A Lawyer’s Dream: Michael Jackson’s Estate

Michael Jackson was as much a corporation as a person.  Like any major celebrity or company, he had ongoing litigation and business operations.  “The National Law Journal” has an article detailing the myriad suits Jackson and his company, MJJ Productions, had at the time of his death.  These suits will continue being litigated by his corporation or his estate.  The corporate suits will proceed with nary a hiccup.  The corporation’s existence is unaffected by Jackson’s death.  Unlike a very small corporation that may be little more than a one man band, MJJ Productions probably has full time professional management.  That management will continue to run the company.  However, there may be issues as to who runs MJJ.  Assuming Jackson owned most, if not all, of the shares of MJJ, the person who controls the estate and eventually his heirs will have control of MJJ as well as his other personal assets and business. 

It is unknown whether Jackson had a will or a trust (or trusts).  According to one attorney,most celebrities have living trusts.  If he has a will or if he died intestate, there is likely to be a delay while a personal representative (a/k/a an executor) is appointed.  If he had a living trust, then the successor trustee can more or less immediately take control of all the assets in the trust.  However, if he had some assets in the trust and some not in the trust, then he may still need a personal representative to manage assets outside the trust. 

Numerous sources estimate his debt at $500,000,000.00.  His spending habits were legendary.  The good news is that his one-half interest in the music catalog that includes 250 Beatles tunes is estimated to be worth as much as $500,000,000.00 to $1,000,000,000.00, but may already be encumbered with a $300,000,000.00 loan.   Other sources say the music business is so bad that Jackson’s assets may not cover the debts.  It is also possible that a fire sale could be forced for the Beatles catalog if creditors get greedy and over anxious.

However, Jackson’s estate may earn even more than Jackson.  Even as I write this, radio stations and TV stations are playing Jackson songs and videos and the royalties are pouring in. Itunes is probably sellng Jackson’s music at a record rate and CDs and posters are flying off the shelves at WalMart.  This income is likely to go further without Jackson to spend it faster than it comes in.  It is likely to support an army of lawyers and accountants and still be able to pay debt and a legacy for his three (3) children.  Elvis Presley’s estate earned $52,000,000.00 last year, which may be more than Jackson earned while living.  Jackson’s estate may do better than Presley’s for the next year or two.  On the other hand, a rush is on for refunds of the tickets sold for his upcoming concert tour.  At least some of that is insured, but one wonders whether there will be suits for the lost profits and money spent in expectation of the tour.

We won’t know for some time just how things will shake out.  One thing is for certain, whether Jackson’s estate proves to be flush or broke, his confused finances and personal life are likely to be a bonanza for a cadre of lawyers on both sides of the issues.

Why Guardianship Avoidance Tools Don’t Always Work

I had some clients come in recently in need of a guardianship for a family member.  The family member was a retired professional.  He had all the right tools in place to avoid a guardianship — durable power of attorney, health care surrogate, and revocable living trust.  So why did he need a guardianship?  Because he was suffering from dementia and refused to cooperate with his family in making rational decisions that were in his own best interests.  Unfortunately, it seems to me that dementia often magnifies the worst personality aspects of some people.  When you combine a cantankerous, domineering personality with paranoia and delusion, it makes for a difficult situation.

A durable power of attorney lets you manage the person’s property, but not the person.  Sometimes I hear people say, “I’ve got power of attorney over my Aunt Ethel.”  No they don’t.  They have a power of attorney that allows them to deal with Aunt Ethel’s property.  A revocable living trust also allows the management of property but not of a person.  In the narrow area of health care and treatment decisions, a health care surrogate or medical power of attorney does give some control over the person assuming that third parties agree and cooperate.  Therein lies the rub.  Without an adjudication of incapacity, third parties my be reluctant to accept the authority of the attorney-in-fact or surrogate.  This is especially true if the incapacitated person insists that he or she is not incapacitated.  The presumption is that people are competent unless declared incompetent.

Sometimes the alleged incapacitated person has lucid moments or is able to “fake it” for significant periods of time.  This makes third parties even more leery of accepting instructions solely from the attorney-in-fact or surrogate.  Third parties who do not spend a lot of time with the incapacitated person are the most easily deceived.  Thus, you can plan and have all the right tools and still not avoid a guardianship.  The good news is that although you may not avoid a guardianship of the person, you may still avoid a guardianship of the property if you have a properly funded living trust in place.

