Acting as the Tacit Enabler

A client of mine, Sandra, often complained about how much money she had to lend (give?) her daughter, Donna.

“It’s one thing after another,” she would say.  “She lost her job and can’t make her mortgage payment. Then she got divorced. Then her car broke down.”

With each successive tragedy, Sandra stepped in and wrote a check.  One after the other. Year after year.

Don’t get me wrong.  Sandra had the money. It didn’t really affect her lifestyle to continue making the gifts.

She called them “loans.”

And she would often have compose promissory notes including a stated interest rate at the lowest “applicable federal rate” that the IRS allows. Even if the borrower doesn’t pay the interest, in related-party loan transactions the IRS expects the lender to impute interest on her tax return.

If the lender doesn’t impute the interest, then there’s a chance that the IRS reclassifies the loan as a gift resulting in the use of the lender’s gift/estate tax exemption.

Over the years, Sandra made loan after loan, bailing Donna out from one financial disaster after another.

Then Sandra died.

In her will, the loans/gifts that she made were to be treated as counting against her daughter’s share. There were four other children, so the estate was to be divided into five shares.

The other children weren’t so understanding of their sister’s situation.  When they computed the outstanding balance of the loans, along with the unpaid interest compounded over the years, and applied that against her one-fifth interest of the estate, she didn’t inherit much.

So there Donna was. Nearly sixty years of age. Jobless. No savings to speak of, and very little inheritance coming her way.

I therefore ask this question: Did Sandra help her out over the years or did she enable her to continue to make poor choices?

It’s difficult for a parent to resist helping a child. I’m a father of three daughters, and I hope that I never find myself in Sandra’s predicament. When we see our children suffering, we want to do something to help. If it’s within our means, why not write the check?

Seeing what I see from behind my desk, I would suggest that sometimes writing that check only makes the situation worse.

And it starts at a place well before our children become adults. When your daughter calls from high school and asks us to bring the essay to her that she forgot from home – should we do it or allow her to suffer the consequences of not turning in her assignment on time? When your son wants to quit the recreational basketball team because he discovers practices are hard and he isn’t having as much fun as he’d hope, do we make him keep his commitment to his team or allow him to find something he considers to be better?

Where should the parent step in to buffer his offspring from life’s disappointments, and where should the parent step away and let the offspring experience the consequences of his or her choices?

I’m not smart enough to tell you the answer to those questions. I suppose that it depends largely on the facts and circumstances of each individual situation. A kid who otherwise is an exemplary soul but who finds herself in a tough situation might and probably should be treated differently than the “serial offender.”

But I do know this. Sandra’s situation is a no-win situation for everyone involved. One of her sons said it best, “We can all be hard on her now,” he said, “but she’s going to show up on our doorsteps now that Mom is gone. What are we going to say then?”

© 2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Tragedy of Aretha Franklin’s Estate

When Motown legend Aretha Franklin died last August, it was reported that she had no will. That all has changed as several handwritten documents were recently found in her home. The documents are purported to be in her hand. A judge will ultimately decide if the wills are valid.

Franklin passed away a resident of Michigan, where state law provides holographic (handwritten) wills as valid even if not witnessed, so long as the will is dated and the testator’s signature and the document’s material portions are in the testator’s handwriting.

Florida law, by the way, would not recognize an unwitnessed, holographic will.

Apparently three such documents were found in Franklin’s Detroit-area home, two in a locked closet for which the key was difficult to find and one in a spiral notebook stuffed under sofa cushions, according to documents filed with the Oakland County, Michigan Probate Court.

The 16 scrawled pages haven’t yet been authenticated as being in Franklin’s handwriting, attorneys for Franklin’s four sons and the personal representative in charge of the estate wrote. And even if they are real, it’s not clear that they’re valid, according to the court documents, which ask the judge to sort through it all and determine what happens next.

But if they are real, they reveal a businesswoman who was intent on making sure her sons were treated fairly. Several times across all three documents, she writes that her assets should go equally to her three younger sons and outlines detailed instructions for the care of her eldest son, Clarence, who has special needs that, to date, had never been publicly disclosed.

Clarence Franklin was born in 1955, when Aretha Franklin was just 12 years old. Aretha rarely talked about her family and personal life, and for decades, Clarence Franklin’s father has been reported to have been a man named Donald Burk, who was a schoolmate of the singer’s.

The paternity is an issue, as one of the purported wills, dated June 21, 2010 states that Clarence’s father is Edward Jordan Sr. — who’s also the acknowledged father of another of the singer’s sons, Edward, who was born when she was 14.

Little is known about Edward Jordan Sr., but Franklin was decidedly unimpressed with him. He’s described in David Ritz’s 2014 biography, “Respect: The Life of Aretha Franklin,” only as a “player” whom Franklin once knew.

Page six of the purported will includes this adamant declaration as part of the instructions for Clarence Franklin’s care: “His father, Edward Jordan Sr., should never receive or handle any money or property belonging to Clarence or that Clarence receives as he has never made any contribution to his welfare, future or past, monetarily, material, spiritual, etc.”

Both instances of the word “never” are underlined for emphasis.

A hearing is scheduled for June 12. What’s very sad about Aretha Franklin’s saga is that a good estate planning attorney, through the proper drafting of documents, could have ensured that her wishes would be carried out.

Assuming the authenticity of the handwritten documents, she had some very real concerns about taking care of her loved ones. Now, not only are the documents called into question, but there is so much ambiguity and conflict between the documents that no one knows who may benefit from her purported $80 million estate.

Who manages the estate? Who would serve as trustee for her special needs son? How are the funds to be invested and distributed? Who decides whether the amounts are to be held in trust or distributed outright? Estate taxes aren’t minimized in the document, nor is there any proper income tax planning.

The bottom line that estate litigation attorneys are likely to be significant beneficiaries. I would guess that hundreds of thousands if not millions of dollars will be lost to attorney fees. Moreover, the litigation will take years to resolve. It truly befuddles me why someone as wealthy as Aretha Franklin, a legend who could readily afford whomever she wants as her attorney to properly plan her estate, chose instead to leave behind hand scrawled notes to take care of her loved ones.

Perhaps she didn’t want to discuss her family’s history with a stranger. We’ll never know. But it’s a real shame.

© 2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.