The Art of Estate Planning

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. 

O Revelations!

Willa Cather, author of "O Pioneers", died in 1947.  She purportedly destroyed much of her private correspondence and left instructions in her will forbidding the post-mortem publication of any remaining letters.  For nearly 70 years, her executors adhered to her wishes.  However, with the death of her nephew and second executor in 2011, her wishes are no longer being followed and a book containing 566 of the surviving 3,0000 letters will be published next month.  There are various reasons given for her request to not publish the correspondence - a desire for privacy, a late life depression, and a desire to conceal her lesbianism about which scholars have speculated for years. 

Several points:

1.  3000 letters survived?  She needed a heavy duty shredder.

2.  The best way to ensure post-death privacy is to destroy the letters while alive.  After a generation or two, those interested in preserving her wishes will have died and successors will be more motivated by money than her wishes. 

3.  In an electronic age not prone to letter writing, most people will not be confronted with this issue in the future.  No one will want to read a series of texts. 

4.  Who needs to speculate about the sexual orientation of a woman who called herself William in college and who lived with the same woman for 39 years?

5.  I did not enjoy reading her work in American Literature classes so I will not be pre-ordering the book of her letters from Amazon. 

How Am I Doing? Quite Well, Apparently.

Former NYC Mayor Ed Koch was famous for walking the streets and smiling at people while asking them "How am I doing."  His will was admitted to probate court this week.   It left $100K to promote government and public service and left most of the remaining balance of $10 million to his sister and her children.

Several quick observations:

1.  A bequest of less than 1% of the estate of a public servant to promote public service seems puny.  

2.   There are few, if any, other charitable bequests.  So much for giving back.

3.  A $10.5 - $11 million estate after being a mayor?  Public service is the start of the path to enormous wealth for many.

 

4.  The large estate reaffirms that it is easier to accumulate significant wealth when one doe not have children.

Mother From Hell

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. 

Tupac's Estate

Rapper Tupac Shakur was killed in 1996.   His estate has released 6 posthumous albums and authorized a hologram likeness of him to perform at last year's  Coachella Music Festival.  Now, his mother has turned over management of his estate to a new group of managers who have worked with the estates of other artists such as Janis Joplin, Otis Redding, and Henry Mancini.

The new managers have thankfully ruled our a hologram tour, but are considering the use of his music in a Pink Floyd-esque laser light show.   Yawn.  Almost everything Tupac recorded has been released in the past 16 years and only snippets of recordings remain in the vault.  Nonetheless, his mother stated of the management change , "I believe it is our responsibility to make sure that Tupac's entire body of work is made available for his fans."  Translation:  it is her desire to make as much money as possible off her son's music.

Someone Will Cry, Cry, Cry

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.