Author: Michele Braverman

Michael Jackson passed away in 2009, but the settling of his estate continues more than 15 years after his death due to a lingering tax dispute with the Internal Revenue Service (IRS) and other legal challenges, including a lawsuit brought by his mother over a deal to sell part of his music rights to Sony Music Group for $600 million. 

A Los Angeles appeals court issued a ruling in August 2024 allowing the deal to proceed over the objections of Katherine Jackson, who argued that the transaction with Sony violates the terms of Michael’s will and runs counter to his wishes. The sale will now move forward, providing money for his heirs—and valuable estate planning lessons about trusts and controlling money and property from the grave. 

Background on Music Sale Legal Dispute

According to the terms of Michael Jackson’s will, his entire estate is to be turned over to the Michael Jackson Family Trust. The primary beneficiaries of the trust are his three children and unnamed charities. John Branca, an attorney, and John McClain, an accountant, are the trustees of the trust and the executors of Jackson’s estate. Trustees and executors have similar roles—the winding down of a decedent’s affairs—but in different contexts. A trustee manages accounts and property owned by a trust. An executor (called a personal representative in some states) is responsible for managing a deceased person’s probate estate (which consists of accounts and property in the deceased person’s sole name that did not have a beneficiary at the time of their death) through the probate administration process.

Katherine, Jackson’s mother, is a life beneficiary of a portion of a subtrust, the terms of which give the trustees sole discretion to manage the trust assets (accounts and property owned by the trust) for Katherine’s “care, support, maintenance, and well-being.” When Katherine dies, any remaining assets in her subtrust pass to the children’s share of the trust. 

Jackson’s will was admitted to probate in 2009, but his estate remains frozen due to a long-running tax issue involving $700 million allegedly owed to the IRS. 

A May 2024 court filing shows that, as long as the legal dispute continues, the family trust cannot be funded. In the meantime, however, the family is receiving payments through an allowance provided by the estate and its executors.

In 2010, the probate court authorized the executors to continue running Jackson’s businesses. Because the estate is still pending before the court, the executors had to seek court approval to move ahead with a deal between the Jackson estate and Sony Music to purchase half of the King of Pop’s publishing and recorded masters catalog (called the Mijac catalog). 

When they brought the deal to the judge, Katherine filed objections. Jackson’s children initially sided with their grandmother in opposing the transaction, but after the probate judge ruled last year that the deal could proceed, they accepted the decision. 

Katherine subsequently filed an appeal. The appeal spawned a separate lawsuit between Katherine and Jackson’s son, Bigi, who argues that it is “unfair” that the estate should have to fund her lawsuit against the executors when the Jackson children already decided an appeal was not in their best interests. 

In a court filing, Bigi’s lawyers wrote that participating in an appeal was a waste of resources because the chances of a reversal would be “an extreme longshot.” 

It turns out the lawyers were right. The appeals court sided with the probate court and ruled that the estate can proceed with the sale to Sony, denying Katherine’s attempt to block the agreement. 

Sony will now have a stake in what Billboard says could be the largest valuation of music assets ever—an estimated $1.2–$1.5 billion. 

Appeals Court Ruling

Katherine argued in her appeal that the music rights sale violated the terms of Jackson’s will and established probate law. 

She said Jackson told family members before his death that the assets should never be sold. She also claimed that her son intended to give the “entire estate” to the trust. According to Katherine, his music catalog—not proceeds from selling his music catalog, or partial management rights over that catalog—should pass to the trust. 

In rejecting her arguments, the appeals court determined that Jackson’s will gives the executors “broad powers to buy and sell estate assets in the estate’s best interests” and that “all of the estate’s assets will be distributed to the trust.” 

Katherine argued that these provisions are inconsistent and that the probate court’s order violates the second provision because it allows estate assets to be transferred to a joint venture (i.e., Sony) instead of to the trust. The appeals court disagreed, opining:  

We conclude that the provisions are not inconsistent: Read together, they give the executors broad powers to manage estate property while the estate remains in probate, and they provide for the transfer of all estate property to the trust when the probate action is concluded. . . . The proposed transaction is consistent with the terms of Michael’s will as so interpreted, and thus the probate court did not abuse its discretion by granting the executors’ petition. 

Katherine could still appeal the ruling to the California Supreme Court, but based on the interpretation of the lower court, her chances of a successful overturn are low. 

Planning Lessons from the Estate of Michael Jackson 

“Michael died testate on June 25, 2009,” the appeals court notes in its background to the case. 

Testate means that Michael died with a will. He therefore avoided dying intestate, or without a will—something that has plagued the estates of musical superstars like Prince, Tupac Shakur, and Marvin Gaye. 

