Simon Says This Is Not a Gift

Mel Simon owned the Indiana Pacers with his brother, Herb, for 16 years. After the Malice in the Palace in 2004, the Pacers started losing money and Simon became disenchanted with his ownership of the team. He sold his interest to his brother in a very quiet deal that was two years in the making. The terms included being released from various personal guarantees. Simon died shortly thereafter of pancreatic cancer. The IRS determined that the deal was so favorable to his brother that his estate owes a gift tax of $21 million. His widow has sued the IRS for a refund of the gift tax paid.

Several quick points:

1. An individual may give away $5.45 million during his life before he has to start paying gift tax.

2. The gift tax rate is 40%.

3. The donor is the person responsible for paying the gift tax.

4. This deal between brothers sounds complicated. It is doubtful that one brother would intentionally give the other $83 million.

5. The widow can afford the tax bill - Simon's estate was valued at $2 billion because of his pioneering development of shopping malls.

6. Ironic that Simon's loss of interest in basketball ownership is tied to the Malice in the Palace. Ron Artest - the gift that keeps on giving.

Back At It

In addition to a dearth of worthy estate planning news, it has been a busy and awesome two weeks. Two concerts, a soccer game in Columbus, business trip to Cleveland, and usual bike rides. With all of that, Jack's smile is the highlight of the past two weeks. Post to follow.

Attacking Camelot

Socialite Alicia Clark died in February. Her will left her $17.5 million estate to the Humane Society. Her estate is in the news because the administrator of her estate has filed a Freedom of Information request to open a file which might shed light on whether Clark was the mother of JFK love child even though she had long denied having a child with the late President. 

She had reportedly planned to blackmail President Kennedy's father in the early 60's related to such rumors. The blackmail attempt only became public after her then attorney went public after she did not pay his $1.2 million bill (in 1961 dollars) for negotiating a will with her soon to die husband which gave her $10 million for 13 days of marriage. Meanwhile, a man in the Bahamas claims the will is fake and that her valid will is a handwritten will she made in the Bahamas in 2001. That alleged will left one million to each of the doormen at her NYC apartment and the caretaker of that apartment, and the rest to the guy in the Bahamas. Got it? 

So many possibilities, so let's try to stay focused on the salient points: 

1. The JFK love child angle seems to be irrelevant. If Clark had a child and raised him, she would have provided for him in her will and would have been seen with him in the past 55 years. If she gave him up for adoption, that child has no rights under law because his rights to her estate would be terminated due to the adoption.  

2. Some (re: me) might think that the estate administrator is grandstanding (successfully because he made the news) or is running up a larger bill than necessary in looking for a love child who likely has nothing to do with the estate, even if he exists. 

3. Clark's former attorney's $1.2 million bill for what is essentially a pre-nuptial agreement seems excessively large by any standards much less those of 1961. Those agreements are not typically handled on a contingent fee basis which must have been the basis on which he billed. 

4. That said, $10 million for 13 days of marriage to a dying man might be worth a $1.2 million fee. 

5. Lastly, the Bahamas guy must be suffering from sunstroke or island fever. Everyone besides the writers of Harold and Maude knows that Manhattan socialites do not create handwritten wills on vacation to leave their estates to their staff and random guys in the islands.

Not Friends

Jennifer Aniston's recently deceased mother allegedly left Aniston out of her will. Even though Aniston reportedly supported her mother in recent years, her mother left her personal belongings and condo to another unidentified relative. Aniston and her mother had been estranged for years and had only somewhat reconciled two weeks before the mother's death.

Several very brief points:

1. Aniston's mother was not required to leave any assets to Aniston by law. She may leave them to whomever she chooses.

2. Aniston certainly does not need any of her mother's money.

3. Like any 40-something year old, it is doubtful that Aniston would want/need any of her mom's tsochktes.

4. It is refreshing to read an article about Aniston that does not involve pregnancy speculation although it does mention Brad Pitt.

The Nest

Gosh, 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.

Back From California

Just returned from a four days in California Wine Country with Janice. Post to follow soon.

The Morning Line

I subbed for Paul Daugherty on his The Morning Line blog yesterday for the Cincinnati Enquirer. I reviewed the best and worst of the first half year in sports. I hope you enjoy it.