In case you didn’t catch the reference from the title, I’m a big Tom Petty fan, always will be. My wife and I were driving from Healdsburg to San Francisco when we heard he had unexpectedly passed over the radio. We then proceeded to play nothing but his hits for the remainder of the hour long ride. Talk about a career. I mean, the guy was cool enough to be a Travelling Wilbury, so that pretty much sums it up. In fact, take a moment to pause, reflect and enjoy my favorite Petty tune.
Now that you’re done remembering my fellow Floridian (as a Gator alum Patrick loves reminding people he was from Gainesville), let’s get down to brass tacks. As you might imagine, after his passing in 2017, Tom’s estate needed to be administered. Before you read any further, let me assure you this is not one of those finger-wagging articles about a celebrity who died without any estate plans. Instead, this is about a celebrity who died with plenty of estate planning documents in place. Only now it’s up to the Courts to determine if they are going to be executed correctly.
According to the terms of Petty’s trust, his wife Dana would be the successor Trustee of this Trust. His children from his first marriage, Adria and Annakim, were supposed to share “equal participation” responsibilities with Dana in regard to the handling of his estate. It doesn’t take an estate planning genius to see where this is headed.
Conflict arose when Adria and Annakim alleged that Dana failed to fund Petty Unlimited, LLC, a company which was created to own Petty’s extensive catalog of songs and distribute royalties from the catalog equally to the three. According to Adria and Annakim’s suit, instead of funding Petty Unlimited, LLC, Dana created Tom Petty Legacy, LLC as a vehicle to receive the singer’s catalog of royalties.
Petty’s widow alleges that the “equal participation” clause would be used by Petty’s daughters to rule as a majority, therefore superseding her role as the sole successor Trustee of Petty’s Trust. Further, she argues that “equal participation” applies to information and discussion, but not to any final decision-making authority.
Who is right? Does “equal participation” mean an equal vote? Or does it mean Petty’s daughters have an equal right to participate in discussions but not in actual decision making which is left to the Trustee? Courts are in the process of deciding. But this is an instructive lesson for people looking to draft an estate plan that makes provisions for both children from a prior marriage and a current spouse.
When I’m meeting with a client in a second or third marriage, the concerns they express are often quite simple. They want to make sure their children from their previous marriage benefit from their estate and also want to take care of their current spouse. It’s a tricky balancing act, because in addition to the financial implications, emotional implications also hang in the balance.
One solution is the creation of a QTIP trust. A QTIP, or Qualified Terminable Interest Provision Trust, creates a solution for the sticky issue of providing for a current spouse while also insuring that children from a previous marriage don’t get “cut out” by the current spouse’s estate plan. Without getting too far into the weeds, a QTIP creates a Trust that your current spouse can enjoy financial support from while simultaneously preventing the ultimate beneficiaries of the Trust from being changed. This insures (at least in principle) that there will be some inheritance left for the decedent’s children from their first marriage. A QTIP will also often have an independent Trustee or even one of the children/beneficiaries serving as co-Trustee with the surviving spouse, thereby providing a layer of “oversight” for the eventual beneficiaries of the Trust.
I don’t know if a QTIP would’ve worked perfectly for Tom, but it might work for you. In the tricky world of estate planning, where relationships and emotions play a big factor, being specific about your wishes will save your loved ones a lot of heartache at the end of the line.