Be Clear or Shut Up! The Importance of Communication

I recently had conversations with a couple of lawyers who also practice probate litigation. We agreed that probate litigation is often the result of poor communication. Specifically, parents tell their children what the children want to hear or use ambiguous phrases like “don’t worry you’ll be taken care of.”  The same goes for other relatives and friends who might be expected to be remembered by you with money or assets when you pass away.

Here is one example of muddled communications — A decedent’s nieces and nephews sued their aunt’s beneficiaries claiming undue influence. The nieces and nephews said their aunt called the beneficiaries the “cleaning lady” and “the lawnman.” The beneficiaries said the decedent disliked her nieces and nephews, but the nieces and nephews swore the aunt loved them and promised to “take care of them” when she died. I believe both sides were telling the truth. The decedent had a prickly, cranky, insecure personality and had told each side what they wanted to hear and whatever made her feel important. Coupled with the fact that she waited to do her estate planning until she was on the way to the hospital where she died, it was a perfect recipe for a lawsuit.

Children often overestimate the wealth of their parents when they don’t know what their parents actually own. They may not realize that dad obsesses over MSNBC and Bloomberg because he enjoys it and that $100,000.00 in 10 or 20 stocks is all he has. They think he’s obsessively monitoring his millions. A phrase like “don’t worry I’ll take care of you” is ambiguous enough to cause problems. For the parent it may mean, “I’m leaving you $10,000.00,” but for the kids it may mean. “Don’t worry I’ll make sure you’re set for life.”

Here are some tips to make sure your legacy to your heirs and beneficiaries isn’t a lawsuit:

• Be clear. Make sure that your children and other beneficiaries know what to expect from you at your death.
• Don’t just tell people what they want to hear. You don’t have to tell people you hate them, but you shouldn’t misrepresent your relationships with others either/
• Don’t wait until the last possible moment to meet with a lawyer and plan your estate.
• Don’t wait until you’re incapable of making your appointments and arrangements to visit a lawyer before planning your estate.
• If you remarry and have children from a previous marriage, get a prenuptial. If you later decide to ignore or revoke the prenuptial, do so in writing.
• Don’t share your estate plan with someone or promise to “take care of them” and then set up all of your accounts and beneficiary designations so they pass outside of the estate plan that leaves everything to someone else.
• Don’t make misleading or false promises to people you don’t intend to “take care of” in your estate plan.

This list is far from comprehensive. The bottom line is to be honest with yourself and others. Do what you can to not make misleading statements or promises or to give false hopes or expectations. You may save your heirs and beneficiaries a lot of headaches.

Florida Adopts the Uniform Premarital Agreement Act

I don’t practice divorce or family law any longer, but I do draft prenuptial agreements. Effective October 2007 Florida adopted the Uniform Premarital Agreement Act as Florida Statute section 61.079. Unfortunately, prenuptials (a/k/a antenuptials) don’t prevent litigation or contentious divorces. They are often sources of litigation themselves as we can see from this article about Bill Murray’s divorce and prenuptial. Doreen Inkeles, a board certified family and marital law attorney, believes that the Act will make it more difficult and risky to challenge prenuptials. She wrote an article for the Florida Bar Journal that concluded with:

Combined with the apparently more stringent standards set forth in the UPAA, parties will have second thoughts about testing the enforceability of their agreements now that the Florida Supreme Court has recognized the enforceability of prevailing party attorneys’ fee provisions contained in prenuptial agreements which would place liability on the impecunious spouse for the already dominant spouse’s attorneys’ fees should the agreement be upheld.52 “Contracts can be dangerous to ones well-being. That is why they are kept away from children. Perhaps warning labels should be attached. In any event, contracts should be taken seriously.”53

Interestingly, the statute applies “only to proceedings under the Florida Family Law Rules of Procedure”, which govern divorces. Prenuptial agreements aren’t only in anticipation of divorce. Older couples frequently have them to cover what will happen in the event of death. For example, a prenuptial often contains provisions waiving spousal homestead rights and the elective share in the event of death. In fact, I recommend that any couple, especially older couples, with children from previous marriages, separate property, and a home have a prenuptial agreement.

