Celebrity Estate Planning: Misfires of the Rich and Famous VII

By Kristen A. Curatolo, Jay J. Scharf, Shifra Herzberg, Shaina S. Kamen, Erica Howard-Potter, and Mikhail E. Lezhnev

Kristen A. Curatolo is a partner in the Trusts & Estates Group at Seward & Kissel LLP in New York, New York.Jay J. Scharf is a partner at McDermott Will & Emery LLP.Shifra Herzberg is special counsel in Sullivan & Cromwell’s New York office and is a member of the Estates and Personal Group.Shaina S. Kamen is a partner at Holland & Knight LLP in Miami, Florida.

Like many ordinary individuals, celebrities often fail to update outdated estate plans or ignore estate planning altogether. Even when a celebrity has done careful estate planning and has well-drafted documents, changes in family circumstances or in the tax laws can create unexpected results. When estate planning misfires occur, grieving family members can end up fighting with each other and with taxing authorities. The estate plans discussed in this article offer useful lessons to estate planners and laypersons alike.

Estate of Tupac Shakur: No Love from His Daddy

Background

Tupac Shakur, the iconic rapper, songwriter, and activist, was tragically killed in a drive-by shooting in 1996, spurring more than two decades of legal battles over his estate.

Estate Plan

Shakur died intestate. He was not married and did not have any children. Under California law, Shakur’s parents, Afeni Shakur and William “Billy” Garland, were presumed to share his estate equally. Because Garland was not married to Shakur’s mother and was largely absent in Shakur’s life, however, Afeni disputed Garland’s claim to half of Shakur’s estate. California law requires a father who is not married to the child’s mother to have a substantial relationship with the child and provide monetary support in order to inherit from the child.

Erica Howard-Potter is a partner at Pryor Cashman LLP in New York, New York. She is a member of the firm’s Private Client Group and Trusts and Estates Practice, and an active member in the ABA Tax and Real Property, Trust and Estate Law Sections.

Mikhail E. Lezhnev is an associate attorney in the Trusts and Estates department at Schwartz Sladkus Reich Greenberg Atlas LLP in New York, New York.

Result

Throughout his musical career, Shakur documented his lack of relationship with Garland. His hit “Dear Mama” included lyrics like “No love from my daddy, ’cause the coward wasn’t there/I was lookin’ for a father, he was gone.” During the proceedings following Shakur’s death, Garland’s contributions to Shakur’s support were reportedly found to include $820, a bag of peanuts, and a ticket to the movie Rollerball. Garland also did not see Shakur for 15 of the 25 years that Shakur was alive. Finding that Garland’s contributions to Shakur’s support and care were minimal, a California judge determined that Garland should not inherit from Shakur.

Lesson

Fortuitously, Shakur died a domiciliary of California, where state law precluded Garland from inheriting. Had Shakur died a domiciliary of a different state, Garland may well have inherited one-half of Shakur’s estate. Intestacy laws differ from state to state, and even a simple will identifying a client’s heirs may avoid years of costly and emotional litigation.

Estate of Paul Newman: The Newman’s Own Exception

Background

Paul Newman was an Academy Award–winning actor, film director, race car driver, entrepreneur, and philanthropist. Newman created the highly successful consumer brand “Newman’s Own” (the Company), which donated 100% of its after-tax profits to charity since its formation.

Estate Plan

Two months before he died in 2008, Newman amended his revocable trust and bequeathed 100% of the Company to the Newman’s Own Foundation (the Foundation). He also gave complete control of the Foundation to nonfamily members. Newman repeatedly expressed his wish that his children direct charitable gifts from the Foundation up to a certain amount each year; however, his estate planning documents were silent on this point. In addition, although Newman clearly wanted the profits of the Company to benefit charitable causes, his estate planning documents did not consider or address the IRS limitations on private foundations that hold operating businesses.

IRC section 4943 imposes an excise tax on a foundation’s excess business holdings. In general, an excise tax of up to 200% of the value of a business will be imposed on any private foundation that receives more than 20% of the voting stock, profits interest, or capital interest in an active trade or business by gift or bequest and does not dispose of its excess ownership interest within five years (or 10 years if an IRS extension is granted). The 20% threshold can be increased to 35% in certain circumstances and is aggregated with certain interests of substantial contributors to the Foundation.

