Retirement Directors Marquette Payton and Ben Rizzuto discuss the importance of careful wealth transfer planning – particularly for minorities, who are not as likely to have an estate plan in place – and why proactive communication is just as critical as legal instruments such as wills and trusts.

A Philanthropic Directive Derailed by Legal Battles

Perhaps not surprisingly, the long-delayed closing of James Brown’s estate earlier this year was not without the type of drama you see in a Hollywood movie. There were several lawsuits and trials that dragged on among children, grandchildren, and a romantic partner originally thought to be Brown’s spouse but to whom the marriage was not considered legal. And of course there were various administrators of the estate involved, all attempting to sort out the murky details of the performer’s estate, which is estimated to be worth between $5 and $100 million.

To understand how we got here, I think it’s important to go back to Brown’s humble beginnings, and by that I mean his birth in the woods of South Carolina. He was raised by his father and an aunt and had what some would consider a difficult childhood. But while he experienced some trials and tribulations on the way to stardom and had other challenges surface once he achieved that fame – problems with the IRS, collapsing investments and losing his son in an automobile accident – his work ethic throughout his career earned him the reputation of being “the hardest-working man in show business.”

Because Brown worked so hard to achieve fame and fortune, it makes sense that one of his wishes was that, upon his death, millions of dollars from his estate would go to charity to fund educational scholarships for poor and underprivileged children in South Carolina and Georgia. Brown realized how important and impactful it would be to provide educational opportunities to high schoolers who grew up much like he did. Yet, sadly, this philanthropic directive was one of the main points of contention among the heirs of Brown’s estate.

When my own father died three weeks before I graduated from college, I was devastated. Not only was I devastated emotionally, but I didn’t even know where to begin when it came to settling his estate. And because he didn’t have a will, I wasn’t aware of his wishes. People don’t have wills for a number of reasons, but as someone who is part of the Hispanic community, not having a will is commonplace in the community where I grew up.

What I learned afterward is that I’m not alone. Minorities in general are not as likely to have an estate plan or even a will in place, and although Brown had an estate plan, his lack of generational experience in these matters likely played a role in the drama that ensued throughout his wealth transfer process.

So what could Mr. Brown have done differently? My colleague, Ben Rizzuto, weighs in on how wills and trusts – but perhaps even more importantly, proactive communication – could have led to a better outcome.

Wills and Trusts Can Aid in Planning

In reading about the legal wranglings that took place over the last 15 years of Brown’s life, we see that, yes, he had a will. He had in fact set up a trust. In most cases, these two legal instruments will serve the needs of the vast majority of clients and families.

This might be a good opportunity to provide a refresher on the differences between a will and a trust:

A will allows someone to legally communicate his final wishes pertaining to assets and dependents. It can also outline what should be done with possessions: Will they be left to another person, a group or a charity? Along with that, a will should outline the custody of dependents and management of financial interests.

A trust takes this a step further by creating a legal entity to hold and distribute assets based on someone’s wishes.

If someone dies intestate (i.e., without a will), the courts will settle one’s estate. In that scenario, the courts decide how to distribute property and who receives payment first, without any consideration for a family’s circumstances. Along with this, any blood relative can stake a claim to the estate, which can obviously lead to disputes. These disputes and the familial trauma they can create highlight how important it is for any family – regardless of how “wealthy” it might be – to at least have a will created.

…But Legal Documents Don’t Solve Everything

Remember, Brown had a will and had set up a trust, yet a number of parties still filed multiple lawsuits in an attempt to make claims on portions of his estate. This fact highlights the other critical thing family members must do: As discussed in a previous post on wealth transfer, they must talk to each other about these issues.

By bringing all the involved parties (i.e., family members, romantic partners, etc.) together to make wishes known in a family money meeting, Brown could have increased the likelihood that everyone understood what they should expect and what he wanted to occur.

In Brown’s case, the consequences of that lack of understanding had a negative impact that reached far beyond his own family. The centerpiece of his will was the creation of a charitable plan to distribute millions of dollars in scholarships to children in South Carolina and Georgia. The implementation of this plan has now been delayed 15 years because of the lawsuits and infighting among Brown’s loved ones.

Death is scary. Losing someone you love is devastating. But not having a will, not having a plan, and failing to ensure everyone understands that plan can lead to further devastation as well as significant collateral damage that can affect future generations. The James Brown estate is just one of many examples of the importance of careful planning and ongoing communication to help ensure the wealth transfer process results in a positive outcome for everyone involved.