Bequests in the News
Throughout the year, CCK collects and comments on bequest-related cases that have captured our attention and sparked thoughtful discussions about charitable giving. These highlights are featured in our “Bequest Bits” and other newsletters, with the intent of offering practical takeaways to support your bequest management efforts.
But with bequests being a hot topic in the news and pop culture lately, we thought we’d do a special edition featuring commentary on media mentions, as well.
For more resources, consider our website, which hosts articles and e-books tailored to bequest managers, both new and seasoned.
PET TRUSTS AND CHARITABLE BEQUESTS: Gift Planners Need to Be Aware of Legal Wrinkle
Pets are members of our families. As such, it is fitting and proper that they are remembered in estate plans. While pets cannot receive bequests, they can benefit from so-called “pet trusts,” which are legal in every state. These arrangements provide funding for post-mortem care of pets, along with instructions on how the task should be executed.
Charitable bequests often appear in estates that have a pet trust. This is not surprising, since both types of gifts evidence great benevolence on the part of the testator. However, the co-existence of pet bequests with charitable bequests is a matter of some concern. Specifically, IRS Revenue Ruling 78-105, 1978-1 C.B. 295 provides that no part of the remainder of pet trust can qualify for a charitable estate tax deduction. In practical terms, that means if a testator creates a large pet trust, with the balance going to a charity upon the animal’s death, the charitable portion is subject to estate tax, thereby reducing the benefit. Pet trusts sometimes are involved in larger estates, so this is not just an academic concern. (One example is the well-publicized estate of hotel magnate Leona Helmsley. She left $12 million for the care of her dog. A court later reduced that to a still robust $2 million.)
Why should charities care about this? Some gift planners still get involved in estate planning, even to the point of drafting documents. Federal and state regulations pertinent to estates are generously sprinkled with surprising oddities (like the pet trust ruling) that can frustrate testamentary intentions. In the case of charity employees, an unintentional misstep can cost the organization a generous gift (at best) or expose it to liability (at worst). We advise a “hands off” policy when it comes to drafting estate documents.
For a recent review of the pet trust landscape, see “Can You Leave Your Estate to Your Pet?” https://www.cnn.com/2024/09/14/business/curious-consumer/index.html (retrieved November 18, 2024)
MAINE PROBATE COURTS UNDER FIRE: Sobering Assessment of Judicial Oversight
A recent study has determined that the handling of certain cases by the Maine probate courts leaves much to be desired. One of the findings is that the courts do not “have a method to detect attempted theft.”
Primarily focused on guardianship matters, the investigation turned up unsettling information about the extent to which the court is failing to fulfill some of its basic responsibilities.
Why should charities care about this? Although the structure of this system in Maine is unique, the report on its shortcomings is a reminder that stewardship of matured bequests is not a matter of passively waiting for gifts to be distributed. It requires active involvement by the charity and/or those that represent it.
When it comes to the administration of decedents’ estates, the probate courts are not actively involved in most cases. “Unsupervised” probate is the norm for routine estates and, more to the point, a substantial portion of decedents’ assets pass via trusts and beneficiary designations, neither of which require a judicial imprimatur. In short, there is every reason for charities to be vigilant in ensuring the timely and full receipt of testamentary gifts from generous and loyal supporters.
For information on the referenced study, see “How We Investigated Maine’s Probate Courts,” The Maine Monitor, December 24, 2023, themainemonitor.org (retrieved October 26, 2024).
HERMÈS HEIR’S ESTATE EVAPORATES: HEIST OR HOAX? Sounds Like a Soap Opera, But All Too Real
We reported a while back that Nicolas Puech of the Hermès luxury goods family was trying to renege on his promise to leave $13 billion to a charity. The agreement reduced that amount by half if Puech produced a male heir. A childless octogenarian, he was (the last time we heard) trying to adopt his 51-year-old (male) gardener to fulfill the condition.
No word on the adoption, but Puech now reports that his fortune has vanished and blames his business manager. A $13 billion loss is sure to raise some eyebrows!
Why should charities care about this? Defaults on large donation agreements present unique legal and public relations challenges to charities. We have explored these issues and offered some solutions in https://www.cckbequest.com/news-and-knowledge/walking-the-probate-tightrope-recovering-lost-revenue-from-the-donors-estate/.
RICHARD SIMMONS TRUSTEE SEEKS TO UNDO RESIGNATION: She Opted Out and Now Wants Back In: Why?