Dying intestate can lead to protracted estate litigation between heirs and other interested parties, especially when the estate belongs to a celebrity worth many millions of dollars. We see this with Prince’s estate, which is still being litigated more than eight years after his passing. 

A formal written will takes precedence over oral statements made to friends and family members. It could be the case that Jackson communicated to his mother, as she claims, that the music catalog should never be sold. But goals and wishes casually discussed with friends and family are not legally enforceable unless they have been put in a valid, legally enforceable document. 

Jackson not only left behind a valid will but also created a revocable trust during his lifetime to benefit his children and mother. He additionally had the foresight to place terms on the trust to ensure that his children would be mature enough to receive their large inheritances, stipulating specific disbursements to them at ages 30, 35, and 40. 

Jackson also avoided another mistake in his estate plan by giving broad powers to the executors. Estate planning attorneys typically advise clients to give executors broad powers to buy and sell estate property during probate so they do not have to spend time and money seeking court approval for routine transactions.

Jackson’s will is crystal clear on this point. Article V of his will provides: “I hereby give to my Executors, full power and authority at any time or times to sell, lease, mortgage, pledge, exchange or otherwise dispose of the property, whether real or personal, comprising my estate, upon such terms as my Executors shall deem best . . . .”

This type of provision lets executors sell assets in response to changing circumstances that the original owner might not have been able to predict when they created their estate plan. For example, Jackson’s estate filed a brief with the appellate court claiming they negotiated the Sony deal to take advantage of an asset market that was “by far the hottest it had ever been.” 

On the surface, it looks as though Michael made all the right estate planning moves: He created a will and a trust and gave his executors the authority to maximize his estate’s assets for the benefit of his heirs. But he made one potential mistake: Not all of his assets were transferred into the trust during his lifetime, in a process known as trust funding. Trust funding is crucial to ensure that all of a person’s assets are administered privately under the terms of the trust rather than in the public eye of a probate court.

Michael had what is known as a pour-over will that was intended to transfer all assets not already controlled by the trust into the trust upon his death. Pour-over wills serve as a safety net; they transfer all probate assets into the trust so they can be administered with the other trust assets pursuant to the terms of the trust. 

But leaving assets out of the trust and using a pour-over will to direct them to the trust after his death meant that the assets had to go through probate, opening the estate up to some of its current predicaments, such as the lawsuit his mother filed challenging the executors. 

Create an Estate Plan That Matches Your Legacy Goals

Most people do not have to deal with the complex estate planning considerations that celebrities face, particularly a celebrity on the scale of Michael Jackson, whose musical legacy continues to generate huge profits. Jackson was the top-earning dead celebrity in 2023, a credit to his executors’ successful management of his estate. 

Choosing the right executor and granting executor powers are key aspects of an estate plan that are often overlooked. When making your plan, you are under no obligation to name a friend or family member as executor. You can do what Jackson did and choose professionals with legal and financial expertise. 

His choice of a revocable trust and a pour-over will may be questioned postmortem, but there were probably reasons why he chose this type of arrangement. Failing to fully fund his trust, however, may have been an oversight that could have been prevented with the help of an experienced estate planning attorney.  Estate planning choices involve pros and cons, costs and benefits, that need to be evaluated on an individual basis. What makes sense for Michael Jackson and his heirs—or any other family—might not make sense for you and your loved ones. 

To put your finances and family in the best situation, you need a customized estate plan that is based on your specific wishes for your money and property, and you should revisit your plan every few years to ensure that it reflects current circumstances. 

Call or contact our attorneys for help crafting a plan that meets your legacy goals.

“No, I am your father.” 

These words, uttered by James Earl Jones in his voice-over role as Darth Vader, are indelible in the minds of Star Wars fans. Jones is also well known for voicing Mufasa in The Lion King and a series of cable news promotions in which he declared, “This is CNN.” 

But Jones’s booming basso profundo is just one part of his legacy. The famed actor, who passed away in September at age 93, had a decades-long career in film, television, and theater that earned him a place among the greatest performers of our time. His legacy also includes a collection of properties in upstate New York, a net worth in the tens of millions of dollars, and a deal ensuring that future generations of moviegoers will enjoy his iconic voice. 

From Silent Stutterer to Silver Screen Star

Jones is best remembered for his voice, but as a child, he did not speak for years after he and his family moved from Mississippi to Michigan when he was five years old; the trauma of relocating caused him to develop a stutter. 

“I was mute from grade one through freshman year in high school . . . I just gave up on talking,” Jones said in a 1986 interview.” 

A high school teacher helped Jones find his voice again by encouraging him to read his poetry aloud, sparking a passion for oration and performance that took him from the small stages of northern Michigan to the silver screens of Hollywood. 

