With the end of 2016 upon us, now is a fitting time to look back at some of the top estate disputes from this past year. 2016 was a typical year in that, unsurprisingly, people continued to die and families continued to fight over estates.
The following are some of the major estate disputes that graced the headlines this past year. Note that this is just a sample of some of the major ones; there were several rather prominent ones this past year that I’m unable to write about, whether because I or my colleagues at LeClairRyan represented parties in them, or because we have business relationships with one of the parties or a related entity. That said, here are what I think are the four top estate conflicts from 2016:
Pop artist Prince died in April 2016 without a will. I previously wrote a blog post, which can be accessed here, discussing at length several lessons that can be learned from Prince’s situation.
Since his passing, a will still has not turned up. As a result, the Minnesota judge overseeing the administration of his estate has had to deal with numerous people popping out of the woodwork, claiming to be children of Prince (who would stand to take a share of his estate under Minnesota’s intestacy scheme). The judge has also excluded approximately 30 would-be-heirs from inheriting a portion of his estate.
Many of the dismissed would-be-heirs claimed that Prince was either their husband or biological or adoptive father, or that they were a half-sibling of the singer (one even maintained the CIA had classified her marriage with Prince as top-secret).
Based on recent developments, it appears that Prince’s younger sister, and five half-siblings, were the singer’s only heirs. The court has mandated the individuals to undergo genetic testing. Pending the results of these tests, these six individuals apparently stand to split his estate, which is valued in the hundreds of millions.
The Prince incident underscores what is probably the most obvious lesson that I repeat on this blog time after time: enact an estate plan, and put the instruments in a place where people can locate them upon your passing.
Frank Sinatra Jr.
Frank Sinatra Jr., the son of the famous singer, passed away in March 2016. At the time of his death, his ex-wife Cynthia had filed for divorce and the two were locked in litigation.
The couple had originally divorced in 2001, but continued to live together. They even purchased a home together after their separation. Sinatra Jr. had also been ordered to pay Cynthia $5,000 a month in spousal support in the divorce decree. While this decree only required the support to continue for 24 months, Sinatra Jr. paid for almost ten years. Cynthia also claimed that Sinatra Jr. called her his wife at social events.
All this apparently led Cynthia to believe the two were in a common-law marriage. In 2013, when Sinatra Jr.’s monetary support ceased when he apparently ran low on money, she filed for divorce again. Sinatra Jr. claimed that the two, while close, were not in a common-law marriage. Despite his protest, a Texas district judge awarded Cynthia the second divorce. This judgment included a $500,000 equalization payment, a share of his property, and another $5,000 per month in spousal support. Sinatra Jr. appealed the judgement, an appeal that was pending at the time of his death. However, the appellate court reversed the trial court. In its decision, the appellate court was persuaded by the facts that the couple filed separate tax returns, listed themselves as single tenants in common for the house they purchased, and that Sinatra Jr. labeled Cynthia as his ex-spouse in tax returns. The court also noted that a common-law marriage requires a specific and mutual agreement under Texas law.
Sinatra Jr. could have avoided this mess in large part by having been more careful with his decisions and actions (chiefly by consulting with and listening to his attorney). Many states do not recognize common law marriage, but in those states that do, people need to be extremely careful that their actions don’t give their lover a basis to claim that the parties had a common law marriage.
In September 2016, Miami Marlins pitching ace Jose Fernandez passed away in a boating accident off the coast of Miami Beach, Florida. The twenty-four year old was unmarried, and one media report appears to indicate that he named his mother as the sole death beneficiary in his trust. At the time of his death, Maria Arias, Fernandez’s girlfriend, was pregnant with their child. Due to Arias not being named in the trust, and not having been married to Fernandez at the time of his death, she stands to miss out on inheriting what otherwise could have been millions of dollars. Had Arias been married at the time of his death, even if he had intentionally disinherited her, she still could have claimed the elective share rights of a married spouse. If Arias had to do it all over again, she almost certainly would have sought to marry Fernandez before (or at least shortly after) she became pregnant.
I have not seen any reports that Fernandez’s child was provided for in his trust, a scenario that may make the child a pretermitted child under Florida law (depending on certain variables outside the scope of this blog post). A pretermitted child is a child who is born after the execution of a will, and who was not intentionally omitted from the will. As a result, the child is entitled to a portion of the estate, the precise amount of which varies from state to state.
While I have not yet seen reports indicating that Fernandez’s estate is the subject of litigation, the scenario has all of the classic signs of what could make for a dispute.
Well-known author Tom Clancy passed away in October 2013, leaving behind an estimated $80-million estate that saw significant litigation in 2016. Clancy’s estate plan provided for three buckets of assets. The first bucket funded a trust for the benefit of Clancy’s second wife, Alexandra Clancy, as the sole beneficiary. The second bucket funded a trust for the benefit of Alexandra Clancy and Alexis Clancy, the minor child of Tom and Alexandra’s marriage. Lastly, the final bucket was for the benefit of each of Clancy’s four children from his first marriage. Originally, the tax burden for the estate tax on Clancy’s estate would be shared equally between the second and third buckets. As a result, the four children would be responsible for $7.85 million of taxes, and Alexandra and Alexis would be responsible for $7.85 million of taxes.
Just before Clancy’s passing, he signed a codicil including a clause that states that “[n]o asset or proceeds of any assets shall be included in the Marital Share of the Non-Exempt Family Residuary Trust as to which a marital deduction would not be allowed if included.”
Over the opposition of the four children, as well as Clancy’s lawyer who drafted the codicil (and initially acted as the estate’s executor), the Court of Appeals of Maryland handed down a split 4-3 decision holding that the codicil shifted the entire tax burden to the four children’s trusts so as to maximize the amount exempt from federal estate taxes under the marital exemption. Now, the four children will be jointly responsible for $11.8 million worth of taxes.
The moral of the story? Estate planners need to be very careful about language that could arguably be construed as ambiguous. With an estate in the tens of millions, it was almost certain that all of the parties involved in Clancy’s estate would retain legal counsel who would pour over each word in his estate plan to seize on any ambiguity that could benefit their clients.