(Not) Gentle On His Mind (Part 2)

I previously noted that Glen Campbell’s 3 children from his second marriage were contesting his will which he signed in 2006. The will omitted them, likely due to their supporting their mother during her divorce from Campbell and later suing him over the publishing rights she received in the settlement. His 2001 will also omitted them. The children recently dropped their lawsuit.

A few points:

1. The lawsuit would have been difficult to win because Campbell made both wills long before he went public with his Alzheimer’s diagnosis.

2. Campbell’s estate was recently valued at $1.2 million which is way less than the original estimate of $50 million.

3. If the omitted children were successful in challenging Campbell’s estate plan, they would have inherited $100K each tops.

4. The money for recording artists is in the writing and publishing not the performing. Campbell generally performed songs written by others.

5. Three divorces, 8 children, and years of cocaine use are never conducive to accumulating wealth.

Photo credit:  Larry McCormack/The Tennessean
License:  Fair Use/Education (from linked article)

Don't Do It His Way

When Frank Sinatra, Jr. died last March, he was embroiled in divorce litigation with his ex-wife, Cynthia.  When they divorced in 2001, he was ordered to pay her $5,000 per month for a year.  Sinatra continued to voluntarily make those payments for an additional 10 years until he was financially unable to do so.  Rather than show gratitude, his ex-wife filed for a second divorce claiming that they were in a common law marriage in Texas because he continued to refer to her as his wife both on stage and privately.  

Sinatra actually lived in California, paid California income taxes while he could have avoided taxes if he were a Texas resident (Texas does not have an income tax), and filed federal gift tax returns for the payment to his ex (transfers to spouses are not subject to gift taxes).  Nonetheless, a Texas court ruled that they were married and awarded her $500,000, half of his $4.5 million house, and $5,000/month for another year.  Sinatra died during the appeal which was ultimately decided posthumously in his favor. 

So many possible points, but let’s stay with a few.

1.   Only 15 states recognize common law marriages.  Ohio is not one of them.

2.  To have a common law marriage, couples must agree that they are married, tell others that they are married, and live together in the state which recognizes common law marriages.

3.  If Sinatra was filing income tax returns as a California resident and filing federal gift tax returns for the payments to Cynthia, he did not consider her his wife.

4.  Being a gentleman got Sinatra nowhere - he was trying to be considerate of Cynthia by not referring to her as his “former wife.”  If he had to do it again, I suspect he would introduce her as “my EX-wife, hear that?  My EX-wife.”

                                          Photo:  Michael Ochs Archives

                                                                     License:  Fair Use/Education

Once a Deceiver

Robert Oesterland and Sarah Pursglove made an enormous fortune in various business such as promising people credit cards, forming membership style clubs for various items such as DVDs, and selling web browser toolbars promising to remove computer viruses. When Pursglove started divorce proceedings, Oesterland swore in court that he was only worth several million dollars. Although Pursglove was unaware of their financial details, she knew they had several assets alone worth more than that, including a $30 million Toronto penthouse and a yacht that cost several million dollars annually to operate. When Pursglove started investigating their finances, she discovered they were difficult to determine because of the opacity provided by the use of myriad LLCs and trusts in tax haven destinations. The divorce is still on-going.

Several points:

1. Wealthy individuals use off-shore trusts to protect their wealth from creditors as an advanced form of asset protection planning.

2. Wealthy individuals also use off-shore trusts to hide their assets from taxation in an illegal form of tax avoidance.

3. It is no surprise that a man who made money by signing people up for memberships that continually charged their credit cards, promised credit cards to people but only gave them a list of credit card companies, and sold browser toolbars with no benefits would deceive his wife in divorce proceedings.

                                         Illustration from New York Times
                                         License:  Fair Use for Education Purposes

Two Words, George. Pre-Nup.

Johnny Depp and Amber Heard settled their divorce case this week for $7 million which Heard has pledged to charity. She had reportedly been seeking spousal support and half of his net worth as a result of their 15 month marriage. During the proceedings, Heard alleged that Depp had abused her. The couple did not have a pre-nuptial agreement.

Several brief points:

1. Depp should have insisted on a pre-nuptial agreement which could have provided that he owed Heard nothing in the event of a divorce.

2. The absence of a pre-nup does not entitle Heard to half of Depp's net worth, but only to what he earned during their 15 month marriage.

3. Anyone making bets on the length of a marriage between a hard partying heterosexual male and a declared bi-sexual woman 20 years younger than him should always take the under.

4. I have long told Janice that her crush on Depp was misplaced. I might finally be vindicated for that opinion.

Who Is Philthy?

Phil Taylor, also known as Philthy Animal, was the drummer for Motorhead. He died of liver failure last November. Prior to his death, he divorced his wife of 15 years who he had not seen since several weeks after their wedding.  He also omitted her from his will. His estate was rumored to be worth $10 million.

