[Source: Celebrity Estates: Wills of the Rich and Famous]

Ep 42 – Jack Cassidy: Loose Ends Can Unravel Your Estate –– With Christopher Melcher

Celebrity divorce lawyer Christopher C. Melcher explains how to finalize an estate plan and more.

Welcome to the celebrity estates, wills of the rich and famous podcast. In this podcast, we break down high profile celebrity estate planning cases for advisors and their clients. Most celebrity estate catastrophes are based on the same issues that everyday people face just with the volume turned up. Our goal is to identify and extract the individual estate planning issues that lie at the heart of each story. We then discuss what advisors should expect. And how to avoid common pitfalls hosted by WealthManagement.com senior editor, David Lenok.

David Lenok:

Hello everyone. And welcome to the latest episode of WealthManagement.com’s Celebrity Estates: Wills of the Rich and Famous. For anyone new to the podcast, in each installment, myself and a guest take on a different celebrity estate in an attempt to extract some key lessons that planners can apply to their more traditional clients. The idea being that celebrity estate planning stories, although often ridiculous in their details, generally have at their core is very basic issues that can just as easily apply to non-famous or fabulously wealthy clients. My guest this week is celebrity divorce lawyer Christopher C. Melcher. Christopher is a partner at  acclaimed family law firm Walzer Melcher LLP, where he focuses on complex family law litigation and premarital agreements, particularly among high net worth individuals.

David Lenok:

He has 20 years of experience helping his clients navigate all the financial aspects of divorce, including tax consequences of property division, alimony, corporate laws dealing with the division of a family business, and the definition of income for purposes of sending spousal and child support. He also handles appeals or family law judgments and proceedings from family law orders. Before entering family law exclusively, he practiced criminal defense and civil personal injury litigation.

David Lenok:

So the subject of our episode today is Jack Cassidy. So Jack, although perhaps not quite as well known as his teen idol sons, David Cassidy, and to a much lesser extent, Shaun Cassidy was an American actor and singer known for his work in the theater, television, and film. He received multiple Tony Award nominations, including one win. As well as a Grammy Award for his work on the Broadway production of the musical She Loves Me. He was also nominated for several Primetime Emmys. Cassidy suffered from some fairly public mental health and substance abuse issues. In his 1994 autobiography C’mon, Get Happy, Cassidy’s eldest son David wrote that he became increasingly concerned about his father in the last years of his life. The other Cassidy, who suffered from bipolar disorder and alcoholism, was displaying increasingly erratic behavior. In 1974, his neighbors were shocked to see him casually watering his front lawn naked in the middle of the afternoon.

David Lenok:

Cassidy’s second wife, Shirley Jones, described a similar incident when she found him sitting naked in a corner of their house reading a book. Jones said to him that they had to get ready to do a show. And he calmly looked up and said, “I know, now that I’m Christ.” In the early morning hours of December 12th, 1976, Cassidy lit a cigarette and fell asleep on a couch. While asleep, he dropped a cigarette, igniting the couch. The flames spread through the apartment and burned down the building. And he, unfortunately, died in the blaze. Cassidy was married twice. The first marriage was to actress Evelyn Ward with whom he had son David and the second was Partridge Family star Shirley Jones, with whom he had three sons, Shaun, Patrick, and Ryan. And he and Jones separated in 1975 and ultimately divorced in 1976. After Cassidy’s death, it came to light that he had not updated his life insurance documents in light of the divorce.

David Lenok:

And that Jones was still the designated beneficiary.

A fight eventually ensued over the $50,000 accidental death payout between Jones as named beneficiary and Cassidy estate, which claimed the money should go to his heirs.

The case eventually made it all the way to the Supreme Court of California, which interestingly found in favor of the estate, explaining that Jones’s designation of appellant as beneficiary was superseded.

As of the date, the parties entered into a marital settlement agreement, which comprehensively disposed of all rights and obligations between them. So Christopher, what are some lessons that advisors can learn from Jack Cassidy’s strange circumstances.

Christopher Melcher:

There is a ton of lessons to be learned here. And I love this story to help teach us here of loose ends. Also, to see how somebody who is a celebrity and very well known back in the day, and we’re talking up through the seventies, could now live in infamy because they’re part of a California Supreme Court history in this case. And that’s helped his legacy in a way live on. And just in a little bit more background why I love this example so much is that I’m a big fan of the Columbo TV series. And that’s my only exposure to Jack Cassidy as an actor because he appeared there three times as a villain. And I thought, “Wow, what a wonderful actor. And so diverse in his talent.”

Through my work as a divorce lawyer, I came across this case, Life Insurance Company of North America versus Shirley Jones Cassidy, that came up some litigation that I had involving another celebrity client where life insurance was an issue.

Christopher Melcher:

Then I read it and realized, wow, they’re talking about Jack Cassidy, Shirley Jones from the Partridge Family. Saw the circumstances of his death and how tragic that accident was and learn more about the family. And it’s just interesting to me that Jack himself would be such a well-regarded actor. And then his wife, Shirley, would be such a great actor. And then the two children also. What happened is a loose end. The divorce lawyer who assisted in resolving the marital settlement agreement got that part done. All the issues in their divorce was resolved, but then no one checked the life insurance. Or at least Jack didn’t take care of it. And to the extent that he had estate planners, and I would imagine he would’ve. He was a successful person, that no one updated that part of his estate plan, looking at the life insurance.