Exercise guru Richard Simmons died in mid-2024. His left a testamentary trust. The trustees included his brother Lenny and Richard’s long-time housekeeper and friend Teresa Reveles. Reveles (and Lenny) are also beneficiaries of the trust. Shortly after Richard’s death and at Lenny’s urging, Teresa relinquished her position as trustee and signed a document to that effect. Not long after, she decided to recant her resignation, but Lenny would have none of it. Asa result, Teresa was forced to file a lawsuit seeking her restoration as a trustee. She claimed that Lenny prevailed upon her during her period of extreme grief immediately after Richard’s death. Further, she pointed out that English is not her first language and that she did not have the opportunity to consult with counsel.
It is unclear why Teresa wants to resume her role as trustee. Given her close relationship with Simmons, her motives may be altruistic, i.e., she may wish to manage the trust as the decedent would have desired. The Simmons family claims that Reveles is motivated by greed. If the trustees have broad discretion in handling the estate, they may be able to affect their own benefit, at least indirectly. That may be another reason that Reveles wants to reclaim her seat at the table.
Why should charities care about this? The case is a vivid illustration of the differences between administration of a will and administration of a testamentary trust. The trustees are controlling the Simmons estate and disputes cannot be quickly resolved by submitting the matter to an already-sitting probate judge. Reveles had to file a brand-new lawsuit, with the concomitant expense, uncertainty, and delay. In this regard, wills and trusts are miles apart.
Charities should also note that signing estate administration documents is a serious matter. Even if Reveles signed without recognizing the significance of her undertaking, she now faces an arduous and uncertain path in attempting to reverse her action. “Sign first and read later” is not a maxim that bequest managers should follow.
There is no lack of media attention to this estate administration. There are constantly new allegations coming from both sides. For example, “Richard Simmons’ Brother Accuses Late Star’s Housekeeper of Taking $1 Million in Jewelry,” https://tribune.com.pk/story/2506696/richard-simmons-brother-accuses-late-stars-housekeeper-of-taking-1-million-in-jewelry (retrieved November 20, 2024).
PUBLICITY OF DECEASED CELEBRITIES: A UNIQUE NON-CASH GIFT: Lessons from George Carlin and Robin Williams
Bequests of intellectual property can be quite valuable, but they require management. In addition to collecting royalties and license fees, the owners of these intangible rights must exercise systematic diligence in guarding against infringement of the property. For example, the owner of the rights to a classic novel must guard against unauthorized republication of the work and seek damages if that occurs.
A new form of intellectual property is the “right of publicity” of deceased celebrities. This right came into prominence in the wake of a pair of landmark judicial decisions, one involving Elvis Presley and the other concerning Laurel & Hardy. The estates of some celebrities continue to generate significant income long after the person had died.
Rights of publicity present new opportunities and new challenges as technology continues to advance. Just recently, the estate of the late comedian George Carlin reached a confidential settlement with an organization that infringed on his right of publicity in a very modern way: it used artificial intelligence to create “new” Carlin performances more than a decade after his death. Absent constant vigilance, that infringement may have gone unnoticed. Now, the settlement has produced significant revenue for the Carlin estate.
Why should charities care about this? Charities often enter relationships with well-known figures who value and publicize the organization’s mission. This has the potential of creating charitable bequests of names and images. For example, the late Robin Williams (d. 2014) bequeathed his publicity rights to a charitable foundation, subject to a proviso that his name and likeness is not further exploited for twenty-five years. Even so, the estate owns valuable interests that will generate income in the meantime and those must be monitored. When the twenty-five-year period expires in 2039, the beneficiary foundation will be able to explore new opportunities for generating revenue from Williams’ name and likeness. Such income may be quite significant. For example, the images and work of comedian Charlie Chaplin (d. 1977), are still sufficiently valuable to warrant management by three separate companies. If a charity is fortunate enough to acquire publicity rights from a celebrity, constant management of the gift will be required to maximize its value.
The Carlin matter has received some attention in the press. See, for example, https://www.theverge.com/2024/4/3/24119785/ai-george-carlin-lawsuit-settled-artist-rights-alliance-protections (retrieved November 19, 2024). For the seminal cases, see Tennessee ex rel. Elvis Presley Int’l Mem’l Found. v. Crowell, 733 S.W.2d 89 (Tenn. Ct. App. 1987) and Lucille Price (Hardy) v. Hal Roach Studios, Inc., 400 F.Supp. 836 (SDNY 1975).