Trust

Generational Divide Between Musicians Now and Then

As singers and actors from prior generations die and we learn about their business lives

Maybe people who went into the music in the past, led with their hearts and souls, like Aretha, but the difference in income is astronomical.

ArethaAs singers and actors from prior generations die and we learn about their business lives, there’s a huge disparity between their earnings and that of today’s artists. Stars from the past, beloved and working into their later years, continue to pass away with estates that wouldn’t be deemed sufficient for a CEO to change jobs today.

Wealth Advisorsays in its new article, “Aretha Franklin’s Estate Almost Criminally Undervalued Even At $80 Million,”that description now fitsAretha Franklin, the Queen of Soul.

She sold 75 million records and is credited as a songwriter on hundreds of albums by other artists. However, even the most generous estimates of her career earnings are no more than $80 million.

Compare her to Taylor Swift. She started at about the same age, has been working one fifth as long and the same calculations say she’s worth more than $300 million.

The mega stars in Aretha’s imperial period didn’t earn as much as they do today. Management was often aggressive and took a huge chunk of every dollar earned from the artists’ record sales, concerts, merchandising and media appearances.

Aretha also didn’t do herself any favors, by allowing her husband to manage her early career. When they divorced, he took a lot of her lifetime earnings with him. A raw deal or not, it was the way the industry worked at the time. As a result, paying alimony meant she had to keep working for her ex.

That may be why Taylor Swift hasn’t gotten married. Despite a finely crafted prenuptial agreement and trusts to protect her money, a wrong decision could cost her hundreds of millions of dollars.

The music industry has changed dramatically. Traditional revenue sources never really grew much bigger than they were in the 1960s. Some, like selling the actual music, tanked and have yet to revive. Today’s music icons, like Taylor Swift, thrive because they manage their own tours and take in ticket income rather than record sales. Many own their own publishing outlets, and that maximizes their percentage of every song they sell. That’s not how it worked in Aretha’s day.

 However, Aretha died with money in the bank. Her children will inherit considerable sums. She most likely gave huge amounts to charity and did it in the most tax-efficient way her advisers could find.

Just like Prince, it’s safe to say that sales of her recordings will take a leap, anything as yet unreleased will be repackaged and her name and image will start being monetized. As a brand and a legend, she will be enjoyed by new generations of music lovers. Her family will benefit, and her fans will grow in number.

Reference: Wealth Advisor (August 20, 2018) “Aretha Franklin’s Estate Almost Criminally Undervalued Even At $80 Million”

The Most Common Estate Planning Mistakes

After years of practicing estate planning law, attorneys are all too familiar with some of these mistakes, and can help you avoid them, if you are smart enough to get help from a professional.

After years of practicing estate planning law, attorneys are all too familiar with some of these mistakes, and can help you avoid them, if you are smart enough to get help from a professional.

MP900400332Some people like to think they know everything, and that often applies to estate planning. The problem is, they don’t learn about the mistake—their heirs do! By working with an estate planning attorney, you can avoid making these mistakes and spare your family the stress and expense.

The Hockessin (DE) Community Newsreports in a recent article, “The dumbest estate planning moves,”that the misuse of joint ownershipis extremely frequent.

You probably know that settling an estate without a will,can be very time consuming and expensive. One way that people try to avoid probate, is with property owned jointly with rights of survivorship.

That’s because the joint owner becomes the exclusive owner of that property, when the other owner passes away. This is the case for a bank account or a family home.

Many seniors say their joint owner, usually a son or a daughter, will gladly share the account with their siblings after the parent passes. But will the joint owner then tell their siblings that’s how Mom wanted it?

More often than we’d like to believe, the result is that the other siblings may get a lot less than Mom wanted—or nothing at all. If the surviving owner does follow through with Mom’s instructions and does truly square up with his brothers and sister, there may be other tax consequences.

That’s because the process of squaring up may be considered a gift for tax purposes.

In real estate, there’s a chance the remaining owner will be burdened with a low-cost basis. As a result, she will be hit with capital gains taxes, when later selling the asset. Mom’s effort to simplify things may have actually caused a lifetime of family conflict.

Instead, avoid these troubles with a transfer on death account or the use of a revocable living trust.

A real estate attorney can handle the title change.  However, before you start dealing with the deed, sit down with an estate planning attorney. He or she will be able to explain how this may impact your tax liability and the conflict it may spark within the family.

A better option is to create an estate plan, properly prepared with the help of an experienced estate planning attorney. This will guide the distribution of assets and prevent or at least mitigate the possibility of siblings battling over the estate.