What Is A Living Will? Part II

“Persistent vegetative state”, “end-stage condition”, and “terminal condition” are all defined logically enough in the definitions section of Chapter 765, which is found at Florida Statute section 765.101. We’ll take the definitions in alphabetical order. An “end-stage condition” is defined as:

an irreversible condition that is caused by injury, disease, or illness which has resulted in progressively severe and permanent deterioration, and which, to a reasonable degree of medical probability, treatment of the condition would be ineffective. Fla. Stat. section 765.101(4)

It would seem that this definition applies to terminally ill cancer patients, Alzheimer patients, patients with liver failure, and the like. It is important to note that the condition must result in “progressively severe and permanent deterioration.” Thus, despite one web commentator claimed, it would not apply to “an amputated finger” because that doesn’t cause “progressively severe and permanent deterioration.”

A “persistent vegetative state” is

a permanent and irreversible condition of unconsciousness in which there is:

(a) The absence of voluntary action or cognitive behavior of any kind.

(b) An inability to communicate or interact purposefully with the environment.

Fla. Stat. section 765.101(12)

This seems like another straight forward definition but as we’ve seen, it can be a subject of substantial debate. Most of us think of an “unconscious” person as one who is “out cold” or comatose. However, there are varying degrees of “unconsciousness” that don’t fit our expectations.

Last, but not least, we have the definition of “terminal condition,” which is

a condition caused by injury, disease, or illness from which there is no reasonable medical probability of recovery and which, without treatment, can be expected to cause death. Fla. Stat. section 765.101(17)

Unfortunately, understanding these definitions is at the intersection of law and medicine. You may want to research these definitions and discuss them with your doctor while you can. Most lawyers don’t have medical degrees and may not be able to as thoroughly discuss their meaning as a physician.

The recommended form for a living will is found at Florida Statute section 765.303. Note that the form is suggested and not required. You can use another form or modify the one suggested. However, it is usually my feeling that you cannot go wrong using the statutory form. The statutory form will have been litigated and considered in the courts. Any time that you alter such a form you may add new questions and considerations. It also contains most of the statutory considerations and requirements. It is important to note that the living will by its terms applies only when you are “dying” and in such a circumstance directs that your death “not be artificially prolonged” provided that you have one of the three conditions defined above and your “attending or treating physician and another consulting physician have determined that there is no reasonable medical probability of [your] recovery from such condition.” Thus, two physicians must agree that you meet the criteria for your death to not be artificially prolonged. I believe that most hospitals also have an ethics committee that will review this decision although I am no expert on hospital procedures.

Here is a key consideration that is perhaps overlooked in the focus on other issues:

It is my intention that this declaration be honored by my family and physician as the final expression of my legal right to refuse medical or surgical treatment and to accept the consequences for such refusal.

You are making it clear to your family what your wishes are and you are directing them to honor them. This can be important during a very emotional time. It can also be a source of strength for the person who has been named the surrogate and who must implement your decision. If you are unable to do so for yourself, then they can point to this language and say, “This is what he/she wanted and he/she asked us to honor this decision.”

The next provision names an individual who is to implement your decision if you “have been determined to be unable to provide express and informed consent regarding the withholding, withdrawal, or continuation of life-prolonging procedures.” This is your surrogate to act for you if you cannot. Note that this person only acts for you if you have been determined to be not able to do so for yourself. Again, I believe that your physicians and the ethics committee would come into play to determine whether you have the capacity to act for yourself. You should give some consideration to your surrogate. It needs to be someone who will represent you and your wishes when the time comes. Someone who can stand up to pressure if need be.

So, should you have a living will? I think the answer unquestionably is “yes” assuming that you have any wishes one way or the other as it concerns the matters addressed by a living will. If you are concerned that you may find yourself in a situation where you are dying, unable to speak for yourself, and don’t want your death artificially prolonged, then it is necessary to have a living will.

