Battle over Jimmy Buffett’s $275 million property highlights dangers of household trusts

A courtroom battle over the late singer Jimmy Buffett’s $275 million property has highlighted the rising litigation over the trillions of {dollars} in wealth being handed right down to spouses and households, specialists stated.

Jimmy Buffett’s widow, Jane Buffett, filed a petition final week in a Los Angeles courtroom to take away her co-trustee, Richard Mozenter, from the marital belief created to help her after the singer’s demise in 2023. Jane Buffett, who married Jimmy in 1977, alleged that Mozenter has been “overtly hostile and adversarial” towards her and has refused to provide her particulars on the belief and its financials. She alleged Mozenter is amassing “extreme charges” of $1.7 million a yr and that he is mismanaging the belief belongings, projecting earnings of solely $2 million, implying annual returns of lower than 1%.

Mozenter has filed his personal lawsuit in Palm Seaside County, Florida, alleging that Jane has been “fully uncooperative” in his efforts to handle the belief. He stated Jane has interfered in enterprise selections, refused to fulfill with Mozenter and breached her fiduciary duties by “performing in her personal curiosity.”

The case has put a highlight on the property plans and enterprise empire left by Jimmy Buffett, the singer well-known for hits like “Margaritaville,” “Cheeseburger in Paradise” and different breezy, beach-vibe hits. Alongside along with his tune catalogue, Buffett left properties, vehicles, planes and a multimillion-dollar stake in his model enterprise.

Buffett deliberate rigorously for the afterlife. His will, first written greater than 30 years in the past and amended in 2017 and once more in 2023, directed that the majority of his belongings be positioned in a marital belief for Jane. The belief was created “for the spouse’s sole advantage of her lifetime,” in line with authorized filings. The three kids they shared — Savannah, Delaney and Cameron — are the so-called the rest beneficiaries of the marital belief, which suggests they’ll obtain any remaining belongings left after Jane’s demise.

Jimmy Buffett additionally referred to as for a co-trustee to handle the belief with Jane. He appointed Mozenter, an accountant who had additionally been his enterprise supervisor and monetary advisors for 30 years, as co-trustee.

The belongings Buffett left had been substantial. A profitable businessman and entrepreneur, Buffett constructed a model empire and merchandising enterprise that far surpassed his tune rights and touring. Based on the filings, the belongings within the property included $34.5 million of actual property; $15 million of fairness in an organization referred to as Unusual Fowl Inc., which held Buffett’s curiosity in numerous planes; $2 million in musical tools; $5 million in autos; and $12 million in different investments.

One of many largest belongings is Buffett’s stake in Margaritaville, the chain of eating places, bars, resorts and merchandising that commercialized the Buffett life-style. Based on the filings, Buffett’s fairness in Margaritaville was estimated at $85 million, held although JB Beta. Margaritaville at the moment has 30 eating places and bars, 20 resorts, and trip golf equipment, casinos, cruise ships and merchandise.

Quickly after Jimmy’s demise, nevertheless, the connection between two co-trustees soured. In her criticism, Jane Buffett stated Mozenter refused to offer her with primary monetary details about the belief. He “belittled, disrespected, and condescended Mrs. Buffett” in response to her request for data, she stated. She stated his charges of $1.7 million a yr to handle the belief had been “huge.” When she requested for her projected earnings from the belief, Mozenter continued to delay. Lastly, after she enlisted the assistance of her pal Jeff Bewkes, the previous Time Warner chief, Mozenter present her with an estimate of $2 million a yr.

Based on Jane’s criticism, Mozenter acknowledged that Margaritaville had paid distributions of $14 million over the earlier 18 months. But he declined to make future projections. “Based mostly on that evaluation, Mr. Mozenter advised Mrs. Buffett that the Marital Belief’s earnings wouldn’t cowl her annual bills and suggested that she might ‘think about changes,'” in line with her criticism.

