A few years after graduating from college, I remember hearing the reports of the grandson of Malcolm X pleading guilty to the juvenile equivalent of second degree manslaughter for starting a fire that killed his grandmother, Dr. Betty Shabazz. That was back in 1997. It is now 2011, almost 14 years have passed since Dr. Shabazz's death. According to a New York Times article, her estate still has not been closed. At her death, Dr. Shabazz's estate was alleged to be worth about $1.4 million. But, her estate includes a vast treasure of unpublished works written by Malcolm X, potentially increasing the value of the property disbursed to the heirs.
Dr. Shabazz died leaving behind 6 daughters and no estate plan. This has generated accusations of inappropriate dealings, irresponsibility, mental incapacity and fiscal mismanagement of the estate among the sisters. But, a number of basic planning and probate administration missteps have exacerbated the problems causing the estate to languish on. In fact, Dr. Shabazz estate could be a case study of what not to do.
First, Dr. Shabazz died without a will. Though some family members believed there to be a will, no will was found among the ashes of her house or any other location. If a will did exist, it was likely destroyed in the fire. This is a prime example of making sure estate planning documents are stored in a safe place or informing a trusted person of the location of the will. (Click here for more details on storing a will.)
Because there is no will, the estate assets will be divided under New York's intestate succession. Given that a large percentage of the estate's assets are in the form of intangible assets, like the unpublished letters and other similar documents, it is harder to financially qualify the value of those documents - not impossible, just harder when you compare the ability to value a particular stock's price on the day of the decedent's death. Trying to divide the hard-to-value intangible assets six ways equitably is complex and costly because of the need to bring in high level appraisers to value the assets. There is also the added issue that most of the documents would likely be worth more together than sold separately.
The take away is if your estate has a large amount of assets that are hard to price, like a unique piece of artwork, make sure there is a will governing the disbursement of those assets. As Dr. Shabazz's estate demonstrates, feuding over the unpublished documents has resulted in wasting estate assets.
Second, two of Dr. Shabazz's daughters were appointed personal representatives to administer her estate. Naming or appointing two people to administer an estate usually results in conflict down the road, if the two personal representatives do not get along. It seems like a good idea at first blush to have two personal representatives. Most testators feel naming two representatives will make sure each one keeps an eye on the other one. Of course, naming two personal representatives for this reason means the testator cannot trust one of the personal representatives and must name a watchdog. It also ignores the fact that most probate offices can be asked to supervise the accounts of a decedent's estate.
Further, each representative will have a view on how the estate should be administered, how assets will be marshaled or disbursed and potentially double charging the estate for personal representative fees. In Dr. Shabazz's estate, there are allegations of the personal representatives advancing shares of their inheritance to their sisters and prepaying themselves commissions even when their lawyers advised against it.
It is better to name/appoint one personal representative that places all the responsibility in one place. The probate courts and register of wills do an excellent job of ensuring that a personal representative acts in their fiduciary capacity. Believe me, if the personal representative is not doing their job a beneficiary will make someone aware of the issue.
Third, one of the responsibilities of a personal representative is to act in a timely manner. Because the administration has dragged on for almost 14 years, a number of problems arose. The estate racked up over a $2.0 million tax bill, including penalties and interest. That is more than the tangible value of the estate and double the original tax bill. Acting in a timely manner would have eliminated the interest and penalty portion of the estate tax bill. It would also have reduced the professionals' fees (lawyers and accountants) the estate accrued over the years in administering the estate.
Third, one of the responsibilities of a personal representative
is to act in a timely manner. Because the administration has dragged
on for almost 14 years, a number of problems arose. The estate racked
up over a $2.0 million tax bill, including penalties and interest.
That is more than the tangible value of the estate and double the
original tax bill. Acting in a timely manner would have eliminated
the interest and penalty portion of the estate tax bill. It would
also have reduced the professionals' fees (lawyers and accountants)
the estate accrued over the years in administering the estate.
1 The GST tax imposes a tax on both outright gifts and transfers in trust to or for the benefit of unrelated persons who are more than thirty-seven and half (37.5) years younger than the donor or to related persons more than one generation younger than the donor, such as a gift from a grandparent to a grandchild. The generation-skipping tax will be imposed only if the transfer avoids incurring a gift or estate tax at each generation level.
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