Pistons, Lightning, Shock, and Litigation

As I previously wrote, William Davidson was the owner of the Detroit Pistons, Detroit Shock, and the Tampa Bay Lightning.  He was also the 62nd richest man in the U.S. at the time of his death with a reported net worth of $4.5 billion in 2008 (and perhaps $3 billion at the time of his death in early 2009).  His estate recently settled a dispute with the IRS over the amount of transfer taxes owed for $388 million after the IRS claimed a $2.7 billion deficiency after his estate had previously paid $245 million in transfer taxes.  His estate has now sued Deloitte and Touche for $500 million on the grounds that the estate planning advice was bad and that the firm had wanted to land Mr. Davidson as a client for marketing purposes. Allegedly, Deloitte had promised that "he would win if lived and would he would win if he died" with their strategies.

Several points:

1.   I understand the frustration, but I do not see the damages (which are key for a lawsuit).  The effective tax rate for deaths in 2009 was 45% which means that Mr. Davidson's total tax bill conservatively could have been $1.35 billion.  Instead, with tax planning he paid $583 million in taxes with only $133K in penalties.  I do not see how his estate was harmed by the planning advice.

2.  According to the figures, his estate declined in value by 1/3 in one year.  The financial crisis was hard on everyone.

3.  If he had died in 2010 like George Steinbrenner, his estate would not have owed any estate taxes because there was no estate tax that year  (although there would have been a deficiency for his unpaid gift and generation skipping taxes).

4.  I remain unconvinced that anyone truly "wins when they die."

She Doesn't Get It - Redux

A young writer recently wrote a web piece titled "If You Have Savings in Your 20's, You're Doing Something Wrong." The article contained the following gems:

• People who are saving in their 20s are people who don’t set their sights high. They’ve already dropped out of the game and settled for the minor leagues.
• Your 20s are not the time to save; they’re the time to gamble. $200 a month isn’t going to make the dent that a $60,000 pay raise will after spending all those nights out networking.
• We don’t have kids. We’ll be renting for the foreseeable future, and we have no problem eating McDonald’s when we’re skint.

Several quick points:

1.  If this advice was from a 40 year old looking back on life, it would be less laughable that it is coming from a 20 something trying to justify her lifestyle.

2.  I am not sure I know anyone who received a $60K annual raise but she seems to think they are plentiful.

3.  The value of the monthly $200 expenditure she mocks is $1 million after 45 years.

4.  If she continues to spend what she makes, she will rent forever, not just the foreseeable future.

5.  The writer and the 2 million plus people who liked her article on Facebook are likely constituents of Bernie Sanders because they are counting on others to provide for their retirement.

D List Actress, A List Will Contest

Meadow Williams is an actress of whom you have never heard and who appeared in movies you never saw.  She was married to Gerald Kessler, founder of Natural Organics natural supplements company, for four years prior to his death earlier this year.  He was 31 years older than her.  In 2013, he changed his will to leave all of his $800 million estate to her while excluding his 2 children and 5 grandchildren.  His children and grandchildren have contested the will on various grounds, including fraud, undue influence, lack of mental capacity, and the fact that Ms. Williams' divorce from a prior husband was never finalized even though it was filed in 1994.

Several points:

1.  The fact that Ms. Williams might not have been officially divorced should not be a factor in whether Kessler's will was valid - he could leave her money whether they were married or not.  The estate tax implications vary, but the bequest remains the same.

2.  Still, 20 years to finalize a divorce?

3.  If Ms. Williams did convince her husband to leave her all of his estate, she might have over-reached.  She could have lived comfortably on any single digit fraction of his estate while still leaving money for his children.

4.  Ironic that that the children of a fortune based on natural supplements allege fraud in a will contest.

Staying A Head

In a slow week in celebrity estate news, the only newsworthy item is an NYT article about cryonics and a young woman who had her brain preserved upon her death from cancer 2 years ago.  To raise the $80K needed to pay for the freezing of her brain until her brain can be brought back to life in the future, she and her boyfriend posted a plea on Reddit.   A post-death brain scan has shown that the chemo-preservatives needed to protect her brain from ice damage only reached the outer level of her brain.

Several points, mostly dorm room existential:

1.  If you could be brought back to life, but everyone you knew had died, would you still want to be brought back?

2.  If you are the boyfriend and your long dead girlfriend was brought back to life, would you leave your current spouse and family to be with her?

3.  If 80% of your dead girlfriend's brain is damaged by the freezing, would she still be the person you would want to be with?

4.  Would Bill Clinton preserve Hillary's brain?  Or vice versa?  I think we all know this answer.

5.  If the young woman ever wanted Ted Williams' autograph, or to meet Walt Disney, cryopreservation was her only hop

Cuckoo Estate Planning

A Manhattan millionaire left $100K to a pet trust for her 32 cockatiels.  She requested that the birds continue to live in the aviary in her $4 million East Hampton property; that they be fed Avi-Cakes (which cost $115 for a 20 lb bag), carrots, water, and popcorn; and that the building be cleaned each Monday and Thursday.  She was far less meticulous with the rest of $5.3 million estate which she initially left to her step-son in a 2006 will.  She later tried to revise that will by crossing out his name and writing in the name of her sister who is now claiming the remaining $5.2 million.  

Several points, some of them previously made:

1.  Certainly this woman missed the forest for the trees - she focused on a picayune aspect of her estate while ignoring the proper disposition of the bulk of her estate.

2.  Handwritten changes on a validly executed will are ineffective and will likely lead to her step-son inheriting the $5.2 million (at least under Ohio law)

3.  As mentioned previously, I retain the original documents for my clients to preempt this type of attempted change/spoliation of wills.

4.  This type of myopic focus on pets while ignoring one's relatives is more commonly seen in cat owners rather than bird owners.   

TML - Football Is Back

Paul Daugherty of the Cincinnati Enquirer allowed me to write his The Morning Line Blog again today.

Limited Inheritance

A Columbus widow is suing L Brands, the parent company of Victoria's Secret and Bath and Body Works (and originally known as The Limited, Inc.), claiming that she inherited $1.5 million of stock that L Brands refuses to acknowledge.  Her late husband,a bricklayer, allegedly purchased 50 shares of The Limited Stores in 1976 after receiving a stock tip from a client.  His widow claims his stock certificate for 50 shares is an original certificate and is now worth $1.5 million after 7 stock splits and 40 years of unpaid dividends.  The company has not yet responded in court.

Several practical points:

1. I detest stock certificates - they are easily lost during the client's life and difficult to transfer after the client's death. I always advise my clients to own stock in a brokerage account rather than in certificated form.

2.  I also always advise my clients to list all of their financial accounts/assets and place the list with their estate planning documents.  This assists their children with settling their estates by providing them knowledge of which assets they own and must locate.

3.  If the stock market continues on its current trajectory, this battle might be moot because the shares will be worthless.