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Opinion: Former NBA owner's estate planning case instructive

Many of our readers in Texas and elsewhere -- especially sports enthusiasts -- are likely familiar with the sad saga surrounding the Los Angeles Clippers basketball team. Earlier this year, the team’s owner, billionaire Donald Sterling, made racist remarks that resulted in the National Basketball Association banning him for life and seeking to wrest control of the team.

That resulted in a flurry of activity, with the bottom line being Sterling’s approval for his wife, Shelly, to negotiate a sale.

She did just that, with a fellow business mogul -- Steve Ballmer, the ex-CEO of Microsoft Corp. -- agreeing to buy the team for a reported $2 billion.

Notwithstanding his earlier agreement regarding a sale, Sterling then backtracked, trying to block the transaction by revoking a family trust owning the Clippers that named him and his wife as co-trustees. Shelly Sterling acted in turn, seeking court approval to remove Donald Sterling as co-trustee based on alleged mental incapacity.

The judge agreed with that argument, which allowed the sale to proceed. Ballmer now owns the team, with Donald Sterling’s effort to block the sale rejected by an appellate court.

One estate planning commentator says there is a lot to be learned from the Clippers tale, chiefly that more planners need to be thinking about incapacity-related issues as they craft important documents focused on asset preservation, the passing along of wealth, tax implications and related matters.

Had Donald Sterling addressed the matter while establishing the family trust, he could have exercised greater control regarding the team’s sale and potentially avoided having the declaration of incapacity ruled upon by a judge.

In other words, a trust carefully considering incapacity could have spelled out with precision the terms relating to transfer of power and the removal of co-trustees. It could also have provided for a financial durable power of attorney delegating a particular person or business entity to handle all trust-related affairs.

As we have often noted for readers, trusts are highly flexible legal instruments that have great utility for estate planners. They can also be inherently complex, requiring the close and studied input of an estate planning attorney.

Having that proven acumen on board can ensure that trust intentions are fully promoted.

Source: Crain’s Wealth, “The lesson from Donald Sterling? Plan for incapacity,” Darla Mercado, Aug. 5, 2014

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