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Estate Planning Failures Of The Rich And Famous - Part V

Whenever a celebrity wins an award, you can expect the tearful thanks to family – deeply expressed gratitude for the long-suffering loved ones without whom none of this would be possible.

But celebrities typically lose that loving feeling when it comes time to plan their estates. Instead, family members get to suffer a little bit longer. It seems to be the way of the uniquely creative, authentically eccentric and fiendishly entrepreneurial types that they come up with new ways to torture their loved ones.

The theme for this year’s gallery of estate-planning failures is families – you can’t live with ’em and they can’t live without you, even when you’re dead.

Sherman Helmsley, before he moved on up to that deluxe apartment in the sky, played the rude and abrasive George Jefferson, spinning off from “All in the Family” to “The Jeffersons.” Apparently, he was a sweetheart of a guy in real life – unless you were family. Then you just didn’t exist.

But exist they did, no matter how much Helmsley ignored them. (Much like the theme song, “Movin’ on Up,” which will undoubtedly blast from the eight-track of your brain for the rest of the day.) Helmsley’s manager and “beloved partner,” Flora Enchinton, found this out the hard way. She said in the decades that she knew Helmsley, he never talked about his family and they never visited. He adopted El Paso as his new home and left his native Philadelphia far behind.

Soon after Helmsley died, Richard Thornton showed up, claiming to be his half-brother and demanding the estate – all $50,000 of it.

“Some people come out of the woodwork – they think Sherman, they think money,” Enchinton told The Associated Press.

But that wasn’t all that Thornton wanted, he also demanded to take Helmsley’s body back to Philadelphia. This was despite Helmsley’s wish to be buried in El Paso with military honors (not in commemoration of his battles with Archie Bunker – Helmsley served in the Air Force).

Thornton’s argument had two things going for it: a test showed he was in fact a blood relative, giving him standing to contest the will, and Helmsley signed his will six weeks before dying of lung cancer. Julie Ann Garber, author of the About.com blog on wills and estate planning, said that when Helmsley signed the will that close to his death, it could have triggered one of what she calls the four grounds for contesting a will. Those grounds are when the signer:

  • Didn’t sign the will in accordance with state laws.
  • Lacked capacity to sign a will.
  • Was unduly influenced into signing a will.
  • Didn’t realize he or she was signing a will, so the will was procured by fraud.

“It is better to plan while you have your wits about you,” said Garber, who is chief legal officer at The Andersen Firm in Florida. “Then there couldn’t be any question that you were doing this in view of your death.”

In Helmsley’s case, a judge said his half-brother could contest the will but followed Helmsley’s wishes to be buried in El Paso. That was after Helmsley had been in a refrigerator for three and a half months.

But that was nothing compared to Ted Williams, one of the greatest players to have ever graced the game of baseball. His head has been frozen for more than 10 years in what has been described as a lobster pot. Two of his children said it was what he wanted and produced a stained, scribbled note signed by Williams to that effect.

Russell Fishkind, wrote about the case in his book, Probate Wars of the Rich & Famous: An Insider’s Guide to Estate Planning and Probate Litigation. He says he was dumbfounded when he saw the note that the heirs produced.

“When I first got a copy of this note, I thought I had a bad copy, but that’s not the case,” said Fishkind, who is a partner at Saul Ewing, a personal wealth, estates and trusts practice in New York City and Princeton, N.J. “There are four or five blobs of oil on this note.”

It said, “JHW, Claudia and Dad all agree to be put in bio-stasis after we die. This is what we want, to be able to be together in the future, even if it is only a chance.” It was signed “Ted Williams,” which is what he commonly used for autographs, but usually signed his full name in legal documents.

The note is in form and content a stark contrast to the Hemingwayesque wishes in his will: “I direct that my remains be cremated and my ashes sprinkled at sea off the coast of Florida, where the water is very deep.”

Daughter Claudia produced the note almost immediately after Williams’ death and whisked the body to Arizona, where the head that once wore a Red Sox cap was removed and placed in one container, while his body was stored in another. Not a cheap procedure, by the way, costing $120,000, according to Fishkind.

Also, it appears that cryogenic storage is not as sedate as it might sound. “His head was cracked, apparently dropped, and has as many as 10 deep fractures in the skull,” Fishkind said. “The company says, ‘Well, that’s just because of changing temperatures,’ but the point is, he’s got these 10 holes that they said are the size of a dime. His head is stored in a silver container marked as ID number A-1949.”

Williams’ elder daughter entered the picture and fought the other two, but legal fees were rapidly depleting the estate. So, they settled on setting up trust for the remaining $645,000 to be split among the heirs. Why did the elder daughter drop the fight? Reportedly, she had previously been disinherited.

People can learn two things from Williams’ case. The first is to document wishes clearly, which he had done. But then those wishes have to be known, Fishkind said. Make sure certain people have quick access to the will so that someone cannot come in and undermine true intentions.

