Tag Archives: Trustee

A QUEEN, A KING AND PRINCE WALK INTO A BAR…

trusts and estates

Estate planning is not a joke and, as discussed in Jason’s last blog post, is something that the majority of Americans fail to do.  In this post, I am going to discuss the Queen of Soul, the King of Pop, Prince and Tim Conway (♪♫♪♫ one of these ones is not like the other) and how a proper estate plan would have helped in each of their cases.

In an ideal estate plan, a person is creating several documents that will assist their fiduciaries not only in the event of that person’s death, but also in the event that said person were to become incapacitated.

The Queen

Aretha Franklin, known to many as “the Queen of Soul” died this month. Similar to Prince who passed away in 2016, according to court documents filed by her sons, Aretha Franklin died intestate.  This means that she died without having prepared a Will or a Trust and it is now up to the Probate Court and laws of the State in which she resided to determine who her ultimate beneficiaries are, not to mention who the Personal Representative (executor) will be.  This will likely expose her estate to a long and expensive battle to settle her estate, which would more than likely have been avoided had Aretha shown some R-E-S-P-E-C-T to her entertainment attorney, who was allegedly after her to prepare her estate plan for a number of years.

The Prince

The estate of Prince (was unmarried and had no children at the time of his death) has been embroiled in those long and costly legal battles over his estate, as multiple people claiming to be his heirs came forward before a Court determination. Those heirs have apparently not been able to agree about certain business decisions, complicating an already complex process and resulting in litigation as the estate has worked to capitalize on the Prince’s work and holdings subsequent to his death.  Again, these issues that are now being litigated and will be for years to come would likely have been avoidable with a proper estate plan. (See the Estate of soul legend, Ike Turner, which has been litigated for over 11 years and is still going!)

The King

We have discussed the Queen and Prince, but what about the King?  When Michael Jackson died unexpectedly on June 25, 2009, he left behind three minor children.  This requires a Guardianship to be established on behalf of the minor children.  Fortunately, the “King of Pop” created an estate plan including a Last Will and Testament and a Revocable Living Trust.

An integral part of an estate plan includes making provisions for who is going to be the Guardian of and thus responsible for the care of minor children. Michael Jackson’s mother, Katherine Jackson, is designated in his Will to serve as the guardian for his minor children.  While this is fine on paper, because Debbie Rowe, who is the natural parent of two of Jackson’s three children, was still alive, absent court intervention, she would be the presumptive guardian of those two children. Ultimately, Rowe and Katherine Jackson reached a settlement that allowed Katherine Jackson to serve as the guardian for all three of the children, and she still serves as their guardian today.

The Jester

In addition to Guardianships created for minor children, it is often necessary to create Guardianships for incapacitated adults.  Adult Guardianships are usually costly proceedings, which are mostly avoidable by creating a Trust, which includes plans for what should occur in the event of a person’s incapacity and designates a Successor Trustee to you to act on your behalf. According to the internet (which is never wrong…), comedian Tim Conway is battling dementia and his wife and daughter (from a prior marriage) are at odds over his medical treatment, resulting in his daughter petitioning the Court to be appointed Guardian of the 84 year old former star of the Carol Burnett Show.  In her Petition to the Court Conway’s daughter states that Conway cannot “properly provide for his personal needs for physical health, food, and clothing” and is “almost entirely unresponsive.”

As mentioned earlier in this post, the creation of a Trust hopefully eliminates the need for the appointment of a Guardian.  However, that is not always the case.  Sometimes Guardianship is unavoidable.  In Florida, a good estate plan will include a “Declaration Naming Preneed Guardian”. In the event that a Guardianship is necessary, this document allows you to tell the Court who you want to be your Guardian. If  such a document were prepared by Tim Conway, this would have likely eliminated the upcoming fight between his wife and daughter over who will be his Guardian as the Court would already have indication as to his preference.

Royal Conclusion

As you can see, this “Royal Family” could have avoided numerous pitfalls with a little advance estate planning.  If you need a Last Will and Testament, Revocable Living Trust, Declaration Naming Preneed Guardian or any other document, which will help you avoid these situations, contact me to set up a conference to discuss your estate planning needs.

 

Jason Steinman, Esq.

ASSOULINE & BERLOWE, P.A.

213 East Sheridan Street, Suite 3

Dania Beach, Florida  33004

Main: 954.929.1899

Fax: 954.922.6662

Email: JLS@assoulineberlowe.com

http://www.assoulineberlowe.com/

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Court: Garnish the Discretionary Spendthrift Trust!

“Oh what a tangled web we weave when we first practice to deceive.”