Stretching to make several points:

1. In Ohio, a spouse can elect to receive 1/3 of the assets passing through the probate estate even if omitted from the will.

2. A former spouse has no statutory rights so Taylor was wise to finalize the divorce prior to his death.

3. I am surprised that someone with Taylor's reputation for wild behavior was able to organize his affairs to divorce his long missing spouse and prepare a will omitting her, just in case, prior to his death.

4. $10 million is a lot of money for the drummer of the 'worst band in the world". Of course, the Kardashians are Exhibit A that talent and net worth are not correlated.

That Is Not Amore

Madeline Castellotti was the co-owner of famed NYC pizzeria, John's Pizzeria. Prior to her death in 2004, she changed her will to leave her entire interest in the restaurant to her daughter, Lisa. She allegedly did so because her son, Peter, was going through a divorce and she did not want his estranged wife to receive any interest in the restaurant. Lisa was supposed to transfer half of her inheritance to Peter after the divorce was finalized. When she did not, Peter sued Lisa. An NY appeals court recently ruled that his 3 year old lawsuit may proceed.

Several points:

1. Typically inherited assets are not subject to division in a divorce proceeding. They remain with the person who inherited them unless they are commingled.

2. The mother would have been wise to use a trust to hold assets intended for her son rather than relying on her daughter to transfer the assets to him.

3. The transfer by Lisa to Peter of assets in excess of $1 million prior to 2011 would have resulted in Lisa paying a gift tax. 

4. Ironically, John's Pizzeria only serves entire pizzas and does not serve pizza by the slice.

Are Not All Former Spouses Bums?

After divorcing her husband of 10 years in 2014, Diane Wagner agreed to pay him $186/week in spousal support. When writing the checks to him, she has used the memo section to write “alimony/adult child support,” “bum,” “loser,” and “FOAD.” Her 61 year old ex-husband recently sued her on the grounds that her notations are causing him emotional distress and caused him to suffer a heart attack.

Several quick points:

1. Whenever a couple marries later in life, they should have a pre-nuptial agreement which would allow them to waive spousal support/alimony upon divorce.

2. I suspect that despite most media coverage about the notations on the check, the real source of the lawsuit is the $5,000 the husband’s bank accidentally deposited into a joint account which she quickly withdrew and refused to return.

3. I sheepishly admit I had to use Urban Dictionary to look up FOAD.

4. One person’s spunky fighter for freedom of speech is another man’s crazy ex-wife.

Money Play

Roderick Covlin was arrested yesterday on charges he murdered his wife on New Year's Eve in 2009.  The estranged couple was in the midst of divorce when Shele Covlin was found dead in a bathtub.  An autopsy revealed she had been strangled.  Ms. Covlin reportedly feared for her safety and had an appointment with an attorney to change her will the next day according to court filings.  Since her death, her husband, an unemployed backgammon expert, has been blocked from receiving any of her $1.0 million estate.  She changed the beneficiaries of her $1.6 million insurance policy to her children the month before she died.

There are a litany of estate planning issues, but let's focus on the major ones:

1.  Changing a will and other documents during a divorce proceeding is always advisable if not prohibited by agreements between the parties or the domestic relations court.

2.  Simply changing a will can allow the other spouse to inherit up to one third of the probate estate if the spouse elects to take the elective share provided by statute.  Transferring the assets to a trust would be a more effective means of disinheriting a divorcing spouse.

3.  If convicted of murder, the husband will lose all benefits to his deceased wife's estate under NY's Slayer Statute.

4.  Am I the only one who doubts that Shele Covlin had an appointment on New Year's Day to change her estate plan? The day after perhaps, but not on New Year's Day.

Coma and Lamar

Lamar Odom remains in a coma in Las Vegas after being found unconscious in a Nevada brothel after going on a weekend bender with cocaine and herbal viagra. His estranged wife, Khloe Kardashian, is reportedly making his medical decisions for him even though they separated two years ago and signed their divorce papers in July.  Los Angeles divorce courts have a four month backlog of divorce cases.

Several quick points:

1.  When individuals separate, they should implement new estate planning documents including health care powers of attorney.  During a divorce, the estranged spouse will be better off financially if the other spouse dies prior to the divorce finalization so it is best not to have the spouse in charge of one's medical decisions.

2.  That said, new estate planning documents are usually not a priority for a guy who was allegedly recently found on skid row.

3.  Odom's mom died when he was a teenager, his father was a heroin addict, and he had an infant die of SIDS.  When the Kardashian family was his oasis of normalcy, the man never had a chance.

Thanks to Kathy Chabot for the post topic suggestion.

