On
the surface, the salacious news story of an octogenarian pro sports team owner,
his ill-advised racist diatribe, and the attempts by his sport's commissioner
to throw him out of the league would seem to have extremely little to say about
estate planning. But, in realty, those considering the creation of their estate
plan can learn a lot from the saga of Donald Sterling and the National
Basketball Association's Los Angeles Clippers franchise.
To
begin with, neither Sterling, nor his wife Shelly, actually own the Clippers
team -- the Sterling family trust does. Donald and Shelly serve as the trustees
of the trust. This status goes a long way toward explaining how Shelly may potentially
be able to sell the basketball team without Donald's approval. Similar to many
estate planning trusts, the Sterlings' trust says that, if one trustee becomes
mentally incapacitated, then the mentally competent spouse takes over as the
sole trustee of the trust. In the Sterlings' case, Shelly had Donald analyzed
by several medical professionals who diagnosed him as incompetent. As a result,
Shelly claimed she was the sole trustee and free to sell the team if she chose.
Most
estate planning trusts do not involve pro sports teams as assets, but, in
general, a married couple's living trust will name both spouses as co-trustees
and state that, if one dies, resigns or becomes mentally incompetent, then the
other spouse becomes the lone trustee. For a married couple where everyone is
"on the same page," an arrangement like this has many advantages. As
illustrated by the Sterlings' case, this can streamline the management of
assets when a spouse suffers mental capacity issues. The Sterlings had a trust
that, in cases where medical professionals certified one spouse as incompetent,
permitted the other spouse to assume control of the trust's assets, including
the Clippers franchise. Without the trust, the law would have required Shelly
to go to court and get an order declaring Donald incompetent and naming her as
the conservator of his assets. These legal proceedings can be complicated, time
consuming and expensive. Generally, living trusts for married couples operate
similarly, allowing a spouse to assume sole power over the trust if two or more
doctors diagnosis the other spouse as mentally incompetent, thereby allowing
the competent spouse to continue managing the family's assets in a seamless
manner without the need of an order appointing a conservator.
Some
families, however, have more complex considerations that may require more
intricate planning. Perhaps one or both spouses were married previously and
have families from those prior relationships. In these and certain other
situations, complete estate planning may be more extensive than just creating
two simple wills or even just one revocable living trust. Some couples may
benefit from the creation of separate living trusts for each spouse, or
implementing other estate planning tools to make sure that the interests and
objectives of each spouse are respected, regardless of death or incapacity.
In
other words, estate planning involves an extremely wide array of options and
what seems like the simplest answer may not be the most effective solution.
Summary:
The story of the family trust that owns the NBA's Los Angeles Clippers, and the
husband and wife pair who serve as the trust's trustees, offers some clear
lessons for others planning their estates. A trust may offer distinct benefits
in some situations for allowing the seamless continuation of the management of
assets in the event of a spouse's mental incapacity. Multiple trusts may suit
some situations where the family dynamic is more complex.
