Jimmy Buffett is in the headlines again, and not for the reasons any Parrotheads would want. After Jimmy’s passing in 2023, his accountant and widow have been co-trustees of his $275 million estate. And it has not been a walk on the beach…
Both Mrs. Buffett and the accountant, Mr. Mozenter, have filed lawsuits against each other to attempt to gain more control over the trust. There are more details to this rollcoaster of a story that can be read in the myriad headlines that have been generated by the struggle for control between the two co-trustees, but they aren’t ones we’ll cover here.
Instead, we want to explore, how could this have been avoided to begin with? It’s safe to say that most people don’t approach estate planning with the goal of making things difficult on their family after their passing. In fact, the goal of estate planning is to do the opposite! However, there are some common mistakes that can end up creating a much bigger burden for the family than intended; here are a few (and ones more than likely present in Mr. Buffett’s estate), and how to avoid them.
- Naming Co-Trustees without a Referee
Co-Trustees can be a very effective strategy. Ideally, you name someone who is close to the family (or a member of the family), who can confirm that the trust is providing for the family as it should, and you name someone who knows the relevant laws and tax code to make sure everything going on in the trust is being done properly. However, sometimes (especially with only two trustees) they won’t see eye to eye, and not every trust provides a clear way of settling disputes.
With co-trustees, effective trusts that we see either have a clear way that disputes are settled, or there is a Trust Protector named. A Trust Protector is a role that is, essentially, a Referee. They can step in to settle disputes. They can interpret the trust language and help end arguments that put the family and the administration of the trust at risk. Sometimes, like in this case, the disputes are taken to court, and that begins to be very expensive.
- Lack of communication
From the outside looking in, it seems that Mrs. Buffett and her co-trustee do not see eye-to-eye. In a lot of families, discussion of money and estate matters are seen as taboo. However, if a trust is part of the discussion, it is very important that all power holders (trustees, Trust Protectors, beneficiaries who can remove and replace a trustee) understand their role and how they should work with the rest of those involved. Additionally, beneficiaries should understand why the trust is in place, and what to expect. Some simple meetings, or a one-page explanation for each person can avoid a lock of headache and, in some cases, heartbreak.
- Unclear expectations
In the case of Mr. Buffett’s trust, the reporting states that in 2024 alone, there was more than $1.7 million paid out in fees to the co-trustee and his firm. The reporting also says that the income to Mr. Buffett’s widow is less than $2 million per year; all of this from a $275 million trust.
Arguments could be made about whether these numbers are reasonable or not, and a lot of it really comes down to what the trust owns, the liquidity of the assets, and the income generated from them. It also might vary significantly from year to year.
What is clear, though, is that these numbers are not in line with the expectations of the family. This can be a very difficult pill to swallow. Hopes and dreams, however unrealistic, get tied to the trust, and then it all comes crashing down when the income payments start flowing in.
When establishing any kind of plan for your family, you should strongly consider setting expectations early – while you are able to explain those to your family yourself — to avoid these types of fallouts. No one is served when the trust is raided for attorney’s fees because each party feels the other is behaving wrongly.
- Naming parties that do not get along
Trust administration, especially after the passing of a loved one, can be difficult enough without adding awkward dynamics into the mix. A good working relationship between co-trustees is essential, and as much as possible it should be the goal of the trust creator to confirm one exists before naming co-trustees.
These are only a few of the potential pitfalls when establishing a trust, especially one with co-trustees, but they are ones that are easily avoided.