Know Thy Neighbor (Before Giving Her Your Will)

A couple prepared wills leaving all of their assets to each other.  The husband's father was the beneficiary if they both died.  The couple subsequently divorced.   The woman allegedly prepared a new will, which she gave to her neighbor, leaving her estate to her brothers.  That will has not been found.  After the woman died, her ex-husband produced the will from their marriage.  Although the divorce precluded the ex-husband him from inheriting from her, his father was still considered a valid beneficiary.  Courts have ruled that the will from her marriage controls and that the former father-in-law will receive her estate.  The New York Court of Appeals will hear her family's appeal.

Several points:

1.  Most states have laws treating a divorced spouse as a pre-deceased beneficiary of a will, trust, insurance, and retirement plan.  Those laws do not affect the contingent beneficiaries.

2.  Divorced individuals should immediately update their wills and beneficiary designations as soon as possible during the divorce process.  This is more imperative for those without children.

3.  My policy is to retain my clients' original documents,  send them copies, and urge them to notify their designated executor of the location of the copies (which have my name on them).

4.  In desperate times, leaving a copy of the will in the refrigerator is always preferable to giving the original will to a neighbor even if it ends up smelling like rotten vegetables, spoiled mayo, or Green Goddess salad dressing.

Beneficiary Designation and Pyrrhic Victory

A Virginia man died of a rare leukemia survived by his 3rd wife.  One of his assets was a $125K insurance policy he received while employed by the federal government.  The policy listed his second wife as the beneficiary.  The surviving spouse contested the former wife's right to the policy proceeds.

Virginia has a statute which precludes divorced spouses from inheriting from a   deceased former spouse.  Nonetheless, the US Supreme Court unanimously ruled that the former spouse was entitled to the proceeds because the 1954 federal law establishing the insurance program and providing that beneficiary designations must be followed trumped the Virginia statute which omits former spouses.   

Several points:

1.  Ohio has a similar statute to Virginia. 

2.  After a divorce, individuals MUST revise all of their estate planning documents and update their insurance and retirement plan beneficiary designations.

3.  After a leukemia or cancer diagnosis, no matter how positive the treatment options, individuals need to review their estate planning documents and their beneficiary designations.    

4.  I suspect this was a Pyrrhic  victory for the former wife with most of the policy proceeds being consumed by legal fees during the 5 year dispute.  But then, most disputes between former spouses are Pyrrhic.   

Nancy Lanza Will

No snark, today.  Just advice.

Nancy Lanza, mother of the Newtown shooter, left her entire estate to her sons under the terms of a 1994 will which was executed 15 years prior to her divorce.  The preliminary filings show an estate with $60K liquid funds and presumably the house she resided in.

Several points:

1.  At some point she and her husband should have revised their estate plan to include a trust for the care of their son (and to minimize estate taxes).

2.  Post-divorce, she should have revised her estate plan to remove the ex-husband from her documents and to include a trust for her son.   

3.  After a divorce from a director/VP at GE Energy Financial Services, and receiving $26K/month alimony, there will be substantially more than $59K in assets.  All the more reason to leave the assets in a trust for her son rather than giving it to him directly assuming he would have survived her.  

4.  All parents with children who are unable to manage finances, whether due to young age or a disability, need to have a trust as part of their estate plan. 

5.  Anyone who is recently divorced should revise their documents to remove the former spouse and to ensure that the documents reflect their current wishes. 

Death Better than Divorce?

Schmuck of the year finalist.  An NY man and woman were married for 30 years.  8 years prior to his death, man obtained an uncontested divorce on grounds that his wife abandoned him.  Man continued to live with woman for duration of his life.  Wife did not discover divorce documents until cleaning up his finances post-death.  Wife claimed that they had been happy.  She was aware that he had tried to sell a house previously without informing her. 

As a widow, she was entitled to his pension and perhaps other benefits.  As an ex-wife, she was not entitled to those and he could leave them to his children (or mistress).  She was able to successfully overturn the divorce and fend off the claims of his children from a prior marriage.

Lessons to be learned:

1.  If a spouse is ill, it behooves the other spouse to stay married because a widow is generally better positioned financially than an ex-wife of the husband/ex-husband.  

2.  If a spouse tries to sell a house without telling the other spouse, the trust level in the marriage should become zero.

3.  One woman's apparently happy marriage can be another man's misery.    

Smart Rider

The late Dennis Hopper made several wise estate planning moves late in his life. First, he had a pre-nuptial agreement when he married his fifth wife. Second, when he was dying and was in the midst of an acrimonious divorce with her, he created a trust for their then 7 year old daughter to which he left nearly $3 million. The then estranged spouse/now widow has no control over the trust assets.  

Two points. When a couple is divorced with minor children, I always advise my client to create a trust to hold assets for the children upon the death of the client. Otherwise, the former spouse will control the assets until the child turns 18 and may benefit from the assets. Second, when marrying for the 5th time, I am glad to see that Mr. Hopper had learned enough from his 4 previous failed marriages to execute a pre-nup. Old dogs can learn new tricks.