Compliments of Our Law Firm,
Written By: The American Academy of Estate Planning Attorneys
Jack Kent Cooke is widely regarded as the greatest owner in the history of professional sports. He was also well known for his attention to detail and uncanny business acumen.. When it came time to create his own estate plan, however, he left much to be desired. Although you may never own a professional sports team or the Chrysler Building in New York, as Cooke did, you can still learn several valuable lessons from his estate planning mistakes.
Cooke was born in Canada in 1912, and at the age of 14 he took his first job selling encyclopedias door to door. He eventually managed and then owned radio stations in Ontario and Quebec. In 1951, Cooke purchased his first sports team, the Toronto Maple Leafs, a minor league baseball club. He then went on to own the Washington Redskins (NFL), the Los Angeles Lakers (NBA), the Los Angeles Kings (NHL), and the Los Angeles Wolves (United Soccer Association) before his death in 1997. By the time he died, Cooke had amassed a $1.3 billion fortune composed primarily of sports teams, media companies, and real estate including the Chrysler Building, a New York landmark. Unfortunately, he also left behind an estate plan that led to utter chaos, disputes among his family and friends, and a $64 million professional services bill.
A Last Will and Testament is typically the foundation of the average estate plan. In Cooke’s case, his will had been amended eight times prior to his death and named not one, not two, but seven co-executors. An executor is the individual responsible for overseeing the probate process following the death of the person who wrote the will. Naming seven people to a position traditionally filled by a single person is quite uncommon – and for good reason. Not surprisingly, Cooke’s seven executors had frequent disagreements which caused unnecessary delays and eventually cost the estate $17 million in executor fees. Family members and long-time friends and colleagues were also pitted against each other.
Cooke’s unusual multi-executor team was not the only problem with his estate. In addition, his estate lacked the liquidity to fulfill gifts made in the will and he also appeared to have conflicting desires with regard to the disposition of his estate assets. Cooke indicated that he wanted the Redskins to remain in the family while at the same time leaving it to a charitable foundation in an attempt to reduce estate taxes. The problem was that Cooke did not have enough assets to fulfill both of those requests when his estate entered the probate process. It appears that he might have been counting on other assets to cover any tax liability the estate incurred, thereby leaving the Redskins to be passed down to his son as Cooke had promised. What he likely didn’t realize is that Federal gift and estate taxes must be paid first, before any testamentary gifts can be fulfilled. If insufficient liquid assets exist to pay the estate’s tax bill, estate assets must be sold to raise the necessary funds. In Cooke’s case, it seems that he overvalued assets such as the Chrysler Building. This put the Redskins, and his promise to his son, at risk. In the end, Cooke’s will required seven years to go through probate, cost the estate close to $100 million in fees, and caused immeasurable grief and heartache to everyone involved.
Had Cooke taken the time to consult with, and listen to, an experienced estate planning attorney, the outcome would undoubtedly have been different. To begin with, he should have created a trust in addition to his will so that the specifics of his estate plan would remain private. Unlike a will, a trust does not go through the probate process which keeps the will’s terms out of the public eye. Also, an estate planning attorney likely would have strongly advised against naming seven executors, or trustees had he created a trust. Naming seven executors or trustees all but guarantees a lengthy probate process, as well as dissension throughout the process, both of which will ultimately cost the estate money. Finally, an experienced estate planning attorney would have insisted that the plan contemplated various assets values at the time of death. Doing so would have ensured that his estate had the liquidity necessary to pay any estate taxes due as well as the overall value to fulfill gifts made in his will. The single most important lesson to be learned from the Cooke estate is the importance of a well-thought-out estate plan created with the advice and guidance of an experienced estate planning attorney.