Spoiler Alert: This post contains spoilers from the first episode.
HBO has begun airing a show called Succession, which, through some dark humor, provides examples of the importance of a proper estate plan. The first episode introduces us to the Roy family – led by patriarch Logan Roy, who is a media tycoon and about to turn 80.
Given the show is titled Succession and the premise is about a family-owned business, it is easy for an estate planning attorney to quickly get sucked in and begin taking notes of all that goes wrong with various transactions and conversations. Early on in the episode, one begins to question Logan’s capacity. For details of the first scene, you’ll have to go watch the show – but it raises the question of whether Logan has the requisite capacity to make any changes to his estate plan. Or are his actions just a symptom of old age and his mental faculties are actually still intact?
Under MN law, anyone who is 18-years old or older and of sound mind may make a Will. Under the MN Trust Code, the same capacity is required in order to “…create, amend, or revoke a revocable trust, or to direct the actions of the trustee of a revocable trust…” The determination of a person’s capacity is subjective. However, practitioners often use the following guidelines to determine a person’s capacity:
- Does the testator/settlor know of those who would naturally inherit his or her estate?
- Does the testator/settlor know what his or her estate entails, e.g. is the testator/settlor leaving the newspaper deliveryman the full estate thinking there is only $50,000, when in actually the estate consists of $3 million?
- Is the testator/settlor being coerced or subject to undue influence or has the testator/settlor made these decisions and been unwavering of his or her decisions?
See Jayne Sykora’s post on Mental Capacity for a more detailed outline of determining a person’s capacity.
In Logan’s situation, he proposes to his children changes to a trust that would alter their voting control of the family business after his death. The show does not expand in detail the structure of the trust but presumably it is an irrevocable trust of which he is the settlor and the children are the beneficiaries. He requests the children to consent to such change and, therefore, does not seem to need to sign anything on his own accord. But should the children sign if they believe dad does not have the mental capacity to even suggest such changes?
Another action that calls Logan’s capacity into question is his decision to make a major change to one of his long-time trust advisors. After a “negotiation” with his one son, Roman, Logan agrees to terminate the current COO of the company. Was he coerced? Or did Logan freely make the decision to be able to carry out his wishes?
Another theme the show highlights, as a need for a thorough estate plan, is that the Roy family is a blended family. Logan has four children – Kendall, Connor, Siobhan (“Shiv”) and Roman. Logan’s second wife is Marcia. The proposed changes to the trust would provide Marcia with extra voting power on the board of the company once Logan has passed away.
While it is not addressed in the episode, one certainly hopes that Logan and Marcia have a prenuptial agreement in place given the empire he built and for the fact that he has children from a prior relationship. Under MN law, a spouse has certain statutory rights to which he or she is entitled the can trump children, unless the spouse has waived such rights under a prenuptial agreement. In the event a person wishes to leave a spouse less than the statutory minimum to which a spouse is entitled, it is important to secure the spouse’s waiver of rights so that he or she does not elect against the estate plan. However, we often tell clients who are interested in a prenuptial agreement, that the prenuptial agreement is the floor – you can always opt to leave your spouse more under an estate plan. In Logan’s case – it appears he wishes to do so; hence his proposed changes to the trust.
Clients ask whether or not they should tell their family of the details of his or her estate plan. My response is “you know your family the best.” If you think your family needs to hear your decisions from your mouth, during your life, then yes – communicate the details of your estate plan. If you think the knowledge of such details will create strife, tarnish relationships and possibly expose yourself to attempts of coercion, then no – leave the details of your estate plan private until your death (because frankly, you won’t have to deal with the conflicts).
I have found when a family gets along – hearing the details from mom or dad during their life is beneficial because they are often provided insight into mom or dad’s decision-making. It often provides the opportunity for questions to be asked if needed and for clarity about their wishes. Additionally, the details are shared at a family meeting, which means everyone is hearing the same thing at once, which helps to minimize miscommunication between parties.
When clients suspect that people in the family are going to be upset with their decisions – they often inquire about including a No Contest clause. In MN, no contest clauses are enforceable, however, except to the extent probable cause exists for instituting contested proceedings. See Implementing a No-Contest Clause.
Lastly, the overarching theme of the show will be able the succession of the family business. The transitions of family businesses are extremely nuanced – there is not a one-size fits all option. To ensure the success of the business for future generations, the logistics of a succession plan must be tailored to the uniqueness of the family, the business, and its plans for the future. We will obviously cover the topics of the business transition in more detail throughout the episodes of the show but for some initial considerations see Small Business Succession Planning – Things to Consider.
While the show has premiered to mixed reviews – for those of us who deal with the quirkiness of families, Succession provides some much needed humor for moments when people are not at their best. Continue to check in for a weekly breakdown of the estate planning topics from each episode.
Should you have any questions about an estate plan or the transition of a family business, be sure to contact an estate-planning attorney.