Jones won a public speaking contest as a high school senior and received a full scholarship to the University of Michigan, where he studied drama. He then served in the US Army during the Korean War before moving to New York and landing lead roles in Shakespearean stage productions. 

In the mid-1960s, he made his film debut in Stanley Kubrick’s Dr. Strangelove and scored roles on TV’s Guiding Light and As the World Turns. But it was his 1969 portrayal of boxer Jack Jefferson in The Great White Hope—both on Broadway and in the 1970 film—that brought Jones major recognition, earning him a Tony Award and an Oscar nomination.

Jones was the second African American man nominated for an Academy Award. He eventually won an Oscar in 2011 when he received an Academy Honorary Award, making him one of the few entertainers to achieve the EGOT (Emmy, Grammy, Oscar, and Tony).

He never won an award for his voice role as Darth Vader in the Star Wars franchise, but it was this 1977 performance that gained him international fame and immortalized his voice in popular culture. 

Jones chose to take a lump-sum payment of $7,000 (the equivalent of around $36,000 today)—instead of a share of profits—to voice the villainous Vader and, at the time, considered it good money. However, choosing the lump sum over a profit-share option reportedly cost him and his family millions in payouts. 

Explaining his thought process years later, Jones said that as a starving young actor, he never expected Star Wars to achieve its cult status and become a multibillion-dollar franchise: “Seven thousand dollars was big money for me in those days. I was broke and needed the money to pay rent and buy groceries.”

Jones retired from his Darth Vader role in 2019. Prior to his passing, however, he teamed up with a Ukrainian AI company to recreate his voice and gave Lucasfilm permission to use it in future productions. His AI-generated Darth Vader voice can be heard in Disney’s 2022 Obi Wan Kenobi series. According to IMDb, it was his final credit. 

With the deal, the voice we almost never heard is now assured to live forever. And while Jones’s legacy is inseparable from what he did behind the microphone, what he achieved on-screen is equally memorable. His nearly 200 film and television credits include Roots, Conan the Barbarian, Coming to America, Field of Dreams, The Hunt for Red October, Patriot Games, The Simpsons, and Cry, the Beloved Country. 

Personal Life, Properties, and Probable Sole Heir

Jones died on September 9, 2024, surrounded by family at his home in Pawling, New York, located in Dutchess County. He had an estimated net worth of $40 million at the time of his death. 

Jones fell in love with Dutchess County during a road trip there in 1970 with a friend who was interested in property for sale. His friend passed on buying the property, but Jones ended up securing the land for himself. Far from the bright lights of Hollywood, Jones lived the rest of his life in Pawling, where he was active in the local community and he and his wife raised their son, Flynn. 

He liked it so much, in fact, that he bought 10 neighboring properties over the years and laid down roots of his own. Jones had a particularly close relationship with Poughkeepsie Day School, which Flynn attended from 1994 to 2001. In 2000, the school named its auditorium the James Earl Jones Theater in his honor. 

Flynn was born in 1982 to Jones and his second wife, Cecilia Hart, shortly after the couple wed. Hart, also an actor, died of ovarian cancer in 2016. 

Flynn Earl Jones was close to his father and, though not an actor himself, followed in his footsteps by working as an audiobook narrator. He also married an actress, Lorena Monagas. The couple wed in 2019 in Tarrytown, New York, an hour south of Pawling. Flynn has 17 voiceover credits on Audible.com but prefers a life out of the spotlight and has no social media profiles. 

As James’s only child, Flynn could be the sole inheritor of his late father’s estate, although there are few public details about the estate plan. 

An obituary from the Horn & Thomes, Inc. Funeral Home in Pawling notes that Jones leaves behind “a loving family including his son Flynn Earl Jones, daughter-in law Lorena Monagas Jones, his brother Matthew Earl Jones, his Aunt Helen Irene Georgia Connolly Morgan and many, many others.”

Matthew Earl Jones is James’s half-brother. They have different mothers and the same father. It is uncertain whether he or other family members will share an inheritance with Flynn. 

It is also possible that Jones included charitable giving in his estate plan, given his community-mindedness. Those who knew him in Dutchess County praised his generous spirit. He supported several charities, such as the Make-A-Wish Foundation and Habitat for Humanity. His obituary states that, in lieu of flowers, donations in his honor can be made to Hudson Valley Hospice, providing another hint that Jones might have left part of his estate to charity. 

For a man of his accomplishments and fame, Jones managed to stay largely out of the public eye. He even requested that his name not appear in the credits of the first two Star Wars movies in deference to the actor in the Darth Vader costume. 

