|How Can Whitney Houston's Court Battle Provide Valuable Lessons for Clients, Advisors?|
Danielle and Andy Mayoras
While Whitney Houston was recently admitted to rehab, she has one other big concern that she still has to face - her no-holds-barred court fight with her late father’s widow. She’s fighting her step-mother, Barbara Houston, over a one million dollar life insurance policy.
Whitney’s father, John Houston, named Whitney as the sole beneficiary of this large policy. Barbara sued Whitney, claiming the money was really supposed to benefit her instead.
The case has now moved on to the Court of Appeals after Whitney scored a big victory in the United States District Court for the District of New Jersey late in 2010. The Judge ruled in her favor and dismissed Barbara’s lawsuit entirely.
In his ruling, the Judge first discussed multiple letters sent between several of Whitney Houston’s accountants and attorneys. Many of these letters validated Barbara Houston’s claim.
These letters supported Barbara’s position that the one million dollar life insurance policy was supposed to be credited in her favor. Specifically, on August 23, 1990, Whitney had lent her father, John Houston, almost $750,000 so he could buy and remodel a home. Whitney held a private mortgage on the house and Barbara, as John’s widow and current owner of the house, alleges that the life insurance policy was intended to pay-off most of this mortgage. The life insurance was purchased on January 17, 1991.
Whitney and her lawyers argued that there was no written agreement of this arrangement. Therefore, Whitney was entitled to keep the one million dollars for herself and foreclose on the mortgage too. Yet when Whitney was questioned under oath at a deposition in the case, she had very little knowledge of the insurance, and even denied ever having seen the mortgage documents that she had signed. Whitney said that her father had access to her money and could have drawn up the documents without her.
So why did the Judge grant summary judgment and rule in Whitney’s favor without holding a trial, even though there were multiple letters from the time written by professionals confirming that John Houston took out the life insurance policy for this very reason?
Frankly, it’s a bit surprising that the Judge did so. These letters are strong evidence. But the Judge felt they weren’t strong enough, ruling that without a written agreement Barbara didn’t have a leg to stand on.
But, Barbara’s lawyer has appealed the case and recently challenged the Judge’s ruling, relying mainly on those same letters. She does have a good chance at overturning the Judge’s decision and at least getting a trial over what John Houston really intended. However, it’s always hard to prove someone’s intent when that intent wasn’t made clear in writing.
This case illustrates a very important estate planning lesson, especially for financial planners. No clients should ever – ever – name someone as a beneficiary on an insurance policy or annuity unless they intend that person to keep the money. Naming someone so they can use the money to benefit someone else, or perhaps share it with their siblings, is often a recipe for a family court fight.
Many people assume that if they name someone they trust as a beneficiary and tell them what to do with the money, that their wishes will be followed. Don’t let your clients make this mistake!
It’s far better for clients to name their trust – or even their estate – as the beneficiary, and then spell out their intentions clearly in the trust document or will. That way, there is no confusion over who is to receive what, and why.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on May 24, 2011