As an estate planning and probate attorney, I frequently hear two statements which in some ways conflict with each other: the rich do not have to pay estate taxes because they pay attorneys to find loopholes.  Another statement that I hear is that I do not need more than a will or a simple living trust (whatever that is) because I do not have much.

Kevin Gorman and Mike Prisuta wrote an interesting article in the Pittsburgh Tribune-Review (July 11, 2008) titled “Estate tax threatens NFL’s old guard of owners”.  While the focus on the article is on the longtime owners of the Pittsburgh Steelers, the Rooney family, it also details some of the other recent ownership changes in the NFL.

Let’s start with the Rooney family who have owned the Steelers since 1933.  Five brothers ranging in age from their late 60s to mid-70s collectively own 80% of the team which is valued somewhere near a billion dollars.  Some of the brothers are concerned with their own estate taxes and therefore are looking to sell their interests.

The estate tax rate is 45% — which is the lowest it has been in a long time – and depending on who the next president is, it could increase to 55% which is where it was until the early part of this decade.

The writers explain that Lamar Hunt gifted the Kansas City Chiefs to his children and paid the gift tax while he was alive.  He regretted not doing it earlier, but he did it early enough that it was a lot cheaper because of the continued appreciation of the value of the team than had he waited until his death. 

The Miami Dolphins were sold by the Robbie family to Wayne Huizenga in 1994 because the surviving family members could not pay the estate taxes to keep the team.  Recently Mr. Huizenga sold one-half of the team and all of its stadium rites in February 2008 and stated that one of his reasons was estate planning.

This is not limited to football.  In Southern California, we have seen the O’Malley family and the Autry family sell the Dodgers and Angels respectively because of estate taxes.  On the other hand, the owner of the Los Angeles Lakers has indicated that ownership of  the Lakers is going to stay in his family.  One would think that the owner, Mr. Buss, has done some estate planning to ensure that result.

The message is that not all wealthy people do all of the estate planning that they should.  In virtually every case, had the owners thought early enough about their estate planning they would have been able to keep the team within the family.  However, as Lamar Hunt said in an interview in 2000 which was six years before his death: “ But for some people, it’s hard to think in terms of dying.  They don’t want to admit it happen to them at any time.”  In the same interview, he lamented not having done the estate planning even earlier than he did it as he said “[i]f I was real farsighted, I would have done it when the franchise was worth $10 million.

Yes.  Many trusts now provide for multiple trustees.  While for the most part this is associated with well-off Americans, it is filtering down to the middle class.  Still for the vast majority of my clients in Culver City (and the surrounding areas including Mar Vista, Palms, Marina del Rey, Playa del Rey, Playa Vista, Westchester, Cheviot Hills, Santa Monica, Brentwood, and Venice), naming a trustee is a fairly simple process.

Most of my clients appoint a family member; most frequently it is a child. I do counsel my clients to think about the position seriously and select the individual who will most successfully implement their wishes.  Even for those clients that do not appoint a family member, it has always been fairly straightforward to select a family advisor such as a CPA or the trust department of a bank or an entity that specializes in managing trusts.

Like virtually everything in life, there are advantages and disadvantages to utilizing more than one trustee.   The advantages can include segregation of duties and also asset protection.  Segregation of duties may benefit the performance of the trust. At least that is the idea.

(On another posting to this blog, I will discuss “trust protectors” which are people who monitor the trustee.)

The asset protection idea is that if a beneficiary has the ability to distribute assets from his/her trust, it is more ripe for creditors.  Thus, many parents are thinking twice about making their child(ren) the distribution trustee.  On the other hand, they may allow their child to determine the investment strategy or to manage a family business.

The negatives include the possibility of higher fees associated with administering the trust.  Moreover, if assets do not perform well, there could be issues as to has the fiduciary responsibility to the trust.