Copyright Notice: All Rights Reserved Harry Thomas Hackney, P.A. 2008

What Is A Living Will? Part I

Florida Statute section 765.101(11) defines a living will as (a) a witnessed written document that a person has voluntarily signed or (b) a witnessed oral statement expressing instructions on life prolonging procedures. Of course, the Terri Schiavo case has shown us the efficacy of an oral statement.  In that case, the argument over whether she expressed such instructions and what they meant went on for years.   That single two part sentence does not do much to explain what a living will really is.  As is typical with legislation, we must look elsewhere to really understand what a living will is and why you would want one.

The public policy behind living wills and other “advance directives” is contained in Florida Statute section 765.102.  The legislature thankfully recognizes that it is a fundamental right of each person to make decisions regarding his or her own health, including the right to choose or refuse medical care.  Chapter 765 protects this fundamental right in the event a person is unable to express his or her own wishes due to incapacity by allowing the person to plan for incapacity.  That is, a person can express his or her wishes before the incapacity arises.  This is cheaper and less restrictive than a guardianship and allows the incapacitated person to immediately resume complete control once capacity is reestablished.

The incapacity requirement is an important point.  Many of my clients seem to fear that once they sign a living will they’ll lose control and that the living will is going to govern events even if they wish to fight their illness.  A living will only applies when you’re unconscious or otherwise lack capacity and you’re in a persistent vegetative state, an end-stage condition, or terminal condition.  Your fundamental right to choose or refuse treatment is your right so long as you have the capacity to express a wish. Furthermore, Florida Statute section 765.105 provides for an expedited judicial review under Florida Probate Rule 5.900 of any decisions made pursuant to an advance directive if one of six standards is met.

Part III of Florida Statute Chapter 765 deals specifically with the execution and contents of a living will.  Florida Statutes section 765.302(1) states:

(1)  Any competent adult may, at any time, make a living will or written declaration and direct the providing, withholding, or withdrawal of life-prolonging procedures in the event that such person has a terminal condition, has an end-stage condition, or is in a persistent vegetative state.

There it is!  That sentence describes what a living will is and when it is effective.  It is a written declaration or (because the definition of the phrase “living will” includes a witnessed oral statement) oral instructions directing that your life not be prolonged in the event that you have one of the three conditions listed.  “End stage condition”, “persistent vegetative state”, and “terminal condition” are defined at Florida Statute section 765.101, subparagraphs (4), (12), and (17) respectively.  A written living will must be signed in the presence of two witnesses who also sign their names to the document.  One of the witnesses must not be a spouse or blood relative of the person signing the living will.  If the person cannot physically sign his or her own name, then one of the witnesses can sign for the person in his or her presence as directed.

These requirements are interesting in that by definition a living will can include witnessed oral instructions.  The most likely “witnesses” to oral statements are your spouse and/or your blood relatives.  What is the likelihood that you’re going to have at least two witnesses?  For many people, this is likely to be a private matter although for the more gregarious among us (myself included) this could come up at dinner or around a campfire.  In any event, I would urge you to make sure that your wishes are unambiguously clear and in writing.  It is the responsibility of the person signing the living will to notify his or her treating physician of the living will.  If that person is unable to do so, another person may do it for them.  The living will is to promptly be made a part of a patient’s medical records.

We’ll consider the statutory definitions of “persistent vegetative state”, “end-stage condition”, and “terminal condition” in the next post along with other details, including the recommended form for a living will, and whether you should have a living will.

Copyright Notice:  All Rights Reserved Harry Thomas Hackney, P.A. 2007

What Is A Revocable Living Trust?

A revocable living trust or intver vivos trust is a written document created by one or more persons called settlors or grantors. (For simplicity, we will use just the term “trust” instead of revocable living trust throughout the rest of this post.) The trust instrument names a trustee or trustees who have the power to control whatever property is placed in the trust subject to the settlor’s instructions. The trust property is used for the benefit of one or more beneficiaries. In fact, the trustee has a fiduciary obligation to follow the settlor’s instructions, to prudently manage the property of the trust, and to act in the best interests of the beneficiaries. With a living trust, the settlor is usually the trustee and is also a beneficiary during his or her lifetime. Thus, the settlor retains complete control over his or her property while living and competent.

One of the advantages of a revocable living trust is that a successor trustee takes over the trustee duties when the settlor dies or becomes incapacitated. This feature can help to avoid probate and reduce the likelihood of a guardianship.