Belief legal professionals stated the case is a part of a rising wave of lawsuits associated to inheritances and trusts. Over $100 trillion of wealth is anticipated to be handed down from older generations to spouses and households over the following 25 years, in line with Cerulli Associates. Extra wealth being handed down means extra litigation, since households usually struggle over who will get what.

The Buffett case has mirrored a distinct, however equally widespread, supply of disputes: dueling trustees. Property attorneys stated Buffett might have made Jane the only real beneficiary in addition to the only real trustee. But he selected to have Mozenter as co-trustee to assist handle and direct the belief.

Mozenter stated that in his lifetime, Jimmy “repeatedly expressed his issues concerning Jane’s capacity to handle and management his belongings” and was “very cautious to create the belief in a way that precluded Jane from having precise management over the belief.” He added, “This reality has made Jane very indignant.”

Attorneys stated appointing a co-trustee is widespread. Typically the heir is ill-equipped to deal with the wealth or asset. Typically they’d fairly depart the small print to another person. Regardless of the cause, tensions between the beneficiary and co-trustee usually erupt into full-blown hostility.

“These instances nearly all activate the very same situation,” stated Keith A. Davidson, with Albertson & Davidson LLP. “You have obtained a beneficiary who would not really feel like they’re getting sufficient data and would not really feel like they’ve any say. And you’ve got a trustee who’s being too paternalistic, they usually really feel like they can provide out data what they need. That is a recipe for catastrophe.”

Feelings run particularly excessive when one of many trustees is a partner.

“Think about you are married to Jimmy Buffett for 47 years, you’ve got a say in the way you’re spending your cash and what you are doing and all that goes away in a single day,” stated Stewart Albertson, additionally with Albertson & Davidson LLP.

Because the lawsuits had been filed in several states, courts will first must determine the place the case can be heard. After that, a choose will begin arguments and finally determine a path ahead. Attorneys stated judges have sometimes sided with the skin trustee (on this case Mozenter). But more and more, they’ve been siding with spouses — which might imply Mozenter is eliminated.

Extra doubtless, attorneys stated, a choose will decide that the connection between Mozenter and Jane is unworkable and identify a brand new, skilled or company trustee from a belief firm or financial institution to interchange them each.

“My guess is a choose is more likely to put in somebody as knowledgeable fiduciary,” stated Alex Weingarten, managing associate of Willkie Farr & Gallagher LLP’s Los Angeles workplace and chair of its leisure litigation apply. “That might permit the fiduciary to get in and determine what is going on on. It is not what she desires, however it could give credence to her argument.”

Attorneys stated Mozenter’s $1.7 million price is not essentially extreme, since trustee charges can typically be as excessive as 1% or extra of the belongings every year. As for the return of $2 million a yr on $275 million being proof of mismanagement, attorneys say lots of the belongings within the belief, like actual property, planes and vehicles, do not produce earnings and price cash to take care of. So the precise returns on income-producing belongings could possibly be larger.

Nonetheless, attorneys stated the Buffett case affords two vital classes for households planning wealth transfers. First, they stated wealth holders ought to talk the plans for his or her estates earlier than they die so nobody is shocked. If Buffett had defined the co-trustee roles to each Jane and Mozenter, maybe tensions would have been minimized.

“Jimmy did good planning, in that he set these trusts up,” Davidson stated. “However he did not take into consideration how this was truly going to play out.” He additionally might have added a “removing proper” within the belief to permit Jane to extra simply take away Mozenter if she wished.

The second lesson is that associates or enterprise associates do not all the time make good trustees. Whereas right this moment’s rich usually identify a trusted pal to a household belief, the trustee might have a distinct relationship with the beneficiary and may see themselves as finishing up the needs of the descendant — which isn’t the job of a trustee.

“By way of drawback instances, those we see, they hardly ever contain skilled trustees,” Albertson stated. “It is nearly all the time anyone who’s a pal. That tends to be the worst. Your position is to observe the belief phrases.”