Result

In 2018, just before the 10-year extension on the requirement for the Foundation to dispose of the Company was set to expire, IRC section 4943(g) (Newman’s Own Exception) was enacted, providing an exception to the excess business holding rules in certain cases where 100% of a business is owned by a private foundation. The Newman’s Own Exception applies only to business interests given or bequeathed to a private foundation. In addition, 100% of the net operating income of the business must be distributed each year to the foundation, and the business must operate independently in many respects from the foundation. Had the Newman’s Own Exception not been passed, the Foundation would have been forced to dispose of 80% of its holdings in the Company, and Newman’s intent for the Company’s profits to pass to charity would have failed. In 2022, two of Newman’s daughters sued the Foundation after the Foundation reduced the amount that each daughter could allocate to charitable causes. The Foundation argued that the daughters did not have standing because they did not hold a fiduciary role in the Foundation or in Newman’s estate. The case is still ongoing, and the matters have not been settled.

Lesson

The Newman’s Own Exception is available to individuals who wish to contribute 100% of an operating business to a private foundation and who are willing to allow nonrelated parties to control the business. Strict compliance with IRC section 4943(g) is critical, and care must be taken when planning to contribute assets to a private foundation.

Estate of Anne Heche: An Email Is Not a Holographic Will

Background

Anne Heche was an actress who endured several personal struggles before dying at age 53 in a single-car collision that also destroyed the home into which she crashed. At the time of her death, Anne had two sons: Homer Laffoon, age 20, from her marriage to Coleman Laffoon, and Atlas Tupper, age 13, from her relationship to James Tupper.

Estate Plan

Following Heche’s death, Homer asserted that Heche did not have a will and petitioned to be appointed as the administrator of the estate. Tupper objected, offering an email sent by Heche in 2011 purporting to be her will, which provided, in part, “FYI In case I die tomorrow and anyone asks. My wishes are that all of my assets go to the control of Mr. James Tupper to be used to raise my children and then given to the children . . and their portion given to each when they are the age of 25. When the last child turns 25 any house or other properties owned may be sold and the money divided equally among our children.”

Result

The court determined that the email did not meet the legal requirements for a validly executed will, or a holographic will, and appointed Homer as the administrator of Heche’s estate. In order for a will to be valid under California law, it must either be in writing and signed by the testator and two adult witnesses or be written and signed by the testator, in which case no witnesses are required. Although a California holographic will does not require witnesses, the material provisions and signature must be solely in the handwriting of the testator. In both instances, the testator must be of sound mind and have the intent to create a will. Because Heche’s email to Tupper did not meet the requirements for a valid will, Heche’s estate passed equally to her two sons under California’s intestacy rules.

Lesson

Heche did not create a proper estate plan. The email was grossly inadequate to constitute even a valid holographic will, resulting in litigation regarding who should be appointed as the administrator of Heche’s estate. In addition, Heche’s entire estate passed outright and quite publicly to her two young children instead of being held in trust for them. The issues surrounding Heche’s estate could easily have been avoided with the use of a pour-over will and revocable trust whose provisions would not have been made public. Ultimately, a relatively simple estate plan that included trusts for the children with one or more adult fiduciaries is all that would have been necessary to rectify most of the problems in Heche’s estate.

Estate of Matthew T. Mellon II: The Ripple Effect

Background

Matthew T. Mellon II was an American businessman whose family founded institutions such as BNY Mellon and Carnegie Mellon University. Mellon’s initial investment of $2 million in the cryptocurrency “Ripple” quickly skyrocketed in value, and by the time of his death in 2018, Mellon’s investment in Ripple was worth approximately $360 million. Mellon had three children from two marriages, both of which ended in divorce.

Estate Plan

Mellon died with a relatively simple will that he executed years before he acquired his cryptocurrency. Mellon left his fortune to his children in trusts that terminated at the age of 35.

Result

Mellon failed to transfer some or all of his interest in his cryptocurrency to an irrevocable generation-skipping trust during his lifetime. As such, this asset was included in his estate at the time of his death, causing approximately $60 million in estate taxes. Had Mellon transferred the cryptocurrency to an irrevocable trust soon after it was purchased, Mellon could have allocated some or all of his federal estate and generation-skipping transfer (GST) tax exemptions to the trust, and all of the future appreciation in the assets transferred to the trust would have been estate tax free for multiple generations. Ripple’s price also quickly dropped following Mellon’s death. Because Mellon did not contribute the cryptocurrency to an irrevocable trust or even a revocable trust during his lifetime, Mellon’s executors were unable to access and liquidate the assets until formally appointed by the court. This delay caused the estate to incur losses in the rapidly fluctuating crypto market. Lastly, Mellon’s will failed to create lifetime trusts for his children to which his remaining federal GST tax exemption could have been allocated, avoiding the inclusion of such property in the children’s own estates.