In the few interviews he did give, Jones often reflected on his preference for a quieter life. It would not be surprising if he maintained this privacy in death by using trusts to transfer assets to beneficiaries. A trust agreement stays private, unlike a will, which is a public record once filed with the probate court. 

Estate Planning Is Not Just for Celebrities

Celebrity estate plans often make headlines only when something goes wrong and causes family drama. Actors Philip Seymour Hoffman and Heath Ledger, for example, both failed to update their estate plans to include a new child who had been born prior to their passing. Other famous actors, such as Bob Saget, Norm McDonald, and Gilbert Gottfried, died without a will, leading to protracted legal disputes in each case. 

Arguably, the biggest mistake that Jones made was forgoing the profit-share option when he signed on to voice Vader. He admitted in 2010 that this decision cost him “tens of millions of dollars.” But Jones can be forgiven for this youthful indiscretion. Almost nobody—not even George Lucas—expected Star Wars to make much money. 

We all make mistakes when we are starting our careers and beginning to build our legacies. How we finish is more important. Given what we know about Jones, it seems highly unlikely that he would neglect the people and causes he cared about through a lack of estate planning. 

If he were still alive today and asked about his estate plan, he might respond, to quote Darth Vader in Star Wars: Episode IV – A New Hope: “I find your lack of faith disturbing.” Call us to schedule a consultation.

The U.S. Department of the Treasury has released its General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals. Commonly referred to as the Greenbook, this document lays out tax proposals that would support President Biden’s policy priorities if he is reelected to a second term. 

A major focus of this year’s Greenbook is increasing taxes on corporations and high-income individuals to ensure that “the wealthy and corporations pay their fair share,” says the Biden administration. 

Some of the proposals in the administration’s budget would modify estate and gift taxation, helping to generate an estimated $97.2 billion in additional revenue over 10 years. These proposals are still a long way from being enacted, but they bear monitoring from an estate planning perspective. 

The Greenbook Proposes Closing Estate and Gift Tax Loopholes

Tax proposals in the Greenbook are not proposed legislation; each budget item would need to be introduced and passed by Congress to become law. 

However, the Greenbook provides insight into tax matters the Biden administration could prioritize in a second term. Among them are closing what the Greenbook calls “estate and gift tax loopholes” that “allow the wealthy to reduce their tax by using complicated trust arrangements to transfer their assets to their heirs.” 

Three proposals in the Greenbook address the following trust and estate tax issues: 

• Modifying grantor trust rules that allow significant value to be removed from an estate without being taxed
• Reclassifying certain appreciated asset transfers so they are subject to capital gain taxes
• Minimizing or eliminating valuation discounts for some intrafamily asset transfers

Grantor Trusts

The Greenbook outlines a plan for modifying tax rules for grantor trusts, including grantor retained annuity trusts (GRATs).  

According to the Greenbook, grantor trusts and GRATs allow taxpayers to use three common tax planning strategies to significantly lower their combined federal income, gift, and estate tax burden: 

• Funding a GRAT with accounts and property (assets) that the grantor expects to appreciate and structuring the GRAT in such a way that incurs very little gift tax when appreciated assets are transferred to remainder beneficiaries 
• Selling an appreciating asset to a grantor trust of which the taxpayer is considered the owner for income tax purposes, allowing the taxpayer to remove future asset appreciation from their gross estate without the recognition of capital gains on the sale or the payment of gift or estate tax 
• Reselling an appreciated asset from the grantor trust back to the trust’s owner, making the purchase disregarded for income tax purposes and not subject to capital gains tax 

The Greenbook proposes the following changes to grantor trusts:

• Recognize sales between a grantor and a grantor trust as taxable and require the seller to pay taxes on them. 
• Treat the payment of grantor trust income taxes by the trust owner as a taxable gift to the trust that would occur on December 31 of the year in which the tax is paid (unless the owner is reimbursed by the trust that same year). 
• Impose a minimum value on a GRAT’s remainder interest for gift tax purposes.
• Require a minimum and maximum term for GRATs.
• Prohibit a GRAT grantor from engaging in tax-free exchanges of trust assets.  

Accounting firm BDO USA writes that these proposals would overturn the Internal Revenue Service rule that disregards grantor/grantor trust transactions as taxable events. The GRAT proposals would also effectively eliminate short-term GRATs used as part of a “rolling GRAT strategy” and prohibit “zeroed-out GRATs,” says BDO.

Appreciated Property Transfers

Another reform proposed in the Greenbook that has trust and estate planning implications deals with the taxation of capital income (i.e., capital gains tax). 

