ESTATE PLANNING NIGHTMARES OF THE RICH AND FAMOUS

Redskins Owner Leaves $1.3 Billion Estate in Disarray:  Complete with a Widow’s Claim, a Son’s Unfulfilled Dreams, 7 Years of Litigation, and $64 Million in Professional Fees.

Jack Kent Cooke started business as a high school drop-out selling encyclopedias door-to-door, and grew until he owned a collection of media companies, sports teams, and real estate valued at $1.3 billion.  Most know him as the former owner of the Washington Redskins football team.  Although a successful and sophisticated businessman, his estate planning failed miserably.  Although Cooke passed away over 10 years ago, the lessons are still relevant today.

Though most of us don’t have $1.3 billion, this is a great case study on how estate planning that is not well designed and customized according to a client’s wishes can result in devastating financial and emotional costs after their death.  This is not an issue of net worth, as much as it is a counseling and planning quality issue.

Cooke had a will that was amended eight times.  It left seven executors, most former employees.  When presented with the will, most of them had never seen the will or knew of its instructions.

Cooke’s wife, whom he divorced once and then remarried signed a prenuptial agreement upon her remarriage to Cooke, waiving her claim to his estate.  A fight ensued nevertheless, which ended in a $10 million settlement to Mrs. Cooke to end the expensive litigation ($6.8 million in legal bills).

Another problem was the disagreement among executors over the Jack Kent Cooke Foundation.  An executor, Stuart Haney worked with Cooke to create the Jack Kent Cooke Foundation to help underprivileged students.  Due to a large estate tax bill, the only way the foundation could be funded was to sell assets of the estate.  Cooke’s son had worked in management of the Redskins for most of his life, shared his father’s passion for football, and dreamed of someday owning the Redskins.  John Kent Cooke was adamant that the Redskins franchise not pass from family control.

John Kent Cooke (also an executor) suggested that one of his father’s other investments, the Chrysler building in New York City, could be liquidated to pay taxes.  However, the building was losing $1.5 million a month and its market value didn’t come close to the loans against it.  The executors, therefore, with the exception of Cooke, Jr., chose to auction the Redskins team. The team went to Daniel Snyder for a bid of $800 million.

The next fight was how much the executors should be paid for their work because the will didn’t specify a fee.  The case was decided in favor of the state’s statutory 5% fee, which equaled approximately $37.6 million.  In the end, Cooke, Jr. never received the Redskins, which he dreamed about and worked towards his entire life.  The executors were divided and bitter, yet they still had to work together as they were all named on the board of directors for the Foundation.  Eventually, $64 million was spent on professional fees.