Greatest Love of All
Reposted from Trust & Estates | By Michael K. Kirsch
Ever since Whitney Houston’s death on Feb. 11 at age 48, rumors have been circulating about her estate. Would her ex-husband, Bobby Brown, seek to gain control of the money? Did Whitney protect her daughter, Bobbi Kristina, with a trust, or will everything be paid to her at once, since she is 18?
Life Insurance Lawsuit
We know that shortly before her death, Whitney won a court case brought by her stepmother over a $1 million life insurance policy that John Houston, Whitney’s father, had left to Whitney. Barbara Houston, her stepmother, said the policy was supposed to pay off the money that Whitney’s father and stepmother borrowed from Whitney to buy their New Jersey condo. Whitney held a private mortgage on the condo.
Barbara sued after Whitney refused to credit the life insurance money against the mortgage. In December, eight years after John died, an appeals court judge ruled in Whitney’s favor because Barbara didn’t have any documents to prove the insurance policy was meant to cover only the mortgage loan. As the judge noted, its impossible to legally determine what the deceased would have wanted, beyond what’s spelled out in the documents. Had John’s attorneys set up a trust to accept the life insurance proceeds and use them to pay off the loan, his wishes would have been clear, and none of the ensuing legal in-fighting would have been necessary.
Assets in Estate
How much was Whitney worth? Some have speculated that Whitney’s estate will be worth between $10 and $20 million. Others claim she was broke. Back in 2001, she signed the biggest record deal in history, for six albums and $100 million in guaranteed royalties. She died owing Arista three records, so a big chunk of that $100 million could be lost. Regardless of its current value, Whitney’s estate is expected to benefit from the boost in sales since her death. Her estate reportedly has made $700,000 in royalty payments since her death. In August 2012, a movie she did with Jordan Sparks called “Sparkle” will be released. She also owned a home in New Jersey, once worth $6 million, but recently listed for under $2 million.
As it turns out, Whitney had a will, which was executed on Feb. 3, 1993. The 19-page will names her only child, Bobbi Kristina, as the primary beneficiary. According to the terms of the will, the assets will be placed in a trust with one-tenth of the principal paid to her at age 21, one-sixth at age 25 and the remaining balance at age 30. A codicil to the will dated April 14, 2000, appointed Whitney’s mother, Cissy Houston, as executor and her brother and sister-in-law, Michael and Donna Houston, as trustees. Reportedly, Bobbi Kristina has been struggling with substance abuse issues for years, much like her mother did.
Distributions made outright to a client’s heirs have no protection from the variety of risks to which personally held assets are exposed. Once distributed, the heirs can use those assets as they choose and the assets can be subject to their creditor’s claims. However, bequests that are kept in trust for the benefit of the heirs enjoy protection from creditors, predators (including ex-spouses), irresponsible spending and future estate taxes.
Whitney’s death serves as a reminder to estate planning professionals to make sure their client’s estate plan includes more than a simple will and that they update documents every few years. For the majority of clients with even a modest amount of assets, a will isn’t enough. A properly funded trust, with detailed distribution provisions specifically tailored for your client’s beneficiaries and based on your client’s wishes, is the best way to protect your client’s loved ones.
Celebrities are, for the most part, very difficult clients to deal with when it comes to estate planning. They’re used to having things done for them, and they would rather not deal with all of the issues involved. Many celebrities start the planning process, but never actually finalize it. A number of music/sports stars have died without completing a will. That list includes Sonny Bono, John Denver, Jimi Hendrix and Steve McNair.
This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.
Photo Credit: cmgworldwide.com