July 21, 2009

Revocable Living Trusts, Protecting Privacy

Madoff, McNair, Michael and the Other 3 M's
Mid-Summer Report

It finally feels as if the country is getting back to normal. Rather than stories and headlines about global financial collapse, over the past few weeks the media has returned to good, old fashioned sensationalism, with a focus on what I have labeled the 3M’s: Bernie Madoff, Steve Mcnair and Michael Jackson. Bernie Madoff was sentenced to 150 years in prison while Ruth Madoff, his wife, was forced to surrender almost all of her assets. McNair, the ex-football quarterback, was shot to death by a girlfriend who then turned the gun on herself. Finally, Michael Jackson, the King of Pop, was declared dead at the age of 50. There is no need for me to fill you in on any further details of Michael’s life or death other then a few comments regarding his estate to follow.

THE REAL 3M’S—MY BOYS OF SUMMER

Being the sentimental fellow that I am, I need to tell you that the 3M’s meant something entirely different to me as a child growing up in the 1960’s. Those of you who had an interest in baseball and are old enough to remember the late, great Walter Cronkite sitting at the CBS News anchor desk, will remember the 3M’s as Mickey Mantle, Willie Mays and Roger Maris. Those were the “boys of summer” that captured our imaginations in those years. In the unforgettable summer of 1961 the nation was captivated by the epic battle between Maris and Mantle, as they each chased the homerun record of Babe Ruth.  The sluggers contest ended with the most famous asterisk in sports history. The irony of that asterisk is that all the guys who passed Maris’ homerun record in the steroid era actually do deserve the taint of a scarlet asterisk next to their names as opposed to Roger, who should have been given the credit he deserved.  Some may feel differently, but in my opinion, as Walter would say,  “That’s the way it is.”

3M’s FROM AN ESTATE PLANNING STANDPOINT

Getting back to this summer, there are always good lessons to glean from studying the wills/estate plans of deceased celebrities and the wills of the current 3M’s provide us with just such an opportunity.  (Regular readers will remember the surprises we found in the wills of Ray Charles, Janis Joplin and Leona Helmsley)

McNair, the former quarterback, died intestate, or without a will. As they say on television, “Don’t try to do this at home folks,” because your family is going to be left with a sorry mess. McNair, left a wife Mechelle McNair, whom the Tennessee Court has named the Administrator of the Estate. However, while Steve Mcnair had 2 children with Mechelle, he is known to have at least 2 other children outside the marriage. While I don’t have a clue at this point as to the value of the McNair estate, I can assure you that if any value exists, there will be problems.

Michael Jackson’s will was interesting in its simplicity and lack of drama (other then naming Dianna Ross as a successor guardian to his children). Michael left most of his estate to a Revocable Living Trust (RLT), the terms of which will control the assets. The lesson here is that the terms of the RLT are private and, therefore, have not been released to the public. Most of you reading this newsletter, undoubtedly prefer the same kind of privacy in your own financial and estate affairs, and should also consider adding a  RLT, if you haven’t already done so. The RLT has many other advantages in addition to the privacy factor. (Note: should the Jackson estate become embroiled in litigation, as I expect it will, the terms of his RLT will very likely become public--stay tuned).

With respect to Bernie, (drum roll please,) I’m not sure he needs a will or a Revocable Living Trust. After all, the man seems destined to die in prison with no assets…that’s right-nada...zilch, to leave to his family. He doesn’t seem to need a Financial Power of Attorney either…he has no finances!  Perhaps he could use a couple of health care proxies if/when he gets sick…but I’m not even sure about how those work in prison. The bottom line here is that Bernie’s estate planning attorney may be looking for work…or a new mega-client.

MID-SUMMER FINANCIAL REPORT

It is summer time and I will not burden you with too many dry details.  Suffice it is to say, after having reviewed the latest earnings figures released by Goldman Sachs, JP Morgan, Bank of America, and Citigroup, it appears that “Wall Street” is doing very well again, and that the financial crisis is abating.  However, from recent reviews of my clients’ business financials, it also appears that the bailout of Wall Street has yet to impact Main Street.

Many of you continue to anxiously wait for revenue to pick up and profit margins to improve. Please keep in mind that we are currently experiencing the doldrums of summer, as we do every year in South Florida at this time, and in most places throughout the country. I urge patience. If the perception of an improving economy holds and investors and consumers continue to gain confidence, we will all begin to feel the positive impact. 

For now I will keep the champagne on ice and wait until I see a little more local business activity in the third and forth quarters before I issue the “all clear” proclamation.

Austin A. Frye, MBA, JD, CFP®

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