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Tom Clancy, who died in October 2013 at age 66, was best known for his many New York Times # 1 bestsellers in the techno-thriller spy genre he invented, but the author was not as renowned in the obscure world of estate tax allocation.  That changed a bit in late August.

ClancyMr. Clancy's $83 million dollar estate, which included an interest in the Baltimore Orioles as well as a large real estate holding in Maryland and a World War II tank, ended up owing almost $16 million in transfer taxes. Unfortunately the author's Will, according to the decision from a Baltimore probate judge, contained "inartfully drafted" direction on who should pay that tax.

The question presented to Judge Lewyn Scott Garrett was whether Alexandra Clancy, the decedent's second wife, and their child should have to pay estate taxes on the two-thirds of the estate they received from the author. Aligned against the widow were the four children from Mr. Clancy's first marriage who, in an interesting twist, argued Mrs. Clancy should get a larger share of the assets which, however, would be reduced by having to bear a portion of an even greater estate tax.

A blank file in a filing cabinetIn many estate plans the provisions that determine who will be responsible for estate taxes can be almost an afterthought and not even deliberated with the client. When an estate that will be subject to estate tax is planned and there actually is a conversation about whose share will pay that tax, many clients prefer that discussion be simple and are often willing to accept the default estate tax allocation provision contained in the statutes of the state in which they reside. But simplicity may still not be realized.  The default under the common law is that taxes are paid from the residue, but many states, Maryland included, consider equitable apportionment and have complicated estate tax apportionment statutes.  When the taxable estate which is subject to such tax includes marital deduction provisions, retirement plans, accounts with surviving joint tenants or pay on death provisions, life insurance policies, partnership interests, one or more trusts and different categories of heirs and beneficiaries, the complications over who pays how much of the estate tax can increase.

For Mr. Clancy’s estate tax, Judge Garrett took the position that the language in his Will showed an intent that Alexandra Clancy not be responsible for estate tax on her share of his estate.

microphone on stage with blue backgroundAnother famous person’s estate made headlines last week when publications such as Forbes and Rolling Stone reported a Los Angeles jury awarded $7.4 million to the estate of the late Marvin Gaye for accidental copyright infringement. The victorious litigants were actually the children of the late singer and songwriter, Nona Gaye, Frankie Gaye and Marvin Gaye III, referred to in the jury verdict as the Gaye Parties. Before deciding that Pharrell Williams and Robin Thicke, referred to as the Thicke parties in the verdict, had infringed the copyright to Mr. Gaye’s 1976 song, Got To Give It Up in their 2013 hit song, Blurred Lines, the jury first had to find by a preponderance of the evidence that the Gaye Parties owned a valid copyright to their father’s composition.

Mr. Gaye, who died in 1984 after being shot by his father, failed to leave a Will thereby joining a long and distinguished list of famous personalities who died intestate.  The estate was probated years ago and resulted in the singer and songwriter’s “intellectual property” passing to his children.

Rumors began as people noticed the similarities between Blurred Lines and Got To Give It Up and Mr. Williams and Mr. Thicke launched a preemptive strike by filing an action against the Gaye children for declaratory relief in the United States District Court in the Central District of California (Case No. CV13-06004-JAK). That lawsuit sought a determination that Blurred Lines was the result of their own independent efforts and not surprisingly the children counter-claimed. Although the jury found the infringement of the copyright wasn’t willful, they awarded $4 million in copyright damages and the balance as profits from the infringement.

Intellectual property such as copyrights pass to the heirs of a deceased artist under federal law although the identity of those heirs where there isn’t a Will is determined according to state law. Someone who dies without a Will is considered intestate (without a Last Will and Testament).  The rules of intestate succession are common sense and similar from state to state. In California, where Mr. Gaye was living at the time of his death, those rules are found in the California Probate Code (see Probate Code §6402).   Nevertheless, it is the U.S. Patent Office which actually controls the ownership of a copyright and issues the documents which establish ownership.  The U.S. Patent Office is not the only federal entity which controls the transfer of a decedent’s assets. For example the ATF (Bureau of Alcohol, Tobacco, Firearms and Explosives) regulates the transfer of Class III firearms to a decedent’s heirs.

Old Baseball ScoreboardWe’ve seen it before: the caregiver becomes the primary or only heir of the Will executed shortly before death and the family files a contest. That same drama is being played out before a Probate Judge in Cook County, Illinois over the estate of one of the most beloved of Chicago sports heroes, Ernie Banks.

Regina Rice has been taking care of Mr. Banks for a number of years and filed a Will for probate in Chicago which Ernie executed at the offices of Illinois attorney Byron Faermark just three months before he died. Initially Elizabeth Banks, the estranged wife, had been given control of the estate on the claim that her husband died intestate. The Cubs legend, a member of Major League Baseball’s exclusive 500 home run club, was survived by Elizabeth as well as twin adult sons and a daughter from prior marriages. The Will offered by Ms. Rice, whose initial estimate of the probate estate was a mere $16,000, states that Mr. Banks was making no provisions for his wife and children, “not for a lack of love and affection for them and for reasons best known by them”.  The minimal probate estate value may not be unusual if there are non-probate assets (for which Ms. Rice will need to account) since the Will is a pour-over instrument to the Ernie Banks Declaration of Trust dated October 17, 2014. The terms of the Trust remain, for now, undisclosed except that Ms. Rice is the trustee and the widow has asked for a hearing on the validity and circumstances of the Will.

At a late February hearing Judge James Riley approved a request from the slugger’s widow for leave to file a citation to discover assets (not an order, as widely reported, that the caretaker provide a full accounting of the estate).  Also the Judge converted the estate from independent to supervised jurisdiction, which resulted in Ms. Rice needing to seek the Court’s permission before selling or moving any assets. Earlier there had been a battle over the disposition of the body, with Ms. Rice wanting cremation and the family seeking a burial.  However, that dispute was resolved with Mr. Banks’ burial at Graceland Cemetery and left the funeral home claiming a significant sum. Just this past weekend the Chicago Cubs organization stepped up to the plate and said they would take care of those funeral expenses.

Illinois has joined other states in seeking to protect against caretakers taking advantage of the elderly by recently adding a presumption under its Probate Act (755 ILCS 5/4-a) that there has been undue influence if a Will benefits a caregiver. This is similar to what California has had in place for a number of years (California Probate Code § 21380).

However the Illinois statue only applies to Wills signed after January 1, 2015 and the Will in question was executed in October of 2014.

On a side note, another pending battle over a famous estate is that of Robin Williams who committed suicide in August of 2014. Those litigants are his widow (from a three year marriage) and his three children. Mr. Williams’ estate plan has more going for it than many that wind up in Court, including a prenuptial agreement in late 2011 and a Trust, amended in January of 2012 which the spouse claims is consistent with the terms of that agreement. Most recently there have been pleadings to interpret the Trust language as to personal items to go to the children such as memorabilia, jewelry, watch collections and the contents of the actor’s home.

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During most of his thirty-five years in the practice of law, Mr. Keeler has concentrated on estate and trust litigation. Licensed in Oregon and California, Mr. Keeler has tried cases involving estates, trusts and conservatorships throughout Oregon, California and neighboring states. Mr. Keeler is also certified by The State Bar of California Board of Legal Specialization in Estate Planning and Trust & Probate Law.

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