Questionable Planning, Terrible Reporting

James Gandolfini  of Sopranos fame was survived by a 13 year old son, an infant daughter, and his second wife.  His estate is reported to be worth $70 million.

His will, prepared in December, was filed in probate court yesterday.  It leaves his property in Italy equally to his children in trust, his clothes and jewelry to his son, bequests totaling $1.6 million to various individuals, and leaves 30% of the remainder to each of his sisters and 20% each to his wife and daughter.   The share for his daughter will remain in trust until she reaches 21.  The will states he has provided for his son elsewhere.  However, almost all media outlets have incorrectly reported that his son is the major beneficiary of his estate.

Many points:

1.  He should have used a funded living trust to ensure privacy of his net worth and his intentions which avoids Cincinnati attorneys from critiquing it .

2.  Giving the daughter unrestricted access to her share at 21 is a recipe for disaster.  He should have staggered her distributions over 10 or 15 years with the earliest one at 25.

3.  The testamentary trust will be expensive to administer for the next 20 years.  A living trust would be easier, less costly, and private.

4. Estate taxes will be painful and could have been delayed/minimized. The federal tax bill will be nearly $20 million while the NY bill will be over $4 million.  He could have delayed the payment of taxes by leaving assets in trust for his wife and giving his daughter her share from the same trust after the death of his wife.

5.  Odd to leave 60% of the remainder to his sisters and none of it to his son.

6.  Unless the clothes/jewelry and  Italian property comprise the majority of the assets, all media outlets from Fox News to HuffPo and from ABC to NY Post, and all others, are incorrect in reporting that the son receives the bulk of the estate.

7.  The linked article also states that it is unclear who will receive the proceeds of other properties once they are sold.  It must be too difficult for reporters to ask an estate planning attorney to read the will and inform them that the proceeds are the remainder and will be distributed to his sisters, wife and daughter.

8.  When the mainstream media ignores big stories like Benghazi and Presidential debate moderators get their facts wrong when interjecting themselves into debates (i.e. Candy Crowley), we should not be disappointed when they can not accurately report the contents of a will.  We should trust them less, though.

9.  I hope that Mr. Gandolfini provided generously for his son in a life insurance trust or some other vehicle.  Otherwise, the son's trauma of finding his dying father will be compounded by receiving much less than his sister, step mom, and aunts.   Maybe someday he will grow into the clothes if he uses food as comfort.

King of Pop Still Reigns

When Michael Jackson died 4 years ago, his net worth was negative $500 million.   Since then, his estate has earned $1.1 billion and grows larger daily.  A new Vegas show, Michael Jackson One, opened last week and is expected to run for 10 years.  A prior show, Michael Jackson - the Immortal World Tour,  has run for 2 years and is expected to run for at least 2 more.  Jackson has earned more money since he died than during his life and is the biggest selling artist on iTunes.  He is survived by 3 children of either debatable paternity or unknown maternity, all of whom have unusual or odd names.

Several points:

1.  Estates can continue to earn money after the death of the individual.

2.  Estate administration can be simplified if the earnings rights are transferred to a trust.

3.  Biggest selling artist on iTunes?  Do baby boomers still not know how to rip their CD collections, nor share them with their children?

4.  Negative $500 million net worth?  A personal amusement park and zoo are expensive.

Priorities When Expecting a Child

Zoey Perkins is the 1 year old daughter of former Kansas City Chief Jovan Belcher and Kasandra Perkins.  Belcher killed Kasandra last December before killing himself.  As the daughter of a former football player, Zoey will receive $1 million in structured payments over the next 22 years.  A Missouri probate court recently awarded custody to Kasandra's first cousin instead of Belcher's mother after a 3 day hearing.

Three points:

1.  When a couple is expecting a child, they should prepare wills to designate a guardian for their children so their wishes are followed instead of  giving the  decision to a stranger.

2.  When a couple dies without designating a guardian, sometimes the potential guardians are motivated by the financial status of the child.

3.  It is easy to overlook a will in the excitement of having a child, but the impact of designating a guardian is far more important than decorating a baby's room.

This Was a Good Idea?

Claudia Cohen was an NYC gossip columnist whose family owned Hudson News outlets.  She was married to Ron Perelman, an NYC business tycoon, from 1985-1994.   Their daughter was born in 1990.  Claudia died of cancer in 2007.   Shortly before her death, she changed her will to name her ex-husband as executor of her estate which was estimated to be worth $68 million.

As executor of her estate, Claudia's ex-husband has been locked in battles with her brother and now deceased father for the past five years.   The battles range from the valuation of Claudia's interest in the family business which was set by a partnership agreement, an alleged broken oral promise to leave Claudia half of her dad's estate, and whether Claudia's dad needed a guardian.  The estate has lost all of these battles and incurred at least $5 million in legal fees, if not more, plus had to repay a $10 million loan to Claudia's father.

Several points:

1.   A value set in a partnership agreement or buy sell agreement will be enforced, even it is not the true value of the interest.

2.  It is nearly impossible to win a law suit to enforce a promise to leave someone an inheritance.

3.  It is never a good idea to name a former spouse as executor or trustee, much less one embroiled in litigation with 2 ex-wives at the time of the designation and known for being disputatious.

4.  Claudia's daughter will be fine financially even if her inheritance from her mother is entirely consumed by legal fees.  Her father is reportedly worth $1.8 billion.

Even Rappers Need Wills (and Life Insurance, Trusts, and Condoms) Pt. 3

I previously blogged about rapper Nate Dogg who died in 2011 survived by 6 children of unascertainable ages and different mothers.  His estate is back in the news again because the mother of one of his children filed a claim against his estate for unpaid child support from the date of the child's 2006 birth, plus support since Dogg's death in 2011.   Two other women, one of whom also has  a child Dogg fathered in 2006, are arguing in court over the amount of support they are supposed to receive from his estate.

Several points:

1.  In Ohio, claims against an estate must be filed within six months of the date of death.  The claim for Dogg's unpaid back support would be invalid due to untimely filing.

2.  In Ohio, child support obligations terminate at death.  Adding money for post-death support to an already late claim just makes the claim doubly improper.

3.  Dogg's children are entitled to social security payments until they turn 18.

4.  For divorced couples, a life insurance policy is recommended to cover any future child support payments.

5.  Dogg could have established a trust to provide for his children upon his death.   However, that would have required foresight and planning.  For a guy who did not make child support payments nor who wore a condom, such planning would be inconceivable.

Double Indemnity Fail

A SC woman murdered both of her 20 something sons, her ex-husband who lived next door, and her step-mother.  She tried to blame the crime on her oldest, murdered son.   She was the beneficiary of insurance policies on the victims in the amount of $680K.  She had previously killed an alleged intruder and kept 3 guns in the house.  She recently plead guilty but mentally ill and was sentenced to life in prison.

What are the estate planning and other issues in this crime?

1.  The killer is precluded from inheriting under the state slayer statute which prevents a murderer from benefiting financially from her crime.

2.  Without valid wills, the sons' policies will benefit their grandparents, or aunts and uncles if the grandparents are deceased.

3.   If a mother takes out a large life insurance policy on a child, the child should sleep with one eye open.

4.  It is never a good idea to live next door to a mentally ill ex-wife, much less one who has already killed a man and who has a life insurance policy on one's life.

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.