Last Will And Testament Of Entertainer Michael Jackson

Michael Jackson's recent death shocked the world, notwithstanding his controversial and mysterious past.  The famous singer will not soon be forgotten, however, if nothing else because of the money, property, and incredible fortune that he left behind to his heirs.  Word is that he had incurred substantial debt at the time of his death, but royalties alone from his catalogue of music will surely reap many millions of dollars in profits long into the future.  Only time will tell whether any major fights erupt out of the settling of his estate (especially since Michael's father and siblings were apparently not named as beneficiaries), but in case you were curious The Smoking Gun has apparently obtained a copy of Michael's Last Will And Testament.

No Breach Of Fiduciary Duty In Unique Trust Lawsuit

The Arkansas Court of Appeals recently ruled in an interesting case that a trustee's encumbrance of trust property did not, under the specific circumstances involved in the dispute, constitute a violation of the trustee's fiduciary duties.  Ordinarily such actions are looked down upon, but this case is an instance in which the unique facts involved apparently warranted a slight departure from the general rule.  

Specifically, on September 9, 2009, the Arkansas Court of Appeals issued its decision in the case of Hanna v. Hanna, #CA08-1256, which was an appeal from Washington County Circuit Court.  The ex-wife had sued her ex-husband for self-dealing, breach of fiduciary duty, and mismanagement of assets in their children's trusts.  The ex-wife had received a $16 million divorce settlement, and the ex-husbanddirected his chief financial officer to form a plan to gather the money (the couple had owned a successful candle company and several other entities) . 

Long story short, the ex-husband obtained loans to raise the funds and also used company assets as collateral for loans to company officers totaling $3 million.  The ex-wife brought the above-described claims against the ex-husband, and he defended arguing that he had not known it was wrong and that he had done it in the best interest of the children.  In doing so the ex-husband offered evidence that it was to the company's advantage that he settle, which he could only do by pledging company assets, and that the bank would not have funded the loan absent using company assets as collateral. 

Ultimately the trial court declined to award damages to the trusts or set aside the loan transactions, but did order the ex-husband to remove company assets as collateral for the officers' loans totaling $3 million.  The Arkansas Court of Appeals affirmed the trial court's decision, holding that this was not a situation in which a trustee was using trust assets solely to pay for his divorce settlement, nor was it an instance in which the trustee's actions failed to benefit the trusts.  The Court instead ruled that the parties to the lawsuit, the companies, and the trusts were all intertwined, and that the ex-husband's actions to carry out the divorce settlement in effect protected them all.  The Court did make clear, however, that its ruling was "confined to the particular circumstances of this case and should not be read to permit a trustee to encumber trust property in the absence of extraordinary circumstances."

General Duties Of A Trustee Under Arkansas Law

Clients and potential clients---whether a beneficiary of a trust or perhaps even the trustee of a trust---often ask about the duties of a trustee under Arkansas law.  This is a very broad question and cannot be done justice in a single Blog post.  

However, in general (unless the trust specifically overrides the general requirement) a trustee is charged with:

---A Duty To Obey The Grantor (while the trust is still revocable the duties of the trustee are owed to the grantor, and the trustee may generally follow a direction of the grantor even if it is still contrary to the trust's terms)

---A Duty Of Administration (to administer the trust in good faith, according to the trust's terms and purposes and the interests of the beneficiaries);

---A Duty Of Loyalty (perhaps the most important duty, which includes putting the interests of the beneficiaries above the interest of the trustee or any third party);

---A Duty Of Impartiality (whenever the trust has two or more beneficiaries, to act with impartiality with regard to the investment, management, and distribution of the trust property);

---A Duty Of Prudent Administration (regardless of whether the trustee receives compensation, to administer the trust as a prudent person would in light of the purposes, terms, requirements, and other circumstances of the trust);

