Tag Archives: heirs

by | January 7, 2011 · 3:59 pm

Tales from the Estate Planning Crypt

Wealth, fame, and celebrity often come with a price. One of these is a loss of privacy resulting in the public airing of sometimes very dirty laundry. Nowhere is this seen more than where money and inheritance are involved. Beginning this month, I will feature a weekly story in what I call Tales from the Estate Planning Crypt – not so that the rest of us can gloat or think that this will never happen to us – but because they do happen everyday to normal people like us. And, perhaps we can learn something from these stories so that we can make better estate planning decisions. We can help you walk through the difficult and murky waters of planning for the contingencies that these stories represent. Don’t wait for your story to appear here!

Walt Disney heirs embroiled in ugly family feud

DisneyWalt Disney World is a great vacation spot and a wonderful way to spend the holidays.  Walt Disney passed in 1966 at the age of 65.  He left behind two daughters and 10 grandchildren.  One of his two daughters, Sharon Mae Disney, had married and then divorced a real estate developer named Bill Lund.  Lund was the man who located and helped select Orlando, Florida as the site for Disney World.  Sharon and Bill had twins, born in 1970, named Michelle and Brad. Sharon created trusts to pass on her share of the Disney fortune to her three children (her other child was from a prior marriage).  Under the trusts, the twins were entitled to substantial distributions.  How substantial?  In additional to yearly distributions of around one million dollars, they can each receive larger amounts, every 5 years, of approximately $20 million.  However, the larger payments would only be made if the trustees determined that the beneficiary was competent to handle the money.  Before Sharon died, she selected her ex-husband, Bill, as one of the co-trustees for the twins.

In 2009, Sharon and Bill’s daughter, Michelle, suffered an aneurysm.  Bill moved her from California to Arizona, where he lived, so he could care for her.  Family members and friends of Michelle launched a court battle to remove Bill, claiming he acted against Michelle’s wishes in moving her and even trying to isolate her from family and friends.   Not very Disney-like! Eventually, Michelle partially recovered from her condition.  When she learned what her father had done, she became angry with him.  She requested that other people be named as her guardian and conservator to make decisions for her as she continued to recover, and she did not want to be under the control of her father or his wife (Bill had remarried, and Michelle apparently did not care for her stepmother … sounds almost like an old Disney movie).

During that court process, co-trustees of Michelle’s trust learned that Bill had entered into secret land deals on behalf of the trust.  More troubling than that, he also personally profited from the deals … which was not permitted under California law.  So the other co-trustees started a second court proceeding, this time in California, seeking to remove Bill as a trustee. Bill initially fought the removal efforts.  He claimed the land deals brought in a lot of money for the trust.  Eventually, citing his own poor health, he agreed to resign (in exchange for yearly payments of $500,000). But that hasn’t ended the family feud.  Now Michelle and other family members are again battling her father, Bill.  This time, the fight is in an Arizona probate court and centers around Michelle’s twin brother, Brad, and his trust money.

Brad is developmentally disabled.  He lives next door to Bill and his wife, and Michelle claims that an independent guardian and conservator is needed to protect Brad from, among others, the (evil?) step-mother. Brad says he’s happy with Bill and his wife managing his affairs and his money.  He’s upset with his money being used to pay expensive lawyers for the guardianship fight, and he wants the court process ended. The battle has gotten so heated that the Arizona judge overseeing the case actually sent one of the lawyers involved (representing Michelle and other family members) to jail.

As many families can attest, there is something special about that Disney magic … too bad it’s not special enough to keep his grandchildren from ugly battles in court!

You can read the full story from the Arizona Republic here, along with a more recent update.

-David Russell, CFP

Disclosure: This report is intended to serve as a basis for further discussion with your other professional advisors. Although great effort has been taken to provide accurate numbers and explanations, the information in this report should not be relied upon for preparing tax returns, legal documents, or making investment decisions. If investment returns are included with this report, the assumed rates of return are not in any way to be taken as guaranteed projections of actual returns from any investment opportunity. The actual application of some of these concepts may be the practice of law and is the proper responsibility of your attorney.