Under current tax law, when someone (a donor) gifts an appreciated asset to another person (a donee) during the donor’s lifetime, there is no realization of capital gain by the donor when they make the gift. In addition, the donee does not have to recognize the capital gain until they dispose of the appreciated asset. 

And when a deceased person passes on an appreciated asset upon death, the recipient receives an adjusted basis equal to the asset’s fair market value at the time of the decedent’s death. If the basis adjustment is a step-up, the postdeath transfer would allow the recipient of the gift to avoid federal income tax on asset appreciation that occurred during the decedent’s lifetime, as all such gain had been wiped out by the adjustment in basis. 

The Greenbook describes these rules as giving preferential tax rates on capital gains that largely benefit high-income taxpayers, resulting in many of them paying a lower tax rate than middle-income earners. Proposals in the Greenbook would tax unrealized capital gains on transferred appreciated property when the following “realization” events occur: 

• Transfers of appreciated property by gift or death
• Property transfers to or from most types of trusts
• Property distributions from revocable grantor trusts to persons other than the trust’s owner or their spouse

BDO calls the proposal a radical departure from how capital assets are currently recognized as income. The addition of realization events would consider a sale of a capital asset to have occurred even when there was no sale, unlike now, when there must be a sale or property exchange to generate a capital gain. 

Taxpayers may not have the money to pay the capital gains tax incurred from a new realization event because the transferor does not receive cash in exchange for the property transferred.  Thus these transferors would need to engage in extremely careful planning to avoid liquidity issues surrounding a deemed sale. This could result in needing to sell assets other than those transferred in order to pay the tax.

Intrafamily Asset Transfers

Family members can transfer hard-to-value assets from one member to another to lower their tax burden. The Greenbook cites two ways this can be achieved: 

• Transfer portfolios of liquid assets, such as marketable securities, into partnerships or other entities; make intrafamily transfers of interests in those entities (rather than transferring the actual liquid assets); and then claim entity-level discounts for valuing the gifted asset. 
• Make intrafamily transfers of partial interests in other hard-to-value assets (e.g., art, real estate, and intangibles), allowing each family co-owner to claim “fractional interest discounts.” 

According to the Treasury, these strategies take advantage of lack of marketability and lack of control factors used to determine the fair market value of such partial interests, but they are not appropriate when families act together to maximize their economic benefits and artificially reduce the transfer tax due. 

A Greenbook proposal to reform these intrafamily asset transfers would 

• reduce or eliminate discounts related to marketability and control when transferring partial interests within a family if the family collectively owns at least 25 percent of the property; and
• make the transferred partial interest’s value equal its pro rata share of the total fair market value of all interests in the property held by both the transferor and their family members. This collective fair market value would be calculated as if all interests in the property were owned by a single individual.

This proposal would replace section 2704(b) of the Internal Revenue Code. 

“Family members,” for purposes of the proposal, would include the transferor, ancestor and descendants of the transferor as well as the spouse of each family member. 

Stay Ahead of Trust and Estate Tax Changes

Themes of fairness and cracking down on what the Biden administration considers tax avoidance strategies by wealthy individuals figure prominently in this year’s Greenbook. 

The future of Biden’s fiscal year 2025 budget recommendations is highly uncertain. But proposed changes to grantor trusts, intrafamily asset transfers, and unrealized capital gains could have a major impact on how wealthy families approach estate and gift taxes and necessitate new and creative estate planning strategies. 

Thinking about the what-ifs of the 2025 Greenbook proposals can be a useful exercise for staying one step ahead of changes to the tax code. To review your estate plan and stay prepared for what could be coming, schedule a meeting with our tax and estate planning attorneys. 

When most people think about creating an estate plan, they usually focus on what will happen when they die. They typically do not consider what their wishes would be if they were alive but unable to manage their own affairs (in other words, if they are alive but incapacitated). In many cases, failing to plan for incapacity can result in families having to seek court involvement to manage a loved one’s affairs. It does not matter who you are, how old you are, or how much you have—having a proper plan in place to address your incapacity or death is necessary for everyone. Recently, comedian and late night talk show host Jay Leno had to seek court involvement to handle his and his wife’s estate planning needs due to his wife’s incapacity.

What Is a Conservator?

A conservator is a court-appointed person who manages the financial affairs for a person who is unable to manage their affairs themselves (also known as the ward). The conservator is responsible for managing the ward’s money and property and any other financial or legal matters that may arise. They are also required to periodically file information with the court to prove that they are abiding by their duties. To have a conservator appointed, an interested person must petition the court, attend a hearing, and be appointed by a judge. This can be very time-consuming, and there are court and attorney costs that must be paid along the way.