“Attach at least a copy of it with the lawyer, with the accountant, with the financial planner, with a key family member so that everybody knows what your intentions are and someone can’t act on their own and undermine your intentions,” Fishkind said.

The Williams and Helmsley cases also illustrate the point that if the will does not specify what happens to the body, the next of kin decides what happens. In Helmsley’s case, his will won, but in Williams’ case, speed won. That’s because wills usually do not go into effect for at least a few weeks and a fight can break out even before then.

The Helmsley case also reinforces the need to account clearly for those unrelated by blood – and those related – for that matter, Garber said.

“If you’re silent on the issue it leaves people wondering if it was intentional or a mistake,” she said. If Helmsley named relatives and excluded them by name, his intentions would be clear. But how would a person do that? It might sound a bit rude, but he or she would use the “you’re-dead-to-me” clause. So, even if Uncle Bob still insists on breathing, he can be cut out of the will by being declared already dead. Garber said it is the clearest way to disinherit someone, but it takes some strong nerves.

“The wording is something to the effect that, ‘I have chosen not to provide for Bob or any of his descendants in my will or my trust for reasons I deem to be good and sufficient. Therefore, for all purposes of this will or trust I deem Bob and all of his descendants to have predeceased me,’” Garber said, adding that some people blanch upon seeing that. “I’ve had clients who cringe when they see that in black and white and they’re like, ‘Wow, that’s, uh, harsh,’ and have second thoughts.”

Clarity is good, particularly when it comes to relationships other than blood relatives and marriages. Those were lessons lost on Thomas Kinkade.

Kinkade, the self-described painter of light, had more than a few streaks of dark pigment in his life. When he died of an alcohol and valium overdose, he was living with a girlfriend, but still married. That major life change right there should have screamed for an estate planning update, which he did, but not very artfully. His girlfriend produced two notes purportedly scrawled and signed by Kinkade leaving her $10 million, a California estate and some art.

Kinkade was smart about his business, amassing a fortune of about $70 million, but did some not-so-smart things. In fact, in Florida, where Garber practices, the state would protect people from themselves. A will that was handwritten and signed without witnesses would not be valid. But even so, the scrawled nature of the notes certainly invited challenges.

“They’re barely legible,” Garber said. “So that goes back to capacity. Did she force him to write that? Then you have the undue influence question. So that was a mess.”

The situation had all the makings of a slowly grinding spectacle bound to inspire creative headlines for years to come. But to the surprise of many, Kinkade’s wife and girlfriend settled.

“I was really shocked when I saw that,” Garber said. “Usually it takes years for people to come to the conclusion, ‘Let’s just forget it and move on.’ ”

Another case of when stupid wills happen to smart people was Larry Hillblom, the Howard Hughes you probably never heard of. Hillblom was the entrepreneurial genius behind the overnight courier, DHL. He challenged the post office to become the first large carrier besides U.S. Mail and paved the way for others such as Federal Express. He also blazed a trail to Nuttytown.

He moved to Saipan, which is one of the United States’ most western territories, sitting in the Pacific Ocean suspended between Japan to the north, Papua New Guinea to the south, the Philippines to the west and a whole lot of ocean to the east. It is somewhere in that ocean where Hillblom now rests – most likely.

He looked like a beach bum unless you saw his DeLorean, his enormous home and somehow got a look at the many hundreds of millions of dollars he had. Some said he was a billionaire, but the official count brought it to about $600 million. He was secretive in his dealings, so many millions might still be unaccounted for. Hillblom also was quiet about his predilection for underage prostitutes in the Philippines and in other places so beset by poverty that children turned tricks to help support their families.

He preferred virgins, supposedly to avoid AIDS, but even if that were so, he was not as careful about his other hobby of flying rickety aircraft without a license. His plane dropped into the ocean with two other passengers in 1995. Their bodies were recovered; his never was. Soon after, women from the Pacific Rim started showing up with children who resembled Hillblom, setting off a nasty probate battle.

Hillblom’s will left generous amounts to the University of California, where he graduated from law school, and for medical research. But it made no mention of possible progeny, leaving the door wide open for challenges.

Garber said people typically name their children and then exclude any defendant not named. “Say you have three kids and you think, ‘Well, I might have a fourth out there somewhere,’ then you would just name those three kids and their descendants, and then say, ‘I specifically exclude any other descendent that’s not named.’ ”

Even though Hillblom had a law degree, and was supposedly advised to revise his will, he did not. He also did not name his live-in girlfriend, who was kicked to the street by Hillblom’s executors. Eventually, four of the children who came forward proved to be related to Hillblom and were awarded 60 percent of the estate in a long, drawn-out settlement. His girlfriend got $3 million.

Someone else with prodigious progeny was music legend Ray Charles. He accounted for his 12 children but left them $500,000 in total, a sliver of an estate valued to be as much as $75 million in cash and assets. The rest went to a business, and to set up the Ray Charles Foundation.

