CELEBRITY ESTATE PLANNING DISASTERS: LESSONS FROM THE LIFESTYLES - - PDF document

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CELEBRITY ESTATE PLANNING DISASTERS:

LESSONS FROM THE LIFESTYLES OF THE RICH AND FAMOUS

Gregory S. Williams, Esq. Carruthers & Roth, P.A. Phone: 336-478-1183 E-mail: gsw@crlaw.com

Disclaimer

 The contents of this presentation have been prepared by Carruthers &

Roth, P.A. and are offered for general informational purposes only and are not legal advice. You should contact your attorney directly to obtain advice with respect to any particular issue or problem. Carruthers & Roth, P.A. makes no representations or warranties regarding the accuracy of any information contained in this presentation, and you use the information at your own risk. You should consult with an attorney before taking any action that may affect your legal rights.

 Unless specifically indicated otherwise, any tax information contained in

these materials is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding any tax penalty that could be assessed related to any matter addressed herein or for purposes of promoting, marketing or recommending to any taxpayer any tax related matter addressed herein.

Introduction

 Everyone needs estate planning  Celebrities need estate planning too  America is obsessed with celebrities, and

loves watching them reach the stars and hit rock bottom

 Oftentimes that involves dying without

planning or planning well

 There are lessons to be learned!

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Common Themes

 No will  Old will  Insufficient or unsuitable planning  Ambiguities  Questionable capacity/undue influence  Questionable choice of fiduciary

Problem Areas

 Dysfunctional family  Blended family  Atypical dispositive provisions

(particularly where unexpected beneficiary is involved in facilitating will)

 Family business  Tyrannical or dilatory fiduciary

Sonny Bono - Disaster

 Disaster: No Will  Sonny Bono, of “Sonny and Cher” fame,

was a musician and politician

 Died in a skiing accident at age 62  Never wrote a will  Turns out he had an illegitimate child

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Sonny Bono – Consequences

 The illegitimate child showed up after his

death to claim part of his estate

Sonny Bono – Should Have

 A simple will would have prevented the

illegitimate child from taking part of his estate

Jimi Hendrix - Disaster

 Disaster: No Will  Jimi Hendrix, guitarist and

singer/songwriter, died at age 27 without a will

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Jimi Hendrix – Consequences

 Even though he was very close to his

brother, because Jimi died intestate the court awarded his entire estate to his father

 Jimi’s father later left everything to an

adopted daughter from a subsequent marriage, leaving the brother with absolutely nothing

Jimi Hendrix – Should Have

 Although no 27 year old expects to die so

young, a simple will would have left Jimi’s estate to whomever he wanted to

 Reminder that even young adults need

basic estate planning documents, particularly powers of attorney and health care powers of attorney

Stieg Larsson - Disaster

 Disaster: No Will  Swedish writer of “The Girl with the

Dragon Tattoo” and other novels

 Died of a heart attack at the age of 50,

leaving behind his girlfriend of 32 years

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Stieg Larsson – Consequences

 Under Swedish law (and NC law would be

the same), his girlfriend would not be entitled to inherit any part of his estate

 Instead his entire estate went to his father

and brother, with whom he reportedly had little contact

 Seems highly likely that he would have

preferred his estate to go to his girlfriend

 Unfortunately led to family disputes

Stieg Larsson – Should Have

 Pretty obvious, but he should have

implemented a will or trust to include his girlfriend

Florence Griffith Joyner - Disaster

 Disaster: Lost Will  “Flo Jo” won several gold and silver

Olympic medals and still holds the 100 and 200 meter world records

 Unfortunately she died suddenly at 38  She apparently wrote a will, but never told

anyone where it was

6 Florence Griffith Joyner – Consequences

 Because the original will could not be

located, she was considered intestate

 Her husband and mother went to court

• ver disputes regarding the estate

 Administration had to be turned over to a

third party

Florence Griffith Joyner – Should Have

 Flo Jo should have told her family where

her original will was and kept it in a very safe place

 Many attorneys will hold original wills for

clients

 Safekeeping other documents can be just

as important, including powers of attorney, health care powers of attorney and medical directives

Heath Ledger - Disaster

 Disaster: Failure to update will  The actor died at age 29 from a drug

• verdose

 He had a will that left his estate to his

parents and sister, but did not update it to include his daughter born 3 years after signing the will

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Heath Ledger – Consequences

 Legally, Ledger’s own daughter was

disinherited because of his failure to update his estate plan

 Fortunately, his daughter was the

beneficiary of substantial life insurance, and his family ultimately reached a settlement that would protect the daughter.

Heath Ledger – Should Have

 “Estate planning is a process not an

event”

 Estate plans should be reviewed after any

significant life event, including births, adoption, deaths, marriage, divorce or separation, sale of family business, etc.

