Estate Planning for the Unusual Asset...Say NFL Season Tickets

As most people can tell from my newsletter, I am a very big NFL football fan. Unfortunately, poor estate planning and NFL football players goes hand-in-hand, as you can read here, here and here. However, even regular fans in the stand, watching the games have estate planning issues relating to the NFL.

Most NFL teams have huge waiting lists for season tickets. The Washington Redskins have a reported 200,000 person waiting list, though I see emails about buying Redskin's tickets all the time. (Sorry, just a little dig at the Redskins fans.) Most do not realize that season tickets are an asset that needs to be planned for if you want to pass the option for season tickets along to an heir and avoid the waiting list.

I am guessing most Redskins fans are dubious about the need to estate plan for a readily accessible asset. But, the Green Bay Packers have a reported 87,000 person waiting list. Just up 95; the Baltimore Ravens have 3,000 people paying to be on a restricted waiting list. The Pittsburgh Steelers who have a waitlist that will take approximately 50 year to reach the last person on the list.

To further complicate the issue, many teams require season ticket holders to own personal seat licenses ("PSL"). That is another asset. Most NFL teams have websites marketplaces where owners can buy and sell PSLs .

For fans of teams with long waiting lists looking to pass their tickets down to the next generation, planning is essential.

Most NFL teams have transfer policies upon death, wherein the tickets must go to an individual or corporation. Some teams even have a transfer documents that a season ticket holder can name a person to transfer on the ticket upon the owner's death, much like naming a beneficiary on a life insurance policy. But, if a person doesn't complete a transfer document, some teams, like the Packers, have a specific policy that states:

Upon death of ticket holder:

1. To surviving spouse; or if no spouse, the surviving children of a deceased ticket holder without authorization. (If children do not agree - no transfer.)
2. If direction by deceased under will or specific writing to family devisees defined [as spouse and "blood" relatives who are not more than first cousins] but not to devisees who are not [spouses or "blood" relatives], even with direction.

But, what happens in families with more complicated family dynamics when there is no planning for the tickets. For example, a husband and wife and two children where the husband owns season tickets. The husband passes away. Typically, the wife will inherit the tickets. The wife then remarries a new husband who has two children and is a big NFL fan. She passes away without planning for transferring the tickets. Guess who gets them? The new husband. The children from the first marriage are left out. Surely that will create family discord. In fact, there are even lawsuits over who gets the tickets or at least the money derived from those tickets. (See Aaron v. Axel)

Now, not every person has NFL season tickets. However, a person might have frequent flyer miles or other loyalty rewards program that has a great value or some other unusual asset. For example, a relative of my wife has earned approximately 8+ million frequent flyer miles. Many organizations that offer reward programs have individual policies with regard to transferring those points upon death of the account holder. If concerned with how frequent flyer points are transferred, or, if they are even able to be transferred, check the organization's transfer policies.

Green Bay season tickets are not found in everyone's estate, but most people have other atypical assets. If that asset has great enough value, some estate planning associated with that asset beyond a simple clause in a will.

Basics of Estate Planning: Will Clauses - Part 1: The Introductory Clauses

Most clients say that all they need is a "simple" will. Beyond the fact that there is no such thing as a "simple" will, I thought a short primer on many of the clauses that should be found in a will is a good idea. There is a great deal of flexibility in drafting a will, and most wills have a number of typical sections, including:

