Alrighty … so, according to his Wikipedia page, hailing from Baltimore, Maryland, he really stayed there for most of his early life – he not only attended school (through high school) in Baltimore, but also college at Loyola University Maryland there too. Fun little fact, he graduated college with a 1.9 GPA. After graduation (in 1969), Tom ended up working in the insurance industry and ultimately, landed at the agency that his wife’s grandfather founded called O.F. Bowen Agency. Later, he ended up purchasing the agency in 1980. During this timeframe, he started really actively writing – and that is actually when he wrote his “breakout novel” I mentioned earlier, The Hunt for Red October.
After that novel, he cranked out novel-after-novel – and, still according to his Wikipedia page, seventeen of his novels landed on the New York Times best sellers list. That’s amazing! Just to give you some insight into Tom’s success (and specifically, the dollars that came with that success), “By 1988, Clancy had earned $1.3 million for The Hunt for Red October and had signed a $3 million contract for his next three books. In 1992, he sold North American rights to Without Remorse for $14 million, a record for a single book. By 1997, Penguin Putnam Inc … paid Clancy $50 million for world rights to two new books and another $25 million … for a four-year book/multimedia deal. Clancy followed this up with an agreement … for 24 paperbacks to tie in with the ABC television miniseries Tom Clancy’s Net Force, which aired in the fall/winter of 1998.” That all according to various sources linked to his Wikipedia page. So yeah, a lot of money came with his books.
More personally-speaking, Tom was first married to a lady named Wanda King – they married in 1969, which was the year that Tom graduated college if you remember, and they ended up having four children together – Michelle, Christine, Kathleen, and Thomas III. Now, Tom and Wanda ended up separating and divorcing in 1997 – which became final in January 1999. A handful of months later, in June 1999, Tom got married again … this time to Alexandra Llewellyn (lew-ellen), who he remained married to until he died in 2013. Together, Tom and Alexandra had one children – Alexis. So, in total, Tom had five children – four from his first marriage, one from his second marriage.
A few years before his death, he started experiencing various heart issues – his good friend and fellow author, John D. Gresham (no, not John Grisham – I had to look it up and confirm!), said the following, “Five or six years ago Tom suffered a heart attack and he went through bypass surgery. It wasn't that he had another heart attack, his heart just wore out.” He said that in regards to Tom’s death on October 1, 2013 – due to heart failure. After his death, it was confirmed that Tom did have an estate plan. That’s good since, according to a blog by Barron, Rosenberg, Mayoras, and Mayoras , an estate law firm out of Troy, Michigan, Tom’s estate value was estimated to be in the neighborhood of $86 Million Dollars. But not so fast, because although there was an estate plan, things went array, to say the least. Let’s first talk about what kind of estate plan he had, then chat about what happened.
According to a Forbes article on Tom’s estate, his estate plan looked a little something like this … his real estate was left to his wife, Alexandra, and the remaining assets, like beyond the real estate, was to be divided up into three Trusts / three portions as follows: a Marital Trust for his wife; a Family Trust for his wife and their joint daughter, Alexis, and a Children’s Trust for his four children from the first marriage – so to, Michelle, Christine, Kathleen, and Thomas III. After Tom created this fairly elaborate plan, he later amended the Trust and added some provisions for estate tax planning purposes. I won’t get into the confusing details, like all the legalese, but just know he went in to add these provisions – and this is what ended up causing confusion and controversy.
The provision that got added basically said that after Tom’s death, taxes owed should be paid from the, what is called the, residuary estate – meaning those Trusts I just discussed. As the Forbes article points out, doing that would result in a nearly $16 Million Dollar tax bill. Further, in paying that bill, the Executor of Tom’s estate would have to use money out of the Family Trust and Children’s Trust and even that would cause another taxable event – this, in turn, would impact not only Tom’s wife, but also his children’s Trust, too. Tom’s wife, Alexandra, said “heck no!” and basically tried to argue that her side of Tom’s estate should not have to pay any taxes (since she is his spouse) and that argument meant 1) the tax bill should be lowered and 2) the payment, albeit lower tax payment, should come from the Children’s Trust.
