He was a high school dropout who started by selling encyclopedias door to door. Through determination and good fortune, Super Bowl Champ, Jack Kent Cooke amassed an estate of $1.3 billion by the time of his death at age 84 in 1997. He lived his dreams, owning a successful NFL franchise, the Washington Redskins, and one of the world’s most recognizable landmarks, New York’s art deco Chrysler Building.
He spent his life steering the Redskins to SuperBowl championships and moving among Washington’s elite. His life was the picture of orderliness, right down to his customary tweed jacket. However, at his death he left a mess. He left a will naming seven co-executors. He left conflicting desires with insufficient funding: Keeping the Redskins in the family and giving assets to a charitable foundation to minimize estate taxes. The estate took seven years to settle, at a cost of $64 million in professional fees. Mr. Cooke’s son was pitted against his longtime business confidant and others, all of whom were co-executors.
What could have been done differently? While Mr. Cooke was a shrewd businessperson, he failed to plan his estate with the acumen with which he ran his business. First, he could have utilized a revocable trust. With such a trust, his estate would not have been required to go through the probate process, which is open to the public, and his affairs would have remained private.
Second, having seven co-executors created turmoil and expense. There was dissension among the seven and the estate ended up paying over $17 million in fees to the executors. When so many co-executors or co-trustees are involved, the risk of feuds or disagreements rises dramatically. If there are two co-executors, there is only one relationship involved, with seven co-executors, there are twenty-one individual combinations, plus numerous more combinations of factions.
Finally, Mr. Cooke failed to provide sufficient liquidity to accomplish his goals. He had promised his son the ownership of the Redskins franchise at his death. Mr. Cooke had counted on the Chrysler building’s value to pay estate taxes and preserve the Redskins for his son. However, as the Chrysler building’s value waned due to deterioration of physical plant and rental conditions, the value of the Redskins become too great by comparison to the taxes due. Mr. Cooke could have reduced the value of his estate, and hence the taxes, through several techniques. Some options would have been a Grantor Retained Annuity Trust, a Charitable Lead Trust, and various other gifting strategies.
Unfortunately, while Mr. Cooke was a star quarterback in his business dealings, his final pass in estate planning was incomplete. A qualified estate planning attorney can help you avoid Jack Kent Cooke’s mistakes and have your estate plan win the day.
Compliments of the McGee Law Firm, Attorney Brandon McGee
Written By: The American Academy of Estate Planning Attorneys