By leaving a proportionally small amount to his children, Charles ensured challenges. Whitney Houston also guaranteed a challenge in her case when she left her $20 million estate to her 19-year-old daughter, Bobbi Kristina Brown. She instructed the trust to pay out 10 percent when her daughter turned 21, 20 percent at age 25 and the rest at age 30.

The estate, and Whitney’s mother, protested, saying that the plan would make Bobbi a target for people trying to exert undue influence and that Whitney would probably have preferred Bobbi to have a lifetime stream of money rather than the lump sum at 30.

In the Charles and Houston cases, although they were clear in their wills and trusts, people questioned whether the legal documents reflected their true intention. Fishkind said one way to avoid this is to videotape the person explaining his or her reasoning.

“I go through the terms of the will with the testator and say, ‘Is this your intention?’ After the testator says yes, then I pan the camera to the witnesses and the notary,” Fishkind said. “Then I have the testator sign, on camera, the witness and the notary sign, and the notary affixes his or her seal, on camera. Then I store that with the will. It knocks out the claim for lack of capacity and that the will wasn’t signed properly.”

But what happens if the client issues a poorly timed joke, such as, “I have no idea what I’m signing,” right into the camera?

“That is a concern,” Fishkind said. “I work with the client in drafting a statement that the client reads into the record, so that no comments essentially go off script. If Ray Charles says, ‘I’ve spent a lifetime in music and it’s very important to me and I have 12 children and I love them all, but I’ve really spent a lot of time with my estate planner designing a plan that meets with my intentions and therefore, what I have agreed to do, and I’ve documented in my will, is to leave the sum of $500,000 to be divided equally amongst my 12 children, and the balance is to go to the Ray Charles Foundation.’ ”

Then Fishkind would refer to that section of the will and confirm the client’s intentions to clear up any possible confusion.

In the Charles and Houston cases, trusts handled the money and were able to avoid estate taxes. That was an area of planning inspired by the introduction of the estate tax and in particular the experience of the John D. Rockefeller Sr. case.

Rockefeller is considered the country’s first billionaire, having amassed an enormous fortune in oil just as cars and airplanes were being developed. But, the United States had a love/hate relationship with the empire builder. Rockefeller helped inspire anti-trust and other regulations designed to curb his power and wealth. The estate tax law, besides helping fund World War I, was also structured to break up dynasties.

Despite the government’s actions, Rockefeller still acquired the vast fortune of $1.4 billion in 1937, even with The Great Depression at its deepest. And although the estate tax did take a 70 percent chomp out of the estate, the Rockefellers still managed to perpetuate a bit of a dynasty, inspiring countless moms and dads to tell their kids, “whaddaya think, we’re Rockefellers or something?”

Now, it would be rare for very large estates to not feature some protection from taxes, but that becomes more difficult for families with large assets. Family farms might come to mind, but it often happens with sport teams and other properties such as major metro newspapers.

The Ochs/Sulzberger family has been getting a sense of this since the family bought The New York Times about 100 years ago. Family ownership had dwindled to 15 percent until Arthur Ochs Sulzberger Sr. died last year. Of his $70.2 million estate, Sulzberger left $41 million in company stock to his children, which they said they had to sell in a few weeks to deal with estate taxes and they wanted to act before they significantly affected the stock price. The sale eroded family ownership to 13 percent. The family’s ownership had been 19 percent as recently as 2010.

Although the estate tax exemption is higher than it has been for years, family-owned businesses are still in dire need of estate-planning to keep the enterprise in the family, if that is their desire.

This series would not be complete if we did not include at least one person who died without a will. This year’s example is Urooj Khan.

That might not be a familiar name, but his circumstances might ring a bell. He had won a $1 million lottery and then soon died of cyanide poisoning. He spoke to the press of his big plans with the money: pay off his mortgages, expand his business and donate to St. Jude Children’s Research Hospital.

Instead, a couple of days before he was to pick up the check, he complained of a severe stomach ache, went to the hospital and died. Doctors said cyanide killed him but authorities have not figured out how he ingested it.

Besides the big plans Khan had for the winnings, he was already somewhat of a winner, having built a successful chain of dry-cleaners and had some real estate. Despite all of that, he did not have a will.

So, the children’s hospital will not get money. Nor will his daughter from a previous marriage. The sole heir is his current wife – the person who served him his last meal.

The moral of this year’s batch of stories? A quote from R. Alan Woods’ book The Journey is the Destination might be appropriate here: “There are two things you can run and not hide from – God and a dysfunctional family.”

So, the lesson here might be that clients shouldn’t even try to run from family, dysfunctional or not. But you can let them know that this is their opportunity to finally have the last word – and testament.

 

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. Steve may be reached at [email protected] Follow him on Twitter @INNSteveM. [email protected].


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