By Jeff Wolfe, Senior Vice President and Manager, Wealth Planning Strategies
Print This Post
The calendar has turned to October, and while you have to wind your way through Christmas trees to get to the Halloween section, it’s still a time to celebrate the scary. As such, we launch the Scary Financial Mistakes series today with a frightening and common error: naming the wrong trustees.
Famed musician Jimmy Buffett died on September 1, 2023, leaving an estimated $275 million estate. It appears Jimmy[1] created a proper estate plan, which included trust planning for his wife of nearly 50 years, Jane Buffett. Jimmy named his accountant Richard Mozenter and Jane as co-trustees of the various trusts. While this planning seems “normal,” it has unfortunately led to a common scary financial mistake: dueling fiduciaries.
Within a year of Jimmy’s death, Jane had sued Mr. Mozenter, alleging he had been “openly hostile and adversarial” during the trust administration. Moreover, Jane alleged Mr. Mozenter had taken “excessive fees” of around $1.7 million a year, while merely generating annual income returns of less than 1%.[2]
In response, Mr. Mozenter has sued Jane, alleging she’s been completely uncooperative and has interfered with business decisions by acting “in her own self-interest.” Recall, Jimmy’s estate includes his music library, his Margaritaville brand that includes resorts, restaurants and a liquor line; along with millions in homes, cars and planes. In short, there are a lot of moving parts.
This unfortunate situation happens all the time. First, naming two (or any even number) trustees can lead to deadlock. All trustees have the same fiduciary obligations and liabilities. When the trustees can’t get along, and if the trust doesn’t stipulate a “tiebreaker” or some other process to resolve deadlocks, the trust administration goes awry. Either one trustee acts in spite of the deadlock, or sometimes no action will occur at all. Both situations often lead to the litigation we see here.
Another concern, especially for estates as large and complex as Jimmy’s, is naming individuals who may not be able to manage the obligations and responsibilities of the office of trustee. Serving as a trustee is one of the highest duties under the law, obligating the named trustee to serve as a fiduciary to the trust and its beneficiaries. Because of this heavy legal burden, many consider using a professional trustee.
While a professional trustee may seem more common for larger estates, even modest estates can benefit from professional trustee management. Professional trustees:
- Relieve relatives and friends from legal liability
- Avoid or minimize the burden to an individual trustee to manage the paperwork and administrative responsibility
- Maintain family harmony with an objective decision maker for trust administration
- Ensure prudent, professional investment management
- Provide permanence and stability
- Deliver services with a dedicated staff of trained specialists: investments, administration, taxation, legal, accounting, special assets, etc.
Perhaps if Jimmy had either named a professional trustee individually, or as a third “disinterested” trustee with Jane and Mr. Mozenter, there would not be litigation tying up the valuable estate. Rarely does anyone “win” when litigation is involved.
Learn from this scary mistake. Review your estate plan to see who you’ve named as trustee. Speak with them to make sure they are willing and able to take on this arduous task. Consider whether you want one or three trustees to make decisions, knowing that when you add more people you add more opinions, which can be a blessing or a curse. Lastly, consider whether a professional trustee, either individually or as a co-trustee with trusted family/friends, makes sense for your plan. Remember, we’d rather have a Cheeseburger in Paradise than be wasting our money away in Litigationville.
[1] We will use “Jimmy” and “Jane” not to insinuate familiarity, but rather to keep references short and clear.
[2] Battle over Jimmy Buffett estate highlights risks of family trusts;
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.