Sports fans have recently seen the impact trust laws have firsthand, as the control of one of the NBA’s marquis franchises, the Los Angeles Lakers, has been determined by the trust which owns a majority share in the team. Most of the clients we work with own assets far less unique than an NBA franchise; however, the end result is the same no matter the asset – a properly drafted trust with appropriately designated trustees is one vehicle that may allow for the smooth transition of property from one generation to the next.
Selecting the appropriate trustee is one of the more difficult choices an individual or family faces when planning a trust for the benefit of future generations. Trustees have the responsibility to manage and/or invest trust assets, file trust tax returns, and manage trust distributions (and beneficiary expectations). Trustees are permitted to hire professionals to assist with these tasks, but the buck ultimately stops with the trustee.
Trustees may share their duties and responsibilities, as it is common for trusts to name co-trustees where appropriate. Sometimes the co-trustee is a corporation that specializes in the management of trusts. Other times the co-trustee may be a sibling or friend. Finally, some trusts provide for the appointment of a trust protector – an individual with the authority to replace trustees and generally make sure the grantors’ intent is carried out. Families should discuss these roles carefully with their estate planning attorneys, as each role carries specific obligations.
One of the things a Trustee often has to deal with is the management of family business interests. In the recent case of the death of Lakers owner Dr. Jerry Buss, that family business was a 66% ownership interest in the Los Angeles Lakers – which Dr. Buss left, in trust, for the benefit of his six children (all of whom worked for the Lakers in some capacity at the time of Dr. Buss’ death).
As is often the case, the Buss family tragedy was followed shortly by family squabbling. Lawyers were hired, briefs were filed, and in March, 2017, Jeanie Buss, Dr. Buss’ daughter, took control of the Buss’ 66% family interest in the Lakers by getting her brothers to resign their roles as Trustee. Lakers fans have had little to cheer about this season – their team is among the lowest ranked in the league while their rivals, the Boston Celtics, just passed 50 wins and are fighting for the top seed in the East. While the Lakers seem incapable of drafting the players who can end the Lakers’ post-Kobe Bryant title drought, at least there is finally some direction for the franchise – thanks to some carefully drafted legal documents.
If you own a business, especially one in which your children work, talk through the future management of the business with your attorney, accountant, and financial advisor.