Those are the initial words of a judicial opinion of the Florida District Court of Appeals, Second District, filed November 27, 2013. (Berlinger v. Casselberry; Case No. 2D12-6470). The Court affirmed the trial court’s finding that a garnishment order can reach otherwise protected monies of a discretionary trust.

Although a probate and family law matter, the case is also instructive for general creditor and debtors claims. A trail of factual and legal maneuvers that at first blush seemed reasonable, later are found to be perhaps counterproductive; considering the complex interplay of statutory interpretation, equity, and public policy.

In 2007, after 30 years of marriage, a former husband (Beringer) and former wife (Casselberry) divorce. Amicably reaching a financial settlement, the former husband continues to pay his $16,000 a month permanent alimony obligation until early 2011. Before a hearing is held on the former wife’s petition to the former, husband agrees to liquidate his IRA to satisfy the alimony arrearages. The Court then issued a writ of garnishment to the discretionary trust bank trustee. Subsequently, without supplementing his financial disclosures and effected by an attorney who was a longtime friend of his personal attorney, the former husband transferred his interest in real property (that included his residence) to a discretionary Irrevocable Life Insurance Trust.  After he established the trust, the former husband was deposed; swearing that there were no life insurance trusts. Interestingly, the bank, as corporate co- trustee, issued the former husband a credit card from which his personal expenses (e.g., travel, entertainment, clothing, medical expenses, grooming, gifts, and his current former wife’s credit card bills) were paid.

Confronted with those facts, the former wife filed a civil contempt and enforcement action against the bank trustee. Neither the former husband nor the bank trustee objected; and the Court issued writs of garnishment against the bank trustee.  Finally, the former wife filed a motion for a continuing writ of garnishment against the bank trustee to attach the present and future distributions made to or for the former husband’s benefit from any trust. She alleged that traditional methods of enforcing alimony were insufficient.

At a hearing seeking a declaration that the family trusts were discretionary trusts, the trustee argued that, subject to Florida Code §736.0504 they had greater protection from creditors. Specifically in this case: “prohibiting any creditor including (the former wife) from attaching distributions on behalf of or for the benefit of (the former husband).” Rejecting that argument, the Trial Court granted continuing writs of garnishment. It substituted the trustee for the former wife as the garnishee. And, it further ordered all distributions made directly or indirectly to, on behalf of, or for the benefit of the former husband made payable to the former wife unless, at the time of any future distributions, there was no alimony or alimony arrears owed. Moreover, if trustee wished to make distributions to the former husband beyond the amount of the then outstanding amount of alimony, trustee must seek court approval before doing so to ensure that there remained sufficient assets in the trust to secure the continued payment of alimony.

Because its decision required statutory interpretation, the Appellate Court was permitted to review the matter de novo (anew). That is, as in the Trial Court, its case analysis and decision involved examining the specific facts in light of the statutory mandate.

The trusts were indeed, in light of the statute, determined discretionary spendthrift trusts. Discretionary: since the distributions were completely within the fiduciary discretion of the trustee; spendthrift: since the statute protects the trust funds from creditor attachment or assignment.

On similar facts in an earlier Florida Supreme Court case (Bacardi v. White, 463 So.2d 218 (Fla. 1985)), and given the former wife’s standing spousal support order, the Appellate Court denied the trusts statutory protection. Specifically tracking the language of Florida Statute § 736.0503, the Court upheld “an order attaching present or future distributions to or for the benefit of the beneficiary (because this is the former wife’s) last resort (and) that traditional methods of enforcing the claim are insufficient.”

Interestingly, the Appellate Court pronounced that “Florida has a public policy favoring spendthrift provisions in trusts and protecting a beneficiary’s trust income; however it gives way to Florida’s strong public policy favoring enforcement of alimony and support orders.”

Not within the four corners of the decision, the Appellant former husband’s actions to “ring fence” trusts, transfer his interest in real property, and testimony at a subsequent deposition proved counterproductive. In an action in equity, they could be characterized as demonstrating “unclean hands.” In such case, equity could deny a claimant protection.

Whether a personal estates and trusts matter or a commercial debtor–creditor transaction, professional guidance and factual scenario planning is critical: an ounce of crisis planning is worth a pound of crisis management!

For more information contact:

Carl H. Perdue, JD, LLM

Senior Counsel and Partner

chp@assoulineberlowe.com

ASSOULINE & BERLOWE, P.A.

The BUSINESS LAW Firm

Intellectual Property, Labor & Employment Law, Bankruptcy, Commercial Litigation, and Corporate Law

Miami · Ft. Lauderdale · Boca Raton

Miami: 305-567-5576

Ft. Lauderdale: 954-929-1899

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