1 Comment

Filed under Creating a Family Legacy, Estate Planning, Life Balance

Tagged as , , , , , , ,

by | December 8, 2010 · 9:00 am

Five Reasons You Might Need A Trust

First off, what is a trust? The simplest definition I can offer is that it is an agreement involving three parties – you, a trustee, and a beneficiary – where property is given by you to a trustee to manage on behalf of one or more beneficiaries. The agreement will have its own set of instructions for the trustee that direct the trustee how to manage the property and when to give property or income to the beneficiary. By law the trust must have an ending event – a future time when the property of the trust is distributed to the remaining beneficiaries. Until then, which can be one hundred years or more, the property is held under the control of the trustee who manages it according to your original wishes.

A few other basics: a trust can be created during your lifetime, in which case it’s called a “living” trust, or it can be created through your will, in which case it’s called a “testamentary” trust. In addition, a trust may be “revocable” meaning that you may change or revoke the trust during your lifetime; or the trust may be “irrevocable” which means that no one has the power to alter the terms of the trust once it’s written. A revocable trust will usually become irrevocable at your death, just like your will.

So, five reasons you might need a trust are:

1. You’re concerned about the expense and delay of probate. Probate is the legal proceeding involved in settling your affairs when you die. It can be expensive, and it can be time consuming, depending on the complexity of the estate. In this case a Revocable Living Trust that holds title to your assets may be an appropriate alternative to a traditional will. Under this arrangement, you can be the trustee and beneficiary of the trust during your life; therefore no control is lost over the trust assets. At death, no title changes are required since the trust already owns the assets, so no probate proceeding is necessary. A successor trustee, normally a corporate trustee or family member, carries on the trust and disburses the assets according to your written instructions.

2. You have more than $2.0 Million in total assets (or $4 Million if married). For 2006, individuals may die with an estate of less than $2.0 Million and pay no estate taxes. Married individuals may leave an unlimited amount to one another, but doing so my waste the first spouse’s $2.0M exemption. That’s because when the surviving spouse dies, the combined estate only has one remaining exemption. To preserve the exemption, use a credit shelter trust. At the first spouse’s death, an amount not exceeding the exemption is placed into the shelter trust. It is neither taxed at that time nor at the later death of the surviving spouse, even though it may appreciate greatly in value.

3. You have minor children. Minor beneficiaries of an estate cannot legally accept title to property or assets. Without a trust, the courts will create a guardianship for the assets. While designed to protect the estate of a minor, these guardianships may not accomplish your specific wishes. The courts may require the guardian to post bond and file an annual accounting. This is fine, unless the guardian is the surviving parent, in which case, these requirements can be overly burdensome. In addition, most guardianships are required to pay out their balance when the minor reaches the age of majority for the state they live in, which may be earlier than you’d like. As one father put it, “if my daughter were eighteen, and received a windfall of tens of thousands of dollars, I know exactly what she’d do with it. She’d buy a new car and spend the rest on clothes

4. You are concerned about the financial maturity of your adult heirs. A trust is the only instrument that gives its creator the ability to control property “from the grave.” Now if this sounds too controlling to you, consider the fact that the average inheritance is consumed within six months. Furthermore, 25% of those receiving inheritances of $150,000 or more totally drop out of the workforce (apparently only for about six months). Many parents are concerned about the impact that sudden wealth may have on their children’s lives. Trusts can preserve the estate for longer periods, and protect the assets from events such as divorce or bankruptcy.

5. You have children from a prior marriage. Children from a prior marriage may inadvertently be left out of their deceased parent’s estate if the parent has remarried and owns all of his assets in joint tenancy with the 2nd wife, or has only a simple will. In either case, the entire estate will pass to the surviving 2nd wife who is under no obligation to leave any part of the estate to the children of the first marriage. However, the surviving spouse may need the income from the assets. To address this situation, a QTIP trust may be established. The QTIP trust allows the creator to designate income to a surviving spouse for life, while retaining the right to name the persons who will ultimately receive the trust assets at the surviving spouse’s death. The QTIP also reduces the possibility of the estate passing to a subsequent marriage partner or “close friend” of the surviving spouse.

These are only five instances where a trust may provide control, tax, or protection benefits. There are a myriad of other situations where a trust may be warranted as well. Only a thorough analysis of your financial and personal goals can determine if a trust is a tool that can benefit you and your family. Perhaps these scenarios will encourage you to take the first step.

Leave a Comment

Filed under Creating a Family Legacy, Creating Financial Independence, Estate Planning, Financial Planning, Taxes

Tagged as , , , , , ,