• Exodium clause (Declaration clause). This is the "I, Tom Testator, Anywhere, USA being of sound mind and body…" clause that can be found at the beginning of each will. This sets the stage for a testator creating a will. This clause also will include information about the location of the testator. More than likely, a testator will move after executing a will. The location identified in this clause creates a starting point for someone searching for the testator or inheritance.
• Revocation clause. This clause is usually tied in with the declaration clause and typically includes the language "I revoke all previous wills and codicils that I have previously prepared." This informs the reader that any prior will or codicil is no longer valid. This is an important clause. If the revocation clause is not included in the will and there is a prior will/codicil that prior will/codicil will be probated with the new will. The court will try to dispose of the estate pursuant to the terms of both wills, and if there is an inconsistency between the two, the terms of the most recent will take precedence. And if the estate is large enough there absolutely will be litigation.
• Family Information. "I have a spouse, Tess Testator and children, Joe Testator and Sally Testator." This simply provides information on the familial relationships of the testator and will be used as a reference point later in the document.
• Personal Representative. "I name my spouse, Tess Testator, the personal representative of my estate." This clause will nominate the person who will be in charge of your estate during probate and who will follow the instructions the testator provides in the will. In the past, this person was called the "executor" and, currently, is sometimes referred to as the "fiduciary." Most married clients will nominate their spouse as the first personal representative. But, make sure that you appoint at least one successor personal representative. There is no requirement for a person to accept the nomination/appointment. Other reasons to nominate back-up personal representatives include: someone could object to the nomination or the nominated person is deceased or incapacitated.
• Guardians. If the testator has any minor children (i.e. under the age of eighteen), someone will need to be selected to watch over the children. Remember you can appoint a different person to be guardian for the person and guardian of the property.
• Bond. In most states, the personal representative is required to provide a bond when appointed. A bond is necessary to reimburse the estate for any losses that may occur because of negligence or wrongdoing. The fee to pay for the bond is usually charged against the estate's finances. Many people see this as unnecessary, and, barring a court ordering otherwise, a testator can waive the need for a bond to be posted by the personal representative.

Next month, I will delve into the more interesting clauses of a will, those that disburse the property and pay the debts and taxes of the estate.

Estate of the Month: Nobel Prize Winner Dies Days Before Recieving Award, Could Create Estate Planning Issues

On Friday, September 30, 2011, Dr. Ralph M. Steinman died. I doubt most people would know who he is. However, just a few days later, on Monday, October 3rd, almost everyone in the world heard about him. He, along with two other researchers, Jules A. Hoffmann and Dr. Bruce A. Beutler, were awarded the Nobel Prize in Physiology or Medicine for their work in immunology.

Dr. Steinman was a renowned researcher that spent years convincing the scientific community how cells could be the key to the inner workings of the human immune system. He was diagnosed in 2007 with pancreatic cancer. The typical timeframe from diagnosis of pancreatic cancer to death is a few short months. However, Dr. Steinman using therapy based on his earlier discoveries lived almost 5 more years. His death raises several interesting issues for estate planning purposes.

The Nobel Prize Committee has a standing policy that says it will not award anyone the Nobel Prize posthumously. This is likely done for one reason. The Committee does not want to get entangled into potential post-death issues like probate, disbursement of assets or, even estate litigation. The award money, approximately $750,000, becomes an asset of the estate. This means that creditors can attach that asset to settle outstanding debts. It would be interesting to watch a Nobel Committee prize be used to pay off a creditor's claim.

It was stunning to hear his name announced by the Committee. In fact, the Committee did not know Dr. Steinman had passed away until they tried to reach him to inform him of his award. The board of the Nobel Foundation pored over its own rules and regulations before posting a statement that Steinman's award would stand because it was made "in good faith. Steinman's estate will be awarded his share of the prize money.

I say Steinman's estate because it was a post-death award of money. It is not Steinman's income but the Steinman's estate's income. Much like other famous people's post-death income, like Gene Upshaw, that money becomes part of the estate. How Dr. Steinman's estate will receive that income will be an issue. Given his health issues, one of the top reasons to create a revocable living trust, he hopefully created a trust that will receive the income or assets. Those assets will then be distributed according to the terms of the trust.

What is important to realize is that anyone could be in similar situation. Not necessarily being awarded a Nobel Prize, but having an unaccounted asset fall in their hands that needs to be addressed Also, if you are on the other end and distribute awards, fellowships or the like, then you should have an idea how a potential recipient's death might impact your award.