Jay Leno’s Petition to the Court

In January 2024, Jay Leno petitioned the court to be appointed as the conservator of the estate of his wife, Mavis Leno, so that he could have an estate plan prepared on her behalf and for her benefit. Unfortunately, Mrs. Leno has been diagnosed with dementia and has impaired memory. Her impairment has made it impossible for her to create her own estate plan or participate in the couple’s joint planning. According to court documents, Mr. Leno wanted to set up a living trust and other estate planning documents to ensure that his wife would have “managed assets sufficient to provide for her care” if he were to die before her. Right now, Mr. Leno is managing the couple’s finances, but he wanted to prepare for a time when he is no longer able to do so.

On April 9, 2024, the court granted Mr. Leno’s petition. According to the court documents, the judge determined that a conservatorship was necessary and that Mr. Leno was “suitable and qualified” to be appointed as such. During the proceedings, the judge found “clear and convincing evidence that a Conservatorship of the Estate is necessary and appropriate.”

Although there was a favorable outcome in this particular case, it still took several months for Mr. Leno to be appointed by the court. In addition to the initial filings and court appearances, there will likely be ongoing court filing requirements to ensure that Mrs. Leno’s money is being managed appropriately. Had they prepared an estate plan ahead of time, much of this time and hassle would likely have been avoided.

Important Takeaways

While many people may dismiss the Lenos’ experience as something that applies only to the rich and famous, the truth is that you could find yourself in the same situation (although with a smaller amount of money and property at play) if you are not careful. Let’s use this opportunity to learn from their mistakes.

• Spouses are not automatically able to step in for each other in times of incapacity or death. Many people are under the impression that because they are married, their spouse can automatically step in for them upon their incapacity or death without any estate planning tools in place or the need for court involvement. The Lenos’ story demonstrates that this is simply not the case. Once a person turns 18, no one (not even a spouse) can automatically step in to manage their finances or healthcare decisions without either the person’s prior consent (usually in the form of estate planning documents) or court involvement.
• Proper estate planning documents could have prevented this. If Mrs. Leno had had a proper financial power of attorney granting her husband the authority to create an estate plan for her, it is quite possible that Mr. Leno would not have had to petition the court to become her conservator, as he would have already possessed the authority through the financial power of attorney. Also, if she had had a financial power of attorney, she likely would have also had a last will and testament or revocable living trust created at the same time, which is what Mr. Leno was ultimately seeking to accomplish. Preparing these documents before her incapacity would have allowed Mrs. Leno to specify her wishes while she was able to communicate them.
• While the intent is to avoid probate court, sometimes it is necessary. When an adult person does not have the ability to manage their own affairs, someone has to be able to step in on their behalf. But what happens if the person has not created an estate plan? State law will usually specify a process for ensuring that someone is appointed to manage an incapacitated person’s affairs and that they are properly cared for. However, there are usually delays and additional costs associated with going through this court process as compared with using a financial power of attorney.
• Having a plan in place is better than relying on a state’s default rules. While the Lenos’ situation seems to have been resolved positively, conflict can arise when relying on a state’s rules. Multiple family members may want to manage their loved one’s affairs, and any disagreements may need to be refereed by a judge. This infighting will become a matter of public record and can also delay the entire process. Also, if you do not have a close relationship with your family, relying on the state’s laws relating to priority of appointment may give an estranged family member the authority to make decisions on your behalf even if that would not be the person you would have chosen. It is better to proactively create an estate plan so that you can be in control of appointing the person you want to act on your behalf.

We can help you and your loved ones regardless of where you find yourself in the estate planning process. Whether you are looking to proactively plan to ensure that your wishes are carried out during all phases of your life, or if you need assistance with a loved one who can no longer manage their own affairs, give us a call.

Under the Corporate Transparency Act (CTA), which took effect January 1, 2024, many business entities including small limited liability companies (LLCs) and partnerships are required to file reports with the Treasury Department’s Financial Crime Enforcement Network (FinCEN). In these filings, applicable businesses must disclose important information about their entity. However, recent developments have called into question the constitutionality of these requirements.

What Is the Corporate Transparency Act, and What are the Requirements?

The CTA is a federal law that requires business entities, referred to as reporting companies, to disclose certain information about the company and its owners to FinCEN. Under the CTA, a reporting company is defined as a corporation, LLC, or similar entity that is (i) created by filing a document with the secretary of state or a similar office under the laws of a state or Indian tribe, or (ii) formed under the laws of a foreign country and registered to do business in the United States. The following information about reporting companies in the United States must be included in the report:

• the company’s full legal name and any trade name or doing business as (d/b/a) name
• street address of the principal place of business
• jurisdiction where the business was formed
• tax identification number

Additionally, the reporting company must provide the following information to FinCEN about its beneficial owners, defined as persons who hold significant equity (25 percent or more ownership interest) in the reporting company or who exercise substantial control over the reporting company:

• full legal name 
• date of birth
• current residential or business address
• unique identification number from an acceptable identification document or FinCEN identifier

For reporting companies created on or after January 1, 2024, the same information must be provided about the company applicant, the person that files the creation documents for the reporting entity. 

