Estate planning mistakes become a costly affair when families have to sort out disagreements in probate court. More than a year after the unexpected death of rock legend Tom Petty, his widow and two daughters from a previous marriage are litigating the management of his estate.
The story shakes out like this. In his estate plan, Tom Petty named Dana York Petty, his widow, as the sole trustee of the Petty estate which includes publishing rights to his catalog of music. Tom’s wishes were that Dana seek input from Petty’s daughters, Adria and Annakim, for how the estate was to be managed. Although Dana is the sole trustee, the language in the trust document specifies that Adria and Annakim “shall be entitled to participate equally in its management.”
The relationship between the daughters and the widow has deteriorated, and they cannot effectively manage the estate. Dana has filed a petition in probate court, asserting that Adria attempted to seize control of the music catalog. The filing cites that Adria set up an LLC to control the catalog, has delayed album releases, and has hired employees and made other business decisions without consulting Dana, the sole trustee.
The whole point of a using trust in estate planning is to stay out of probate court, and yet here they are. What happened?
Why Did the Petty Estate End Up in Probate Court?
The language in Petty’s estate plan is clear about who should be involved in managing the estate, but it does not provide instructions about how the three parties should make decisions. That is troublesome. Friction between the daughters and their stepmom has snowballed, making management of the trust effectively impossible. The trustee has decided to pursue expensive litigation asking the court to spell out how the Petty estate shall be managed, because the estate plan did not effectively do so.
Family friction is fairly common whenever management of a trust is shared by members of a blended family. The fact of the matter is that problems arise no matter how strong or positive the relationship is between co-trustees. When someone creates a trust that involves input from two or several different people, usually it is because they do not want to hurt anybody’s feelings. It turns out backfiring when disputes wind up in probate court and costing a lot of money to fix.
What Could Petty Have Done Differently to Avoid This Mess?
In estate planning, one way to avoid this is by naming fiduciary trustee who is not related to any of the beneficiaries to control management of the estate. A fiduciary is a person or organization that acts on behalf of the estate, and is bound by law to act ethically in its best interests.
In blended family situations that can be contentious it is advisable to name a corporate trustee, like a bank or financial planning service, to act as a fiduciary for the estate to avoid management conflicts.
You can also designate a third-party trust protector to sort out disagreements about management of the trust. The role of trust protector is relatively new in California estate planning, but they are designed to keep estate disputes from going to probate court. Think of a trust protector as a safety valve. They are an independent third party that you choose—like a CPA or financial planner—that steps in and performs fiduciary duties if things go awry with the trustee.
At Holstrom, Block & Parke, we will ensure that your wishes about asset distribution are clear, comprehensive, and accommodating for your family. We specialize in designing creative solutions for any obstacle or goal, and help you avoid estate planning mistakes that land in probate court.
About the Author
Sharon M. Anderson is a trial attorney that manages the Estates & Probate Department at Holstrom, Block & Parke. She provides legal expertise in issues related to probate, estate planning, conservatorship, guardianship and trust administration.