Going for a Touchdown When a Field Goal Would Have Sufficed

Jim Carlen was one of the winningest football coaches at the University of South Carolina.  His children from his first marriage, which ended in 1980, are suing his 2nd wife of 29 years alleging that she influenced him to leave all of his estate to her. 

His 2007 will and all prior wills had included the children from his first marriage.  The 2010 will, executed one year after he was diagnosed with dementia, left everything to his widow.  In 2011, he executed a power of attorney in favor his wife which she purportedly used to transfer assets to herself prior to his death 

Several points:

1.  A will executed by an individual diagnosed with dementia that substantially changes his estate plan will always be challenged by the beneficiaries of the prior will.

2.  The coach could have provided for both his widow and children by leaving assets to her in a trust and having them distributed to the children upon her death.

3.  Proving that pigs get fat and hogs get slaughtered, the widow would have been better off ensuring that the children received something rather than seeing them disinherited entirely.

4.  45 wins constitutes the third most wins at South Carolina?  That might explain the one conference championship it its history.         

Mubarak and Marshall

Anthony Marshall, the 89 year old son of Brooke Astor, was paroled from prison after serving 8 weeks of a 1 -3 year sentence for stealing millions from his socialite mother when she was suffering from Alzheimer's.   Mr. Marshall’s health problems include Parkinson’s disease and congestive heart failure. His lawyers said recently that he could not walk, stand, clean himself or dress himself and had potentially life-threatening swallowing issues. One of the issues for Mr. Marshall was whether he should have been incarcerated at all given his age.   

Estate planning lessons?

I am not really certain.  Stealing from a disabled mom is obviously a bad idea and is subject to punishment. Beyond that?   Incarcerating an 89 year old seems unwise although given the amounts involved it was probably necessary.  The early release seems humane. If Egypt can release former president Mubarak this week, NY can certainly release Mr. Marshall.          

"What Is Per Stirpes?"

After I ask clients if they have reviewed drafts of their wills, the question they most often ask me is "what does per stirpes mean?"  It helps that the term is underlined. In short, it means by representation.  If a beneficiary dies before the decedent, that beneficiary's heirs will divide his or her share.  

A recent Nebraska case, Estate of Evans, recently interpreted per stirpes in the context of an individual who died without a will and was survived by a nephew from a pre-deceased brother and 2 nieces from another pre-deceased brother. The court held that the 3 individuals would share equally because the division into shares began at the generation with living heirs.  

Several points:

1.  In Ohio, the division would be made at the level of the pre-deceased brothers so the nephew would receive half and the nieces would each receive one quarter.

2.  A common fallacy among non-attorneys is that if an individual does not have a will, the assets will escheat to the state.  States have statutes that provide who will inherit assets if there is no will.  Only if there is no one somewhat directly related to the decedent will the assets escheat to the estate.  

3.  It is always better to prepare a will to determine who inherits assets rather than leave the distribution to a state statute.

4.  It is rare to be able to use the term escheat twice in the same post.                      

What in the Name of Tony Oliva?

Carl Pohlad was the owner of the Minnesota Twins.  He died in early 2009.  His estate is currently embroiled in a $121 million dispute with the IRS about the value of his ownership interest and the commensurate estate taxes owed.  The IRS claims that his interest was worth $293 million while his executor claims it was only worth $24 million.  The executor's value is much lower because it claims that even though Mr. Pohlad owned a majority interest in the team through several entities, he owned only 10% of the voting shares and he died when the stock market was at a 12 year low.       

Several points:

1.  Fractional interests of privately held businesses are difficult to value.

2.  Voting control of an entity is worth significantly more the non-voting interests.

3.  Mr. Pohlad died when the financial markets had collapsed and the stock market was being pummeled. However, baseball teams with television contracts and other revenue streams have different business cycles than financial institutions, and should not be valued in the same manner.  

4.  As if the Twins habitually losing to the Yankees in the regular season and the playoffs is not ignominious enough, it has be to be more galling to the Pohlads and Twins fans that George Steinbrenner's estate did not pay any federal estate taxes on his $1.6 billion (yes, with a B) interest in the Yankees because he died in 2010 when there was no federal estate tax.          

Just the Team for the Job

Short and sweet (and no lessons) after last week's Gandolfini treatise.  A Cleveland Browns fan requested six Browns players to serve as pall bearers at his funeral this week.  The reason?    "So the Browns can let him down one last time."

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.