Some Current Litigation

National Small Business United v. Yellen

On Friday, March 1, 2024, in National Small Business United v. Yellen, Judge Liles C. Burke of the United States District Court for the Northern District of Alabama ruled via memorandum opinion that the CTA is unconstitutional because Congress lacks the authority to require companies to disclose personal stakeholder information to FinCEN. The National Small Business Association (NSBA), an Ohio nonprofit organization representing more than 65,000 businesses from all 50 states, and Issac Winkles, an NSBA member and owner of two small businesses, had brought suit against the US Department of the Treasury and Treasury Secretary Janet Yellen, alleging that the mandatory disclosure requirements imposed by the CTA exceeded Congress’s authority under Article I of the US Constitution and violated the First, Fourth, Fifth, Ninth, and Tenth Amendments. The US Department of Justice has since filed an appeal of the district court’s decision with the US Court of Appeals for the Eleventh Circuit asserting that the CTA is constitutional.

Boyle v. Yellen

On March 15, 2024, William Boyle initiated a lawsuit in the US District Court for the District of Maine alleging that the CTA is unconstitutional. The lawsuit states that Congress exceeded its authority under Article 1 of the Constitution and encroached upon the states’ respective sovereignties in violation of the Ninth and Tenth Amendments and constitutional principles of federalism and retained state sovereignty.

Small Business Association of Michigan v. Yellen

On March 26, 2024, the Small Business Association of Michigan, Chaldean American Chamber of Commerce, Steward Media Group, LLC, Power Connections Co, LLC, Derek Dickow, Semper Real Estate Advisors, LLC, and Timothy A. Eisenbraun, filed a complaint for declaratory judgment and injunctive relief alleging that Congress exceeded its constitutional authority, the CTA amounts to an unreasonable search and seizure, and the CTA is a violation of due process. In response, the US Department of Justice has filed a brief asserting the constitutionality of the CTA.

Where Do We Go from Here?

With one case decided, two awaiting further proceedings, and other lawsuits being filed, there will be little change for most business owners. The decision in Alabama only applies to the named plaintiffs; anyone who was not part of that case is still required to comply with CTA requirements. We understand that the landscape is constantly evolving, and we are here to keep you updated so you can comply with all applicable laws. If you have questions about the next steps, give us a call.

Wrongful death lawsuits and probate proceedings are both civil legal matters that occur after somebody has died. 

When the death of a loved one is caused by another individual or entity, it can lead to the filing of a wrongful death lawsuit and, ultimately, the awarding of compensation to surviving family members. Probate is a court proceeding that deals with administering a decedent’s estate, inventorying their accounts and property, paying off creditors, and making distributions to heirs or beneficiaries.  

While probate proceedings are fairly common when a person dies, very few deaths give rise to a wrongful death claim. However, wrongful death and probate can intersect if somebody dies due to another’s misconduct. 

State laws vary on who has the legal authority to file a wrongful death case. There is also considerable state variation on how the proceeds of a wrongful death claim are distributed to survivors.

What Is a Wrongful Death? 

A wrongful death, as the term implies, is a death that results from the “wrongful” action of another, such as negligence, carelessness, recklessness, or intentional conduct. 

Both individuals and entities, such as businesses and governments, can commit a wrongful action that leads to death. For example:

• A person drives drunk and kills somebody else in a car accident
• A doctor negligently fails to diagnose or treat a patient’s medical condition that proves to be fatal 
• A company manufactures a toxic chemical that causes a deadly illness
• One person assaults another and kills them

Wrongful death is a matter of civil law, although in some cases—perhaps most famously the O.J. Simpson case—a person’s death can lead to both criminal and civil charges. 

Who Can File a Wrongful Death Lawsuit? 

A wrongful death lawsuit can award damages to pay for the decedent’s medical bills, pain and suffering, and funeral expenses. It can also provide money to survivors for their economic and emotional injuries, such as loss of financial support, household services, and love and companionship. 

The question of who can file a wrongful death lawsuit comes down to state law. Generally, states allow one of the following to sue: 

• Survivors of the decedent designated by state law, such as a surviving spouse or romantic partner, children, parents, or siblings
• The decedent’s estate, via their personal representative (referred to in some states as an executor)

In states where survivors are allowed to sue for wrongful death, the right to file suit is typically prioritized based on the closeness of the relationship, with a surviving spouse and children given priority. 