---A Duty To Control And Care For Trust Property (to collect and insure trust property, pay debts and hire caretakers if necessary, keep adequate records, keep trust property separate from the trustee's own property, enforce claims of the trust, defend claims against the trust, not allow beneficiaries to use trust property unless otherwise allowed, etc.);

---A Duty To Report (to provide information about the trust in general, the trustee, the trust's existence, the trustee's compensation, the assets and liabilities, etc.; keep in mind that this duty may only come into effect once the grantor of a revocable trust is deceased or deemed incompetent);

---A Duty Of Confidentiality (trustees have been charged with the responsibility to keep trust matters, including the terms of the trust, the nature of the trust's assets, and the identity of beneficiaries, confidential unless waived by the terms of the trust or required by law);

---A Duty To Administer The Trust In An Appropriate Place (while the trustee can move a trust's primary place of administration, the trustee is under a continuing duty to administer the trust in a location that is appropriate in light of the trust's purposes, administration, and interests of the beneficiaries); and

---A Duty To Use Reasonable Care To Prevent Cotrustees From Breaching The Trust, And To Obtain Redress If A Breach Is Committed (this basically means just what it says---if the first trustee has a cotrustee [second trustee] and that second trustee is violating their fiduciary duties, the first trustee has an obligation to take reasonable action to prevent further harm).

A trustee's duties have been stated in different ways, but the foregoing is a fair summary of the trustee's primary obligations under Arkansas law.  Again, the terms of the trust itself can override some of these duties, which is why it is extremely important to read and understand the actual language of the trust instrument.  All of these issues will be examined in more depth in later Blog posts.

***Welcome To The Arkansas Estate, Trust & Probate Litigation Blog, a.k.a. "Wealth Wars"

Welcome to the Arkansas Estate, Trust & Probate Litigation Blog.  My name is Matt House and I am a lawyer with James, Fink & House, P.A. in Little Rock, Arkansas.  I intend to regularly update this Blog with commentary, analysis and general items of interest relating to estate litigation, trust litigation, and probate litigation, especially within the State of Arkansas.  Perhaps I should get out of the office more or take on a new hobby, but I am fascinated by this area of law, enjoy the challenges and issues associated with these civil lawsuits, and have simply decided to write about the topic from time to time.  I hope that you find this Blog interesting and helpful.  

With the Baby Boomers starting to retire in greater numbers, Arkansas's older population demographic, and the slow but steadily increasing concentration of wealth in the United States, we anticipate a substantial increase in "wars over wealth" in the coming years.  Indeed, the largest intergenerational transfer of wealth in human history has already begun and will continue for many years.*   These wealth wars will most commonly take the form of estate and trust conflicts, inheritance battles, will contests, accounting actions, claims by or against fiduciaries, proceedings requiring the interpretation of wills and trusts, fights over trust expenditures and money management, disputes over missing assets and property ownership, accusations of self-dealing, family business litigation and "corporate divorces," claims of fraud and undue influence, abuse of elders and questions of competency, and actions to determine the rights of beneficiaries and creditors. 

Feel free to contact me with respect to these legal issues at 501-372-6555 or mhouse@jamesandhouse.com.  Thanks for stopping by, and please visit often.

Matt House

*One of the most cited figures is a low-growth minimum estimate of $41 trillion (in 1998 dollars) in intergenerational transfers during the 55-year period from 1998 through 2052.  See John J. Havens and Paul G. Schervish, Why The $41 Trillion Wealth Transfer Estimate Is Still Valid:  A Review Of Challenges And Questions, Boston College Social Welfare Research Institute, January 6, 2003 Newsletter (also published in The Journal of Gift Planning, Vol. 7, No. 1, January 2003, pp. 11-15, 47-50) (internal citation omitted). 

DISCLAIMER:  This Blog is for informational purposes only and may not be relied upon for legal advice.  Absent a written and signed representation agreement, Mr. House and his law firm are not your attorney and neither this Blog, nor any telephone call, letter, fax, or e-mail inquiry, creates an attorney-client relationship.