Warren Burger - Disaster

 Disaster: Wrote his own will  Warren Burger was Chief Justice of the

US Supreme Court from 1969 to 1986

 Justice Burger’s will was famously 176

words long

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Warren Burger – Consequences

 Will did not address estate taxes, give

powers to his executor or include other important administrative provisions

 Allegedly cost his family $450,000 in

avoidable estate taxes, court costs and attorney’s fees

Warren Burger – Should Have

 Even though Justice Burger was clearly a

brilliant scholar in jurisprudence, he was a trial attorney inexperienced in estate planning and taxation

 Perhaps he should have asked one of the

• ther justices for a referral to an estate

planner

Joe Robbie - Disaster

 Disaster: No Planning  Joe Robbie was an attorney and

successful entrepreneur

 Owned the Miami Dolphins and the Miami

football stadium named after him

 While owner, Don Shula coached the

team to a perfect season and 2 Super Bowls

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Joe Robbie – Consequences

 Much of Joe Robbie’s large estate was

illiquid

 Upon his death in 1990, his estate

qualified for the marital deduction, but his wife died shortly thereafter

 Facing a $45 Million estate tax bill, the

family had to sell the team and the stadium at a deep discount

Joe Robbie – Should Have

 Should have done some advanced

planning to minimize the impact of the estate tax

 Because of the illiquidity of the estate, Mr.

Robbie should have considered establishing an irrevocable trust to purchase a large life insurance policy

 Lifetime gifting and/or charitable giving

would also have helped

Philip Seymour Hoffman - Disaster

 Disaster: No Planning  The Oscar winning actor died of a drug

• verdose with an estate of $34 million

 Not wanting to create “trust fund kids”, he

left everything outright to the mother of his children (to whom he was not married).

10 Philip Seymour Hoffman – Consequences

 Despite reported advice of legal and

financial advisors, Hoffman declined to do any advanced planning, including establishing gift trusts for his children

 Given that he was not married, the

bequest to the mother did not qualify for the marital deduction

 Unfortunately a large estate tax was due

Philip Seymour Hoffman – Should Have

 Hoffman should have considered the

typical strategies for high net worth folks, including lifetime gifts to trusts, purchasing life insurance and/or including charity in the plan

 Perhaps he should have considered

marrying her???

Tom Clancy - Disaster

 Disaster: Ambiguity in estate planning

documents

 Residuary estate divided into Marital Share

(benefiting second wife), Family Trust (benefiting spouse and their minor child) and Trust for kids from prior marriage

 An ambiguity arose from a codicil as to

whether the estate tax was to be shared between Family Trust and Trust for kids from a prior marriage

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Tom Clancy – Consequences

 Clancy died with an $82 million estate; the

ambiguity was whether the Family Trust (part

• f the wife’s share) would bear half of the

$16 million estate tax or whether the children would bear all of the tax

 Years of litigation ensued to determine

whether the Family Trust should bear part of the estate tax or whether it would all come

• ut of the share of the children from the prior

marriage

Tom Clancy – Should Have

 Tax apportionment language is important

and complicated, particularly where significant estate tax is at risk and the residuary estate is divided among different beneficiaries with competing interests

 A tax apportionment clause that made it

clear whether the Family Trust was to share in part of the tax would have saved a great deal in time and money

• J. Howard Marshall - Disaster

 Disaster: Insufficient planning/undue

influence

 Marshall was an elderly oil tycoon who met

Anna Nicole Smith at a strip club where she performed

 During their 2 year relationship he showered

her with gifts and asked him to marry her several times.

 When they married in 1994, she was age 26,

and he was age 89.

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• J. Howard Marshall – Consequences

 Marshall died 13 months later in 1995 at age 90.  She claimed that he had verbally promised her

half of his estate.

 A bankruptcy court awarded her nearly half of

his estate. The Houston probate court repeatedly ruled that she was entitled to nothing.

 Both the 9th circuit and US Supreme Court

weighed in on the dispute, and the eventual conclusion was that she was not entitled to a share of the estate

• J. Howard Marshall – Should Have

 As a lawyer, Marshall should have known

that this was likely going to be a problem

 Perhaps he didn’t care or was too frail to

appreciate the problems

 Assuming he was competent, then

reaffirming his estate plan or adding a codicil to include Smith could have avoided years of costly litigation

Anna Nicole Smith - Disaster

 Disaster: Poor choice of executor/drafting

problems

 Smith, a performer and actress, survived

her elderly husband (J. Howard Marshall)

 Her son died of a drug overdose days

after she gave birth; some months later she died of a drug overdose

 Her will named her significant other as

executor and contained problems

13 Anna Nicole Smith – Consequences

 Smith’s significant other falsely claimed

that he was Smith’s daughter’s father; choosing a trustworthy executor is critical

 The will incorrectly stated that she had no

predeceased children, left everything to her now deceased son, and specifically excluded any children born after the will

Anna Nicole Smith – Should Have

 Should have considered an independent

executor

 Should have updated her will or

anticipated that her son might predecease

• r that she might have future children

 Referring back to Marshall’s estate,

perhaps she should have insisted that he put his purported promise of part of his estate in writing before she married him

Lou Reed - Disaster

 Disaster: Use of will rather than trust  The singer died in 2013 relying on a will to

distribute his $30 million estate

 This permitted the New York press to

report detailed information on his assets, liabilities and what each beneficiary received.