Some states allow groups of survivors to sue. Others give priority to family members and give them a limited amount of time to file a lawsuit, and, if they fail to do so, additional relatives and even unmarried domestic partners can then sue. 

There are also certain states where only the decedent’s probate estate can file a wrongful death lawsuit. In these states, the personal representative of the probate estate (for example, a family member or a lawyer) is the only party who has the legal authority to act on behalf of the estate and file the lawsuit. The personal representative of the probate estate might be someone who was named in the decedent’s will or appointed by a judge according to state law if the decedent died without a will.

Wrongful Death, Estates, and Probate

Probate is not always necessary when someone dies; there are instances when the value of the decedent’s money and property is small enough to avoid probate, or the family uses estate planning tools such as living trusts to avoid it.

Wrongful death claims, as previously mentioned, are relatively uncommon. In 2022, there were just over 227,000 preventable deaths caused by injuries nationwide and not all of these were wrongful deaths.

Even if a person has no accounts or property or if their estate is otherwise eligible to skip probate, numerous factors can make opening an estate and filing for probate necessary to resolve a wrongful death claim. 

Here are some areas where a wrongful death claim overlaps with opening an estate and engaging the probate court: 

• In states where only the personal representative of the estate is authorized to bring a wrongful death lawsuit, the local probate court must appoint a personal representative to file the wrongful death claim. This step is required whether or not the decedent left a will naming a personal representative, regardless of whether they are suing on behalf of the estate or on behalf of the decedent’s survivors. 
• The decedent could have incurred medical debt between the time of their injury and their death. Portions of the wrongful death settlement could also be taxable. These debts might need to pass through the estate to pay off creditors, which would require petitioning the probate court to open an estate for the wrongful death case.
• Some state courts award wrongful death damages to the estate, which then distributes payments to survivors rather than awarding damages directly to survivors. 
• In some jurisdictions and situations, wrongful death damages are subject to probate because the court must approve the division of accounts and property before they are distributed to beneficiaries. This can occur with or without a will. 
• There may be people eligible for wrongful death damages who were not named as beneficiaries in the decedent’s will. The probate court may need to approve payments to these individuals. 
• If probate and a wrongful death claim are ongoing at the same time, the estate cannot close until the lawsuit is resolved because the proceeds will likely be considered part of the deceased person’s estate. 
• The wrongful death claim could be settled out of court before a lawsuit is filed, but to receive the settlement money from the defendant, the defendant must first be released from liability—something that only the personal representative of the probate estate can do on behalf of the estate.

To summarize, if a wrongful death lawsuit is filed, it is likely to trigger probate and court involvement considerations in one way or another. The specific ways in which wrongful death and probate intersect, however, are largely dependent on state law. 

Who Gets the Money from a Wrongful Death Lawsuit?

Determining who benefits from a wrongful death settlement or jury verdict, like other aspects of a wrongful death lawsuit, comes down to state statute. 

The different ways that states approach the distribution of damages awarded in a wrongful death lawsuit include the following:  

• State intestacy laws: the laws that dictate how a decedent’s money and property are distributed when they die without a will 
• Agreement among surviving family members: using a family settlement agreement, a type of contract that family members put in writing and sign 
• In proportion to the losses suffered by each surviving family member: potentially based on the value of their lost support and services
• According to the terms of the decedent’s will
• At the discretion of the probate court
• Based on the level of dependency of the survivors

As these examples show, there is a high degree of variability among states about wrongful death lawsuit award distributions. States may give significant latitude to family members to decide how the proceeds should be split or strictly adhere to statutory provisions. 

States also vary on the types of damages that can be awarded in a successful wrongful death claim. Most state laws allow economic and noneconomic damages to be recovered, but they may give itemized descriptions of the specific damages that can be awarded to particular survivors and distinguish between damages recoverable by survivors and recoverable by the estate. In some states, each heir must present evidence to the court of their losses to receive a share of the wrongful death damages. 

Talk to a Lawyer About Wrongful Death and Settling an Estate

Closing the book on a loved one’s estate can be procedurally complicated and emotionally difficult no matter the circumstances of their death, but if their passing also involves a wrongful death claim, the situation can become much more emotional and increasingly complex. 

Whether you are a personal representative or family member responsible for filing a wrongful death lawsuit, an heir seeking to claim a portion of a wrongful death payout, or you want to make sure that your estate plan anticipates the possibility of a wrongful death and addresses how to best deal with it, our attorneys can help. 

Contact us to set up a time to talk about the intersection of wrongful death, probate, and estate law.