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Sibling Chaos | Delta Trust Case Study

Delta Trust feels case studies are a great way to illustrate how we have been able to assist families and individuals with real life problems. All case studies are based on true client relationships and experiences. Names have been changed to enact client privacy.

Ted and Stacy Johnson built a successful automobile sales company. Stacy is his second wife. They have two daughters together and Stacy has a daughter from her previous marriage.

Ted, age 50, is thinking about selling his business. He believes it is worth $10 million before taxes. He also owns the real estate at the dealership which he leases to his company. The land is worth $3 million.

Johnson Estate
Cash $525,000
Dealership $4,000,000
Land $3,000,000
Residence $450,000
Personal $200,000
*They have wills but no estate plan or insurance.

Stacy, age 60, is not in good health. Her parents are both alive and live in a nursing home. She is the youngest of three children. Her parents have no meaningful estate due to selling most of their assets to pay their medical bills and nursing care. Her dad was a furniture dealer, and her parents have a nice collection of antique furniture. Her mother’s great grandfather was one of Teddy Roosevelt’s Rough Riders and they have a wonderful portrait of him in her nursing home room.

The Daughters
Terry Jones, age 33, is the oldest girl from Stacy’s previous marriage which ended in divorce. Terry is single and has had trouble holding down jobs. She lives in a condominium paid for by the Johnson’s who also pay her insurance expenses. Her mother slips her money routinely without Ted knowing.

Leslie Johnson-Kelly, age 25, is married to an electrician in Dallas. They have one child and one on the way.

Sally Johnson, age 23, is a new college graduate and has worked holidays and summers for her father. She wants to work in the family business.

Current Situation
Sally and Leslie are complaining that their half-sister has a better deal. Sally is upset with her father for contemplating a sale of the business just when she wants to enter the business. Leslie’s husband, Joe, has approached Ted about establishing a children’s education fund for their child and the one on the way.

Stacy’s sister and brother-in-law live in Boston and have started hinting to her parents that they are interested in the grandfather’s portrait. They mentioned how nice it is and that a lot of people in Boston were impressed with their connection to Teddy Roosevelt.

The Johnsons decide they need help.
Delta Trust advisors met with the Johnson’s and discussed their long term goals. The following issues were addressed:
1. Would they want an opportunity to pass the business on in the family? Does Sally have the skills to take over the business?

2. How do they feel about leaving wealth to their kids?

3. What charitable plans do they have?

1. Ted thoughts prices were great for selling the business but wasn’t completely sure he was ready to sell just yet.

2. Ted and Stacy want to leave something for their children but are not sure of their options or how to equally distribute their estate.

3. Arkansas Children’s Hospital is Stacy’s favorite charitable organization. The hospital helped her while raising her daughters and she would like to leave something for them.

Unexpected Circumstance
Within a matter of weeks, Stacy is diagnosed with a blood disorder and suddenly dies. Ted feels a lot of stress with the girls asking him every question and having to comfort his in-laws.

As in most spousal deaths, all of Stacy’s assets passed tax free to Ted. Terry now wants the money her mom promised would be hers upon her death, but there was no such legal promise. With Stacy’s death, Ted bonds with Sally and begins to see her as a potential successor in business.

Steps Taken by Delta Trust
1. Rework Stacy’s parents’ estate documents to reflect Stacy’s death, including a healthcare declaration and durable power of attorney for Stacy’s siblings. Each of the remaining three siblings were invited to list items  they would like. Delta Trust handled this in order to limit the emotion. Conflicts were worked out by the parents based upon need. Delta Trust had the portrait of great grandfather copied on to canvas using a museum quality photographer and each sibling was presented a copy. The original did go to the sister in Boston.

2. We helped Ted engage an expert at an automobile dealer valuation and recommended that Sally work for one year at Sewall Cadillac in Dallas.

3. Ted set up an irrevocable trust for Terry that pays her $500 per month. He refuses to pay for anything else. The condo is put in the trust, so if it is sold the money will stay in the trust and can be used for another house.

4. Ted also arranged several education funds for Leslie’s children ($11,000 per year for 5 years) and has told Sally and Terry that he will make arrangements for their future children.

5. Uncertain about where the children could end up, Ted put the dealership and land in a family limited partnership. This allows him to gift to the girls (or set up a trust for them) additional value in these assets in the years ahead.

6. Delta Trust acts as co-executor with Ted and Delta Trust also becomes trustee of a new life insurance trust.

7. Ted agreed to set up a charitable remainder trust with the beneficiaries after his death being Arkansas Children’s Hospital in honor of Stacy’s memory.


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