Reference: Hockessin (DE) Community News (April 24, 2018)“The dumbest estate planning moves”

Living Trust and Fiduciary Duty at Issue in Case Before California Court of Appeals

This case involves the issue of whether and to what extent superior courts have authority to intervene in the administration of nonintervention estates.

This case involves the issue of whether and to what extent superior courts have authority to intervene in the administration of nonintervention estates.

MP900387776A successful business owner, Mildred Vail had purchased a number of properties in the Healdsburg area during the course of her lifetime. She was also the mother of four children: Patricia, Jonatha, Michael and Steven.

Leagle.com recently published the case of “In re Mildred M. Vail Living Trust.”In this litigation, Mildred executed a Living Trust naming her four children as equal beneficiaries in 2003. The Trust instrument named Mildred as the "trust manager" and provided that her four children would become joint successor "Co-trust managers" in the event of her death, incapacity or resignation. It also gave Mildred the absolute power to revoke or amend the Trust during her lifetime and to add or remove property from the Trust at any time. Mildred placed several properties in the Trust.

In October 2004, before heart surgery, Mildred gave Steven her general durable power of attorney and a separate durable power of attorney "for banking and other financial institution transactions." In 2007, she revised her trust. She resigned as Trustee and named Steven as the "new trust manager."

In 2006, Steven led an effort to purchase and develop a property on behalf of the Trust. A family meeting was held to discuss the transaction. To obtain the money to buy the property, two Trust rental properties were sold, netting $466,000.

Mildred died on in 2011, at the age of 94. At that time, the four siblings, including Steven, behaved as though they had become successor co-Trust Managers. Steven later testified at his deposition that at the time of his mother's death, he hadn’t remembered her resignation as trust manager, but he later found the document making him the substitute trust manager.

Michael filed a petition to remove Steven as a co-trust manager, which alleged Steven was taking action without the consent of the other co-trust managers and refused to provide an accounting of his activities. In 2012, the court relieved all four siblings as co-trust managers and appointed Shelly Ocana as the interim trust manager.

Michael provided Ocana with a witnessed 2011 letter signed by Mildred that stated that Steven has been engaged in "rogue [activities]" and "secretive dealings" and was not authorized to act under her power of attorney. Ocana investigated the claims against Steven and ultimately sold the property at issue. The four siblings then entered into a settlement agreement providing for the distribution of Trust assets.

In 2015, Michael filed a suit accusing Steven of "numerous acts of injury to his mother and her trust involving elder abuse, conversion, breach of fiduciary duty, theft of trust assets, fraudulent transfer of assets, forgery, co-mingling trust assets, impersonating as trustee of the trust for personal gain, undue influence, conflict of interest, breach of trust, constructive trust for wrongfully retaining, secreting and/or appropriating trust assets and perjury." The trial court issued a statement of decision concluding that Steven had produced credible evidence that he had spent $71,000 for legitimate trust purposes.

The Court of Appeal of California reviewed Steven’s claim that the trial court applied the wrong legal standard, when determining whether he violated his duties as trustee.

Judge Henry E. Needhamwrote the opinion of the Court and agreed with Steven that it was Mildred to whom he owed a fiduciary duty.

“A revocable trust is a trust that the person who creates it, generally called the settlor, can revoke during the person's lifetime,” Needham explained. The beneficiaries' interest in the trust is contingent only, and the settlor can eliminate that interest at any time. When the trustee of a revocable trust is someone other than the settlor, that trustee owes a fiduciary duty to the settlor, the Court said—not to the beneficiaries,  if the settlor is alive. During that time, the trustee needs to account to the settlor only and not also to the beneficiaries.

However, the judge did note that after the settlor's death, the beneficiaries have standing to assert a breach of the fiduciary duty the trustee owed to the settlor to the extent that breach harmed the beneficiaries, and that the trustee's conduct can be attacked for fraud or bad faith. Therefore, Michael had standing to bring claims against Steven for his alleged breach of his duty to Mildred while she was alive.

The judgment was affirmed.Judge Needham said he inferred that the court had found Steven to be liable based on a breach of his duties to his mother as settlor of the Trust, which was supported by substantial evidence. The court ruled that Steven was not credible regarding the expenditures for which he was claiming an offset. Those included a down payment to purchase a property, payments made on a property after it was sold and the cost of building out his office.

Reference: Leagle.com (March 27, 2018) “In re Mildred M. Vail Living Trust”

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