When a celebrity’s death hits the newswires, it’s often immediately followed by reports of the size of the deceased’s estate and the identity of the beneficiaries.   In addition, not infrequently public battles among the beneficiaries ensue.  Some disputes are the result of the simple (yet, significant) error of dying without an estate plan, as in the Prince estate. Others provide specific lessons demonstrating the need for attention to detail when creating an estate plan, such as in Tom Petty’s estate.

Tom Petty was a historically-acclaimed singer-songwriter and record producer, who performed as a solo artist and as the lead singer for the Heartbreakers.  Upon his death in October of 2017, his trust directed the trustee, his second wife, to establish an entity to be used to hold and control Petty’s sizable and valuable music catalog.  The terms of the trust ascribing control of the entity provide, as follows:

With respect to the creation of the Artistic Property Entity, the Trustee is directed to create the governing documents of the Artistic Property Entity such that those of the Spouse, ADRIA and KIM who are living at the time of creation of the Artistic Property Entity shall be entitled to participate equally in the management of the Artistic Property Entity, even though their respective economic interests in the Artistic Property Entity are not equal.

This language has invited litigation.

In a probate petition filed by Petty’s children from a prior marriage, they have taken the position that, as the holders of a two-thirds majority vote in the entity, they now have effective control over Petty’s music catalog.  However, in a recent, competing petition filed by Petty’s widow, she argues that Petty’s intent – and a better reading of his trust – should, instead, require the unanimous consent of her and the two children.  In other words, “equal participation” does not mean complete control by the children to the exclusion of Petty’s spouse.

Given the size of the estate and some of the alleged facts in the dueling petitions, it appears that this may be just the beginning of an extended fight between all involved.

The Petty estate should serve as a cautionary tale in business succession planning.  If Rule No. 1 is to determine who should receive a particular business interest, then a close Rule No. 2 is to clearly describe the controlling parties over such business interest, if not how the business should operate.

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