Poor planning leaves his heirs with unnecessary legal fees and an onerous tax bill
The way his terrible estate plan is unraveling, if the late James Brown, the “Godfather of Soul,” could see from wherever he is, he wouldn’t be screaming his most-famous three words: “I feel good.”
Most likely he would be lamenting, “I’ve really messed things up, because papa had a great big bag, and no one can figure out who gets it.”
The problems began to show up almost the instant Mr. Brown died at age 73 on Christmas Day. First, his wife since 2001, Tomi Rae Hynie, and their purported 6-year-old son, James Joseph Brown II, were locked out of their Beech Island, S.C., mansion with eight padlocks, courtesy of some of Mr. Brown’s children from previous relationships.
Second, the decision on where he was to be buried became an issue between the children and Ms. Hynie. Finally after a three-month tug-of-war, the soul singer found his final resting place in his hometown of Augusta, Ga., inside a gold casket.
Third, Mr. Brown had drafted a will in August 2000 and subsequently an irrevocable trust, in which all rights to his music and to the 60-acre Beech Island mansion were placed. Then he had two major life events take place: James II was born 10 months later, and in December of 2001, he and Ms. Hynie were married without a prenuptial agreement.
The will was never redrafted to account for them and ironically stated, “I have intentionally failed to provide for my other relatives or other persons, whether claiming or not to claim, to be an heir of mine or not. Such failure is intentional and not occasioned by accident or mistake.”
Perhaps it was an intentional omission, since the legality of the marriage has since been questioned because Ms. Hynie already was married and her annulment didn’t occur until 2004. Regardless, because Mr. Brown’s estate plan was set up in pieces, it will be contested, and the legal fees will consume huge chunks of the reported $100 million to $200 million estate.
In addition, an eventual gigantic federal estate tax bill will be due nine months after the estate is settled at a rate of 45% of the net estate after the $2 million exclusion.
If Ms. Hynie’s marriage to Mr. Brown is upheld, South Carolina state law would entitle her to 33% of his assets regardless of what the will stated. If the will is deemed invalid, she would receive 50% of the assets with the remaining half divided among his children equally, and James II would receive his equal share of that sum.
The fourth mistake was the omission of other children fathered by Mr. Brown. Again, the omission may have been intentional, but so far 14 people who say he was their father are seeking a DNA test to prove it.
The probate court will decide who is entitled to a share, regardless of the will, a process that will cost hundreds of thousands of dollars.
The fifth, and final mistake, was Mr. Brown’s decision to name David Cannon as a co-executor of his will. Mr. Cannon resigned last month after being accused of having siphoned off $350,000 on Dec. 28, just three days after Mr. Brown died, according to court documents.
Mr. Cannon re-turned the money at a court hearing in South Carolina, according to reports.
By all normal standards, Mr. Brown’s estate planning could be the backdrop for a Hollywood movie. What could he have done to bring out the best in his wife and children, avoiding the hate, envy and jealousy that his lack of planning will cause?
He needed an up-to-date family dynasty trust. In Mr. Brown’s case, a simple will or a basic revocable living trust wouldn’t have been enough.
In the dynasty trust, he should have made provisions for his new wife and son. If Mr. Brown didn’t want her to lay claim to any of his estate, because he wanted it for his previous children, then he should have drafted a prenuptial agreement.
The main reason a person should leave assets to a surviving spouse is the ability to use the marital exclusion, allowing for a pass-through of the entire estate to a surviving spouse 100% federal estate tax-free. In other words, “never die single.”
Obviously, Mr. Brown didn’t think about how much of his estate the Internal Revenue Service would confiscate — and at the top rate of 45%. Had he cared about the tax burden, he would have set up an irrevocable trust and funded it with ample life insurance, providing the cash to pay the taxes, leaving the assets intact.
Furthermore, Mr. Brown would have been a logical candidate for a “recourse” premium-financed plan, under which a bank would have lent him money to pay the premium for a life insurance policy.
At death the loan is paid back with proceeds from the death benefit. There are other steps Mr. Brown could have taken to avoid the difficulties his estate faces.
He could have been specific in his trust as to where he wanted to be buried. In addition, if there was any question that Mr. Brown may have been the father of a child whom he wanted to include or exclude from an inheritance, he should have had the child DNA-tested.
When a family dynasty trust, or any trust, is created, make certain that the trustee is honest and on your team. No one knows if a trustee is going to be tempted to take a bundle of cash off the top.
But provisions should be set up to terminate a trustee if the need arises.
A hearing has been scheduled for Sept. 24, which will be the first of many more to come. The soul singer with the slick moves should have been a little smoother when he planned for the distribution of his wealth.
The estate issues will drag on for years. Meanwhile, James II and Ms. Hynie are living “out of suitcases.”
David T. Phillips is the founder and chief executive of Estate Planning Specialists LLC in Chander, Ariz., a national network of estate planners. He can be reached at firstname.lastname@example.org.