Who Will Inherit Whitney Houston's Fortune Following Bobbi Kristina's Death -- and What Are the Lessons?
Now that the late Whitney Houston's only child, Bobbi Kristina, has herself died, what will happen to the estimated $20 milli...Read more
Whitney Houston's tragic death provides an example of how a trust that takes effect upon death can work as part of an estate plan. But Houston's estate plan has some surprising aspects as well, including why she used such a trust.
The late singer's will leaves everything to her 19-year-old daughter, Bobbi Kristina, but Kristina can't access her mother’s estimated $20 million fortune right away because it is in a trust.
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Susan Pollack served as Chairperson of the Falls Church Senior Citizens Commission from 1997 to 2011 and was on the Executive Board of the Falls Church Education Foundation. She has also served on the Board of Directors of the Alzheimer’s Association of the National Capital Area and is a member of the Arlington B...
Margaret A. O’Reilly is an estate planning and elder law attorney with over thirty-five years of legal experience. Attorney O’Reilly graduated from Duke University with a degree in psychology, and received her law degree from Northeastern University School of Law in Boston, Massachusetts. For over 15 y...
Attorney Samantha Simmons Fredieu is an associate at Hale Ball. Ms. Fredieu graduated magna cum laude from Vermont Law School where she was the symposium editor on the Vermont Law Review, a production editor on the Vermont Journal of Environmental Law, and a member of the Moot Court Advisory Board. She has clerked for...
According to news reports, Houston's will sets up what is known as a “testamentary trust” for her daughter. A testamentary trust is a trust created by a will. The will names a trustee and specifies what property will be put in the trust. Such a trust has no power or effect until the will of the donor is probated (processed through the legal system). Although a testamentary trust does not avoid the need for probate and becomes a public document because it is a part of the will, it can be useful in accomplishing other estate planning goals, such as providing for a child or reducing estate taxes in certain circumstances.
The person creating the trust may want to prevent a beneficiary who is a child or young adult from inheriting a large amount of money before he or she can handle it. One option is to pay the beneficiary in stages when the beneficiary reaches a certain age or achieves a specific goal.
This is what Whitney Houston's trust does. It reportedly allows Houston’s daughter to receive a 10 percent payout when she turns 21, another one-sixth when she turns 25, and the remainder of the trust's assets when she turns 30. In this type of trust, the trustee usually has the discretion to distribute trust funds to the child at any time prior to attaining these ages, if needed for education or other reasons.
Will Never Updated
Now to the surprising parts of Houston's estate plan. First, as Forbes magazine columnists note, Houston could have accomplished the same goals through a "living trust," which would have kept the provisions of the trust private because it would pass outside of probate. Second, Houston was relying on a will that was created in 1993, when she was married to Bobby Brown, and it apparently was never updated, even after she and Brown divorced in 2007. The will names Brown as the suggested guardian for Bobbi Kristina. Although Bobbi Kristina is no longer a minor, Brown could still gain control of Kristina through a conservatorship, as was done in the case of Britney Spears. Finally, the will provided that if Houston had no living children at the time of her death, her fortune would be split between Brown and several family members.
Perhaps all this is what Houston wanted, even after her divorce from Brown, but that should have been made clear in an updated will. As it stands, it appears that Houston simply neglected to do something elder law attorneys (and this site) urge all clients to do: update their estate plan after a divorce or other major life change.
Trusts -- either testamentary or living -- can be set up for many different purposes. To decide if a trust is right for you, consult an elder law attorney.
For more information on trusts, click here.