Lesson

Clients should update their estate planning documents as soon as they obtain highly appreciating assets. Clients also should consider gifting or selling such assets to an irrevocable trust during life to use their estate and GST tax exemptions and to provide ready access to those assets without waiting for a formal fiduciary appointment by a court. Lifetime trusts for children and grandchildren are good estate planning tools to preserve appreciating assets for future generations.

Estate of Lisa Marie Presley: A House Divided

Background

Lisa Marie Presley was the only child of singer and actor Elvis Presley and actress Priscilla Presley. Lisa Marie was married and divorced four times and had four children, Riley and Benjamin Keough and Finley and Harper Lockwood.

Estate Plan

In 1993, Lisa Marie created a revocable trust to manage her assets. Lisa Marie restated the revocable trust in 2010 to appoint Priscilla and Lisa Marie’s business manager, Barry Siegel, as cotrustees. In 2016, Lisa Marie signed an amendment to the revocable trust that removed Priscilla and Siegel as co-trustees and replaced them with two of her children, Riley and Benjamin. Benjamin subsequently committed suicide in 2020 at the age of 27, leaving Riley as the sole trustee of Lisa Marie’s revocable trust, wielding full control over Elvis’s home, Graceland, including its 13-acre original grounds, Elvis’s personal effects, and Elvis’s legacy. At the time of Lisa Marie’s death, the Elvis brand brought in more than $100 million per year.

Result

Following Lisa Marie’s death, Priscilla contested the 2016 amendment to the revocable trust. Priscilla questioned the authenticity of the 2016 amendment for several reasons, including that it was not witnessed or notarized and that Lisa Marie’s signature appeared inconsistent with her customary signature. The legitimacy of the 2016 amendment was critical in determining who would serve as Lisa Marie’s trustee or trustees. Four months after Lisa Marie’s death, the dispute between Priscilla and Riley was settled out of court. Riley reportedly agreed to give Priscilla more than $1 million in order to become the sole trustee of Lisa Marie’s revocable trust and also created a sub-trust for Priscilla’s son and Lisa Marie’s half-brother, Navarone Garibaldi. Riley, Finley, and Harper split the remainder of the revocable trust.

Lesson

Carefully observing the formalities when executing an amendment to a trust agreement (such as dating the amendment, signing before witnesses and a notary, and delivering notice as required) can help avoid post-mortem challenges to a client’s estate plan. Revocable trusts in particular should be amended and restated in their entirety rather than being amended in bits and pieces that can be lost, overlooked or challenged.

Ivana Trump: Why Less Isn’t Always More with Estate Planning

Background

Ivana Trump, a Czech American skier, socialite, and businesswoman, gained fame as the first wife of President Donald Trump. Throughout their marriage, Ivana held significant roles within the Trump Organization, and after their divorce, she authored several best-selling books and ran multiple businesses until her death in 2022.

Estate Plan

Ivana’s estate, worth tens of millions of dollars, was distributed through her will, with her son, Eric Trump, serving as the sole executor. Although attractively simple, reliance solely on a will to pass an estate as large and well known as Ivana’s could result in significant publicity for the decedent and beneficiaries. This risk could be mitigated through the use of more advanced estate planning techniques, including revocable trusts.

Result

The publication of Ivana’s will revealed intimate details about her life and final wishes, including the fate of her dog, fur coats, jewelry collection, and well-known domestic and foreign real estate. Although such public disclosure might intrigue some fans and probate enthusiasts, it is an outcome most high-net-worth and high-profile individuals are keen to avoid. Ivana could have avoided the inherent publicity of the probate process by using a “pourover” will and a funded revocable trust. Under this approach, her assets would have transferred to a revocable trust, ensuring that the details of her estate and its disposition remained private. The additional benefits of funding a revocable trust during the grantor’s life include easing the management of assets in the event of the grantor’s incapacity, bypassing the delay and expense of probate, avoiding ancillary probate for out-of-state real property, and avoiding court oversight of continuing trusts created under the revocable trust agreement.

Lesson

In estate planning, simplicity can be deceptive. A simple will may be easy and inexpensive to create up front, but it can create costly complexity and unwanted publicity down the line. Ivana’s case underscores the need for thoughtful planning and strategic foresight catered to each individual client.

Conclusion

The celebrities highlighted above each had an estate misfire. Some had no estate plan at all, and some had plans that suffered from poor drafting or poor planning. Given the ever-changing tax laws, the vast differences in state intestacy laws and estate taxes, and the complexities often inherent in today’s families, all persons should protect their assets and their loved ones by hiring competent estate planning counsel and devising thoughtful and comprehensive estate plans.