Of course, Tom’s four kids from the first marriage, the beneficiaries of the Children’s Trust, were not a fan of Alexandra’s idea and argument – and this caused things to end up in a Court battle. Basically, the crux of the battle was about Tom’s intent by the provisions / the words he added to his estate plan when he later amended it to include those estate tax planning provisions. Basically, the Executor of the Estate, who happened to be the attorney that DRAFTED the language in question, said the taxes should be paid from both “sides” – from Alexandra’s side AND the side of his first four kids’ side. So, what a mess, huh!
Mess, indeed. So, that’s when the Courts got involved and ultimately, on the first level of Court involvement, according to a Forbes article, a probate court judge in Baltimore, Maryland ruled that the taxes should be paid from the residuary Trusts – meaning the Children’s Trust. The ruling was appealed and ultimately made its way to the highest Court of Maryland, where the then-seven Justices had to decide the fate of the tax dollars – well, where those tax dollars were coming from. According to Attorney Danielle Mayoras’ website, it was a crazy close 4-3 decision, where the “four” (the majority) agreed with the lower courts and ruled that the taxes should be paid from the Children’s Trust. The minority, the three Justices, came down for the other side and thought that the taxes should be paid equally from two of the Trusts – not JUST the Children’s Trust only. Interestingly, if you recall, the Executor, who was the attorney that DRAFTED the plan, was on this latter side – that, taxes should be paid from both sides. This Court said “nope” to him!
So, what’s all that mean? Well, again according to Mayoras’ website, “The four children now have to pay an estate tax bill to the IRS of almost $12 million. If they had won, the total tax bill would have been closer to $16 million, but they would have split it with one of the trusts set up for Clancy’s widow. So they lost $8 million, and the IRS lost out on about $4 million.” Yeah, that was quite the chunk of change at stake – not only for the kids, but for the IRS too, right?
As I always like to do in these episodes, what does this teach us everyday people about estate planning? If you set aside the issue about estate taxes, because estate taxes are really an issue for those that have several millions of dollars in assets, the true issue with Tom Clancy’s estate plan was ironically the wording – I say “ironically” because he was an author, after all, a literal man of words. Though, in Tom’s defense, most non-attorneys do not know or understand how to craft language for an estate plan. When Tom revised his plan and included those tax planning provisions, some of the wording was unclear and confusing, which is what caused all the court chaos.
As Attorney Mayoras perfectly states, “Here’s the lesson for all of us (millionaires and non-millionaires alike): What you intend your will or trust documents to say does not matter if they are written differently than what you meant. The wording of the documents, not what you tell your estate planning attorney, is the only thing that matters. Battles like this do happen on a regular basis across our country. While millions of dollars of estate taxes aren’t usually on the line, it’s very common for poorly-drafted wills and trusts to lead to long, expensive battles among heirs who read the same language in different ways.”
Exactly my thoughts. Words matter. And it reminds me of something from law school – what is within the four corners of the document? … Meaning what’s literally on-paper. Intentions and conversation (that lead to those words) are not what’s on paper. What’s within the four corners of the document is THE most important. Tom’s attorney and Executor tried to argue otherwise … like “Well, he meant…” and “His intentions were…” The Courts here disagreed with him and basically said, “We’re looking at the four corners of this document and what it tells us…” Wow, Tom’s estate is really a great example of how precious estate planning is – it takes the tiniest thing to cause chaos. WHATEVER you can do to minimize the slip-ups, do it.
Alrighty, let’s wrap this episode up and shift to a sneak peak at next week. Next week we’re back to a “cautionary tale” episode where we talk about real-life clients, real-life cases that I, or my office, have worked on -or- maybe they are just generally good things to know/be aware of so you don’t slip up and turn into a cautionary tale one day. Next week, I haven’t decided yet what I’m going to blab about – so you’ll just have to tune in to find out I guess, but until then, Legal Tea Listeners…take care and be well!
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