In a nutshell, a living trust is an artificial legal entity created by a settor or grantor that provides instructions for the management of the settlor’s property during his or her life and the final management and distribution of the property after death. A trust has advantages if you become disabled because the successor trustee can manage the property for you and you can leave detailed enforceable instructions. A trust avoids a guardian of the property in the trust. A properly funded living trust avoids probate but not estate taxes. A properly set up living trust with certain provisions may avoid estate taxes. Living trusts also do nothing to avoid claims of creditors for the person who creates the trust. That person’s heirs may, however, enjoy some creditor protection if the property remains in trust and the trust has spendthrift features.

You may need a living trust if you are concerned about becoming disabled, if you wish to avoid probate, or if your estate is taxable.

Copyright Notice:  All Rights Reserved Harry Thomas Hackney, P.A. 2007

What Is A Will?

A will is a set of written instructions for the distribution of your property when you die. It may also include instructions regarding the handling of your remains although this is not required. During your lifetime, a will does nothing. Upon your death, a copy of your will is filed with the local court and probate proceedings are started, if necessary. Your will names your Personal Representative. If you have minor beneficiaries, disabled beneficiaries, a taxable estate, or certain other situations, then your will may also include a trust naming a trustee for the management of the property for the benefit of those named.

Florida Statute section 731.201(39) defines a will as

an instrument, including a codicil, executed by a person in the manner prescribed by this code, which disposes of the person’s property on or after his or her death and includes an instrument which merely appoints a personal representative or revokes or revises another will.

You can’t get much more basic than that.

Copyright Notice: All Rights Reserved Harry Thomas Hackney, P.A. 2007

Do I Need A Will?

This is probably the most frequently asked question for any estate-planning attorney. Anyone with any property at all, whether real or personal, or with children ought to have a will. Even a person who has nothing may be instantly worth a large sum of money at death, if they are killed through someone else’s negligence or are well insured. For a divorced person with minor children, a will eliminates arguments over who will manage any assets or money left to the children (e.g., an ex-spouse). If you do not have a will, then the state decides who gets your property. In addition, the court will decide who will be your Personal Representative and it may be necessary for that Personal Representative to obtain a bond at the expense of the estate. If you prepare a will, then you can direct that the bond be waived.

Copyright Notice: All Rights Reserved Harry Thomas Hackney, P.A.

Estate Planning For the Average American

This is the first post in a series that will explain some of the basics of estate planning and basic estate planning documents.  Many people put off estate planning because they associate it with their own death or they think it is too expensive, but estate planning isn’t just about the distribution of your assets after you are gone. It also isn’t just for the wealthy. In fact, it may be more important for the middle class because there won’t be enough money to correct a failure to plan after you are gone. It is cheaper to do it right the first time. Proper estate planning also takes into account how you will be taken care of if you become disabled. It also considers how to protect your assets for your own use and your hopes, dreams, and desires for your loved ones whether family, friends, or charities. Your estate plan will be built on a firm foundation by first considering your needs, then the needs of your family, ways to protect your estate, ways to grow your estate, and, finally, ways to minimize estate taxes, if applicable. Less than two percent (2%) of estates are subject to estate taxes.

Once upon a time, I might have said that you didn’t need an estate plan unless you had assets, property, or children. However, I have run into some situations that have convinced me that just about everybody needs an estate plan. It is possible for someone who never had any assets to have a large estate at death. How does this happen? A young father or mother could be killed in an accident with a well insured Coca-cola truck whose driver ran a stop light. Suddenly the not wealthy young father or mother has a substantial claim and a large estate. If the decedent was happily married to the other parent of the children, there may not be any problems. However, I have seen many situations like this where the couple was estranged. In the absence of a will, this often causes problems. On at least one occasion, I encountered a family where four of the five surviving “adult” children were mentally handicapped. The fifth was not much better. Their mother left a mobile home on some land and no will. This caused considerable problems. \

The Terry Schiavo tragedy is another example. If she and her husband had done any estate planning, chances are that they would have received Living Wills. There then would have been no doubt as to Ms. Schiavo’s wishes one way or the other. Many years of expensive litigation might have been avoided or shortened.. So now I think most people could benefit from estate planning.

Copyright Notice: All Rights Reserved Harry Thomas Hackney, P.A. 2007