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Lou Reed – Consequences

 By passing his estate through a will, the

dispositive provisions and financial information of the estate were completely public

 The probate process can also be time

consuming, expensive and burdensome

Lou Reed – Should Have

 Most celebrities use revocable trusts to

avoid public intrusion into their personal and financial affairs

 However, many “normal everyday” people

use revocable trusts to avoid probate

 Family business owners are particularly

interested in the privacy aspect of revocable trusts

Doris Duke - Disaster

 Disaster: Questionable choice of fiduciary  Duke, the tobacco heiress, named her

butler as executor of her estate and trustee of a substantial foundation

 The butler’s spending was so

questionable that he was removed by the courts

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Doris Duke – Consequences

 Although control of the estate was

ultimately settled by establishing a third party board to manage the foundation, years of litigation no doubt cost the estate a huge amount in attorney’s fees and

• ther expenses

Doris Duke – Should Have

 Particularly in a large estate, one or more

professional fiduciaries might be a better choice than a butler

Brooke Astor - Disaster

 Disaster: Questionable choice of

fiduciary/undue influence/elder abuse

 Astor was the sole heir to the Astor fortune  Although she was quite a philanthropist

during her lifetime, she still had a $100 million estate at her death in 2007 at 105

 Named her son Anthony as attorney-in-fact

and executor, whose own son charged that he had taken advantage of Ms. Astor

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Brooke Astor – Consequences

 In 2009, 85 year old Anthony was

convicted on multiple counts of fraud and larceny and sentenced to 1 to 3 years

 Astor apparently had an appropriate, tax-

efficient will, but then amended the will twice very late in life reducing what went to charity and giving control to Anthony

Brooke Astor – Should Have

 Perhaps she should have named multiple

agents, instead of just Anthony

 If anyone on the team of advisors

suspects a problem, then speak up

 In certain cases, consider a mental

capacity assessment

 Consider videotaping the will execution

Leona Helmsley - Disaster

 Disaster: Questionable capacity  The hotel tycoon died with a $5 billion

estate, but excluded 2 grandchildren

 On the other hand, she left a $12 million

trust for her dog “Trouble”

 The grandchildren sued claiming that she

didn’t have the capacity to establish the estate plan

17 Leona Helmsley – Consequences

 Given the unusual disposition of Ms.

Helmsley’s estate, the grandchildren had some arguments that she did not have the capacity to establish the estate plan

 The litigation settled, instead giving some

money to the grandchildren and reducing Trouble’s share to “only” $2 million

Leona Helmsley – Should Have

 If possible, an estate plan should be

implemented well before illness or frailty would invite will contests

 Where an estate plan disposition is

unusual, consider a capacity assessment and/or videotaping the will execution

Ernie Banks - Disaster

 Disaster: Caregiver takes over control  Ernie Banks was a beloved African-

American professional baseball player, particularly in the Cubs organization

 He died at age 83 of a heart condition;

death certificate listed dementia as a significant contributing factor

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Ernie Banks – Consequences

 3 months before his death, Banks signed

a new set of estate planning documents, putting the caregiver in complete control and naming her as the sole beneficiary

 Disinherited his estranged wife and his

three adult children

 Numerous facts and circumstances

suggest undue influence and litigation ensued

Ernie Banks – Should Have

 Should have implemented his estate plan

well in advance of his illness, and hope that a relationship with an attorney would help prevent later foul play

 Also like to include all children in the

discussion/loop where possible and approved by the client

Jerry Garcia - Disaster

 Disaster: Choice of executor/ambiguity  Garcia was a well known musician who

founded the rock band the Grateful Dead

 Garcia had numerous relationships with

various women, including three marriages

 Had four daughters from 3 relationships  Garcia died in 1995 from a heart attack,

likely brought on from drug abuse

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Jerry Garcia – Consequences

 Garcia named his third wife as executor; she

was a 1/3 beneficiary and his was a very complicated estate, with various business interests, royalties, etc.

 The third wife cut off alimony payments to

second wife and that obviously went to court

 There was also a dispute over the disposition

• f his guitars, and alleged ambiguity in their

description

Jerry Garcia – Should Have

 Garcia should have considered using a

professional trustee, whether a corporate trustee or CPA or attorney, rather than putting

• ne of his spouses in the middle of a

complex situation with numerous conflicts of interest

 Given the value of his guitars, he likely

should have identified them specifically rather than just a general description of “my guitars”

Hopeless Situations?

 Kurt Cobain/Courtney Love  Casey Casem  Ted Williams  Mickey Rooney

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Got It Right

 Elizabeth Taylor – created private trusts,

included charity

 Robin Williams – created private trust

documents before illness

 Joan Rivers – living will and health care

power of attorney was helpful

 Deceased celebrities whose estates are

never mentioned in the press

CELEBRITY ESTATE PLANNING DISASTERS:

LESSONS FROM THE LIFESTYLES OF THE RICH AND FAMOUS

Gregory S. Williams, Esq. Carruthers & Roth, P.A. Phone: 336-478-1183 E-mail: gsw@crlaw.com