the past decade, Dweezil has played his father’s music on a concert tour titled “Zappa Plays Zappa.” After Zappa’s widow (and Dweezil’s mother) died, Ahmet and Diva became trustees of the family trust and have told Dweezil that he no longer has permission to use the title “Zappa Plays Zappa” without paying $150K each time he performed a song owned by the trust. The concert tour will be titled “Dweezil Zappa Plays Frank Zappa” this summer.
 
Several points:
 
1. The selection of a trustee is vitally important. A corporate trustee would likely be more onerous than the Zappa siblings and extract as much money as possible from Dweezil for performing his father’s music.
 
2. There is no word on how much his mother made Dweezil pay the trust for the use of the music. Odds are that it was minimal.
 
3. Dweezil is correct that the new tour name “does not exactly roll off the tongue.”
 
4. Abel and Cain were unavailable to comment on the sibling rivalry.
 
5. My first rock concert was Frank Zappa at the Armory Fieldhouse in 1978. How my musical tastes have changed.
 
 

Guardians, Drugs, and Embezzlement

Monday, 04 April 2016 21:50

boston guardian

 

A Massachusetts man was appointed guardian of his niece and nephew when their parents died in a car crash in 2009.  The man was recently indicted for allegedly stealing approximately $250,000 from their trust fund in the 11 months after he was released from rehab.  He pleaded not guilty.

Three very quick points:

  1. I always recommend that clients designate different individuals to serve as guardian and trustee.
  2. If different people, the guardian should be able to ascertain if the trustee is stealing from the trust.
  3. Embezzlers are smart enough to not use stolen funds to buy tangible property, but not smart enough to avoid being caught.  Such is the lot of gambling and drug addicts.   

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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.