The Morning Line Again

Paul Daugherty of the Cincinnati Enquirer has once again graciously allowed me to guest write his The Morning Line blog.  I hope you enjoy it.  

Even Rappers' Estates Need to Pay Their Debts

I have previously blogged about rapper Nate Dogg and the financial issues surrounding his estate.  He died in 2011 without a will but with 6 children of unascertainable ages and different mothers and unpaid child support and medical bills of $290K.  His primary asset was a house with $200K of equity.  The administrator of his estate has a contract to sell the house for $340,000 but his children are opposing the sale because it will not leave them enough money.

Several points:

1.  A decedent's debts must be paid before estate beneficiaries receive any proceeds of the estate. It is unfortunate for his children that there will likely be no assets left for them after the payment of debts, but an administrator cannot magically make a house worth more than the market is willing to pay nor make the debts less.

2.  If Mr. Dogg had wanted to provide for his children and not worry about his debts, he could have purchased a life insurance policy to benefit them.

3.  His house was worth $340K?  I doubt it was featured on MTV's "Cribs."

 

Last Will and Embezzlement

Diminutive actor Mickey Rooney died this week at age 93. In recent years, he was in the news for his allegations of elder abuse against his step-son and step-daughter-in-law and for his Congressional testimony about the abuse. Last Fall, he symbolically settled the case against his step-son and his step-daughter-in-law for a $2.8 million judgment that will not be paid by them. He re-wrote his will last month to exclude his wife of 35 years, from whom he had separated a year ago after allegations of physical abuse, and his 11 natural children. He left his entire $18,000 estate to his other step-son who has been his care giver for the past 3 years.

Several points:

1. Elder abuse is more common than realized. Although it is rare when a spouse of 36 years is somewhat complicit in the abuse, mothers will go to great lengths to "protect" and enable their children's bad habits.

2. Under Ohio law, his estranged wife would receive the entire $18,000 despite what the will states because a spouse is entitled to at least the first $20,000 of assets.

3. Eight wives? Someone should have told him he did not need to marry every woman he dated.

Shooting an Airball

Lorenzen Wright played in the NBA for 13 years and earned $55 million.  Shortly after his retirement, he was the victim of an unsolved murder in a suspected drug deal.  He was survived by his ex-wife, Sherra Wright,  and their 6 children.  After his death, his ex-wife received $1 million in insurance proceeds in trust for the children.  Within 10 months of receiving the proceeds, she was accused of having spent nearly all of them on housing, furniture, cars, and travel.  She is now subject to probate court action to remove her as trustee.

Several points:

1.  It is never a good idea to have a former spouse serve as trustee for the children.  A financially savvy third party is a much better choice.  Newly divorced individuals should quickly revise their wills and trusts to remove the former spouse and to keep him/her away from assets for the children.

2.  In some defense of Sherra Wright, purchasing real estate with trust assets is not spending them, it is re-allocating the type of investment.

3.  I suspect that Mr. Wright is not the only former NBA player to have significant career earnings and to die with less than 2% of them remaining.  Annual child support and alimony payments of $330,000 tend to rapidly diminish one's net worth.

Fast, Furious, and Guardianship Settlement

As mentioned previously, Paul Walker designated his mother as the guardian of his minor daughter, Meadow Rain, even though Rebecca Soteros, Meadow's mother, was still alive.  His mother filed probate documents asking to be named guardian.  According to Bela Lugosi Jr, attorney for Mrs. Walker, the parties recently agreed to allow Meadow to live with Soteros once Soteros completes a stint in alcohol rehab.

Several points:

1.  This would have been a difficult fight for Mrs. Walker to win because the birth parent is presumed to get sole custody of a child regardless of provisions in the deceased's will.

2.  Mrs. Walker probably leveraged the will provision to ensure that Soteros sought treatment before gaining sole custody of Meadow, although she might have been tempted to fight for custody by the trust funds available to her.

3.  Who knew that Bela Lugosi (Jr.) was practicing law?  I thought Bauhaus said "Bela Lugosi's Dead."

As Tears Go By

L'Wren Scott was the fashion designer girlfriend of Mick Jagger.  When she committed suicide 10 days ago, rumors swirled that she was in financial trouble.  After her will leaving her entire estate to Mick was filed in NY Surrogate's Court this week, media outlets are reporting that she was not financially stressed because the probate documents listed her as the owner of an $8 million condo and $ 1 million of personal belongings.

Several points:

1.  The media outlets are incorrect and Ms. Scott could have been financially strapped.  NY (and Ohio) requires initial probate documents to reflect gross value of assets.  Debts and liabilities are not required to be listed so it is doubtful that she had a condo with $8 million equity.

2.  Leaving money to Mick Jagger?  No matter how much she wanted to show love for him, L'Wren might have been better off selecting a charity important to her and Mick, assuming she had assets to leave. Mick does not need a nickel from her which will only be taxed at his death (although he and Keith Richards might have a deal with the devil to live forever).

3.  As I have mentioned before, I remain available for media consultation on will and probate interpretation matters.  Someone has to assist in getting these stories reported correctly.

Love or Exploitation?

A couple, who resided together for 4 years, met with a lawyer to discuss executing wills.   The lawyer allegedly advised them it would be cheaper if they simply married.  Seven months later, after the woman had suffered her second stroke and had been declared incompetent by her physician, the man removed her from the nursing home and married her in a civil service.  When the woman died intestate 3 months after the wedding, her sister and step-children from her first marriage contested the validity of the marriage due to her alleged lack of capacity.  If the marriage were invalid, the sister would inherit the $450,000 estate.  If the marriage were valid, the husband would inherit.  The step-children were listed as the beneficiaries of an unsigned  1999 will.  After the Wisconsin Supreme Court held that the marriage could be challenged on the grounds of legal incapacity, the husband and relatives agreed to split the estate.

Several points:

1.    There are many "will substitutes" which include trusts, beneficiary designations, and jointly owned assets.  Marriage is not one of them.  In 27 years of practice, I have never advised a couple to get married instead of executing wills.    

2.  Carpe Diem!  If you pay for a will in 1999, sign it and let your family know where the original is.  If you want to prepare a will in 2008, follow through.  If you want to get married instead, get married then not seven months and two strokes later.

 

3.  The Wisconsin marriage statute does not address the ability to void a marriage after someone has died.  However, in an era where courts interpret statutes to permit same sex marriage it was easy for the Wisconsin court to create its own rule on voiding a marriage.