By Estate Street Partners, Special for USDR.
A motion filed (1) in the Los Angeles Superior Court (Docket Number: BD514309) on April 22, 2013 by Jamie McCourt, ex-wife of Frank McCourt, the former owner of the Los Angeles Dodgers claims Mr. McCourt undervalued the estimate of his assets by $1.7 billion, creating what would be the largest divorce by any professional team-owner in the United States (2); however, Estate Street Partners, creators of the UltraTrust irrevocable trust, recently reviewed their miry situation and released their assessment and advice.
Estate Street Partners believes that had the McCourts thought ahead and implemented a well-drafted irrevocable trust, then the assets would be placed out of their hands for the benefit of their four children.
Frank McCourt and Jamie McCourt were divorced in October of 2010. The McCourts were married for over 25 years and have four children together: Drew, Travis, Casey, and Gavin (5).
During the divorce negotiations they agreed to split the marital assets down the middle (3). Mr. McCourt valued his assets at $300 million and Jamie kept $131 million (2). Two months after the divorce was completed the Dodgers franchise was sold for an astonishing $2.1 billion.
A motions hearing was scheduled for April 15th, 2013, which was initiated by Jamie because she believes her husband intentionally misrepresented the value of the L.A. Dodgers during the divorce negotiations (2).
“There are better ways to protect assets in a divorce than misrepresenting assets though. Nobody wants to be drawn back into court,” states Mr. Beatrice.
Assets within a properly drafted, executed, and funded irrevocable trust are not marital assets and won’t be subject to an equitable distribution in the event of a divorce.” There are decades of cases to support this including: [Cooley v. Cooley, 32 Conn.App. 152, (1993).], [Moore v. Moore, 111 S.W.3d 530 (2003).], [McGinn v. McGinn, 273 Ga. 292, 540 S.E.2d 604 (2001)], [Findlen v. Findlen, 695 A.2d 1216 (Me. 1997)], [Mikhail v. Mikhail, 124 Ohio Misc. 2d 5, 791 N.E.2d 468 (C.P. 2003)], and [In re Marriage of Jones, 159 Or. App. 377, 981 P.2d 338 (1999)] are a few examples of case law supporting this fact.
“A person prior to marriage, or even in some cases, during a marriage, can take personal assets out of their name and place them into an irrevocable trust. There, they are safe and can grow estate tax and probate free,” explains Mr. Beatrice.
If one of the McCourts would have put the baseball team in an irrevocable trust, it would not have been a marital asset. Furthermore, any increase in value would not have triggered additional gift or estate tax.
The McCourts would have been gift taxed once and even if the value grew, say to $2.1 billion, the team could be passed to the children estate tax and probate free.
“In a case where an asset is owned by both parties, it can still be put in a trust. Most married couples don’t foresee divorce, but they certainly don’t want to get into a long divorce where the only winners are the lawyers,” opines Mr. Beatrice.
“Usually both parties want to support their children, so getting significant assets out of the marriage into a safe trust for the benefit of those children is widely accepted. Its basic estate planning.”
As it stands, however, Mr. Beatrice believes that both Frank and Jamie are spending hundreds of thousands of dollars on lawyers, fighting a battle that they didn’t have to.
“It would be hard to spend all of that money in a lifetime, but with this battle, they are only taking away from their children and grandchildren,” figures Mr. Beatrice. “Both parties should have done it differently from the beginning.”
Estate Street Partners believes, neither Frank nor Jamie will probably ever spend all the money they have, and presumes, both parties will be leaving their assets to their mutual children.
According to Estate Street Partners, all of this money they are fighting about will probably be joined back together in the estates of the children (minus the estate taxes if they don’t do some estate planning), which follows that this litigation, seemingly about billions of dollars, may not matter much in the long run.
Estate Street Partners further investigated the possibility of a prenuptial agreement between Frank and Jamie and the consequences thereof and sheds this light on the matter.
Frank and Jamie did not have a prenuptial agreement, although they did separate their assets for asset protection purposes when they moved to California from Boston according to Bloomberg (4).
“You would think that people with these kinds of assets would have done something, but everyone thinks that marriage is forever. I wish it was, but at least half of the time it isn’t,” explains Rocco Beatrice Managing Director of Estate Street Partners.
Prenuptial agreements are subject to attack in the court system. In this case, if Jamie was to get a percentage of marital assets, the prenuptial wouldn’t have helped, Frank still could have devalued his baseball team.
Even if the prenup specified an amount, courts have been known to throw out prenuptial agreements on a variety of reasons [see: In re Marriage of Little, F050969, (2008)] including a substantial change in circumstances [see: McHugh v. McHugh, 181 Conn. 482, 436 A.2d 8 (1980)].
“Over 25 years of marriage and the acquisition of a $2.1 billion baseball team would probably count as a change in circumstances in the courts,” states Mr. Beatrice.
“There is another option, though, that is better than a prenuptial agreement and certainly better than nothing,” elucidates Mr. Beatrice. “It can save families estate and gift taxes as well as probate costs too.”
“I would advise all my clients to seriously look into an well-written irrevocable trust like the UltraTrust that we’ve constructed to avoid these lengthy court battles.”
To learn how to protect assets save on estate taxes and probate costs visit UltraTrust.com, the irrevocable trust experts. Visit MyUltraTrust.com to set up a DIY irrevocable trust plan.
About Estate Street Partners (UltraTrust.com): Assets can be protected from frivolous lawsuits while eliminating your estate taxes and probate, and also ensuring superior Medicaid asset protection for both parents and children with their Premium UltraTrust Irrevocable Trust.