John Bullis: Estate of Tom Petty problems
Tom Petty, rock and roll singer, died Oct. 2, 2017, from an accidental drug overdose, at age 66.
He had tried to plan the administration of his estate and trust, but now his widow and two daughters from a prior marriage are suing each other.
The main issue seems to be who is in control of a separate LLC that was established when he died.
The LLC, Tom Petty Unlimited, is to manage the assets. The widow, Dana York Petty, apparently has made decisions and taken actions that the two daughters object to. Now the courts will have to decide who is in control.
This is another unfortunate illustration of the need to do a family meeting before death. If all involved parties clearly understand what is desired, there is a better chance they will all get along and administer the estate without problems and delays.
A family meeting can “clear the air” as to who inherits what and why. It is better for the heirs to be unhappy with the person that died, than to fight with other beneficiaries.
Definitions do matter. “Equal shares” might not result in equal amounts after taxes are factored in.
If A inherits the cash account of $100,000 and B, the other heir, inherits an IRA of $100,000, the amounts after income taxes are considered are not equal.
The cash account had no adjustment for income taxes. However the IRA will be subject to income tax when it is distributed to heir B. The amount of taxes depends on several things but mainly what other income heir B has when IRA distributions are received.
Someone said “You would not pull your own tooth. You would go to a dentist. The same is true of an estate plan. It needs to be drafted with exactness and with intentions spelled out.”
In addition to having an attorney draw up the legal documents, it is important for all heirs (and their advisers and family) to understand what the plan is and how it will affect them. A good discussion can help clear up misunderstandings and avoid future problems.
It is important also to review the plan at least every three or five years. Time causes changes for everyone. The decision of who will be in charge (trustee of the trust or executor of the will) is one of the main items to review.
Did you hear “In some situations the right answer is the best answer, the wrong answer is the second best answer, and no answer is the worst answer.” Scott McNearly
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.