Christopher Melcher:

In my mind, I see this a lot with attorneys and particularly in divorce, sometimes with estate planning, we’re so focused on the document, whether it’s a marital settlement agreement or a trust that we’re trying to get to finish, but then we don’t tie up the loose ends. And it’s almost like running a race. You could do a great job running that race, but it only counts when you cross the finish line. And here, they got right up to the finish line and then just stopped and didn’t deal with this one issue of the life insurance policy. So he dies in 1976, and the issue doesn’t get resolved until 1984. So that’s eight years of litigation after a tragic death.

Now this family is facing eight years of dealing with lawyers and all the expenses, all the way up to the California Supreme Court, simply because nobody changed a designation form on a life insurance policy.

David Lenok:

Yeah. And particularly, I mean, even in mid-1970s dollars, this is only $50,000 that they’re fighting over. So after eight years of litigation, one has to imagine that at a certain point, you’ve kind of exhausted what you were fighting over.

Christopher Melcher:

That is right. And I was trying to understand who is fighting, who because the insurance company stepped aside and said, “Hey, there’s a dispute. You guys figure it out.” The dispute was really between Shirley Jones, the ex-wife, and the estate of Jack Cassidy.

And when I read further, least just what I could see on the internet, that there was apparently falling out between Jack and his son from the prior marriage, David Cassidy, before the death, and that Jack had eliminated David from his estate plan. The children  between Jack and Shirley, I’m still not clear on why there would be such a dispute because you figure Shirley and Shaun would be aligned. But there was obviously a problem between Shirley wanting the money directly and the estate wanting it to go to the estate and why she chose to fight all that, not just give up on the 50 grand and let it go to his estate. I don’t know and certainly don’t understand. There should be another zero or two behind that number to make any sense to me.

David Lenok:

Yeah. And this is, I mean, pretty easy example of a blended family, right. Where if we have this fight where David isnt’ involved, and maybe cut out of the will. And we have his father’s ex-wife who’s not his mother. And then we have other children who are only his half relatives and, or Shirley herself, who has really no necessarily blood connection to David to bind her. This is not really an uncommon fact pattern in a divorce or really in any estate.

Christopher Melcher:

Yes. And I do a fair amount of premarital agreements. I really don’t like premarital agreements just generally.

But in the blended family, it’s so important because when somebody has children from a prior relationship and then they get married or remarried. They have an obligation to their new spouse. And they also have an obligation to the children from the prior marriage, and to see a fight between the spouse of a deceased party and children of that marriage, or from the prior marriage has got to be the one of the worst legal disputes you could possibly have.

I think, through good planning, whether that’s with a premarital agreement or an estate plan is to recognize the dynamics of that blended family and making sure that everyone’s protected because once somebody dies, they’re not around to control things and guide things and self-interest takes over. Like I say, this is some of the most personal, maybe vial litigation that you could get into.

David Lenok:

So that’s really interesting, actually, what you just said, because I think it’s safe to say in the past on this show when the issue of prenuptial agreements has come up, we’ve been pretty pro prenuptial agreement. But you say that you actually dislike prenuptial agreements. Do you mind sort of expanding on why that is?

Christopher Melcher:

Yes. I guess I like to think in a romantic way that people should be married for love and respect, and in it for life. And then when they get married with a premarital agreement, it’s I do with your fingers crossed behind your back. There’s a question there is that a full commitment. Realistically, there’s people of enormous wealth or have these other complexities in their life where a premarital agreement is indicated. And I like it and favor it in those situations. But then I’ve seen so many where it’s just some sick manifestation of power and control. Somebody’s afraid that if they shared wealth with their new spouse, that that person would leave them or that they would lack control over that other person. I’ve just seen some of the negative aspects of it that even though I built a specialty around premarital agreements, I’ve become to dislike them.

David Lenok:

Interesting. So for those of us who aren’t quite as experienced regarding prenuptial agreements, what does one of these sort of overly controlling, or I guess for lack of a better term, bad prenuptial agreements look like as compared to one where you would think it would be a little more kosher?

Christopher Melcher:

The indication is you get nothing. It’s a completely one-sided agreement. No property will be created during the marriage. So no community or marital property. No alimony or spousal support if they break up and a complete waiver of all surviving spouse rights. That’s what the bad one looks like. To me, why would anybody want to be in a marriage that had no protections, no benefits at all? I like to see a give and take and exchange a partnership and to understand that each spouse brings something to this marital partnership that there should be things shared. And when they exit or terminate that partnership, there should be some rights and protections.

David Lenok:

So in one of these situations where maybe there’s a potential for power imbalance, I guess let’s call it. Are there other documents or tools that you prefer to use in lieu of the prenuptial agreement, or are you just more willing to have faith in sort of the bundle of rights that marriage and divorce sort of naturally under the state laws allow?

Christopher Melcher:

Well, and that’s a great point because we, at least in California, we have strong protections for premarital property in which we would call separate property that’s not available for distribution or division, generally speaking. And it’s only the things that are created or acquired during a marriage that would be community and divided.

Somebody coming into a marriage who’s maybe retired, semi-retired with a ton of wealth. They could be married without a premarital agreement and not have any community property. So it’s actually in that sense that the out spouse would benefit by having a premarital agreement because they would know if there was a death or divorce that they would actually get something.

I think that the dealing with the power and control would hopefully be through some counseling. And if they do get presented some terrible one-sided agreement or they’re arguing and breaking up during a negotiation over a prenup, that should be a good sign that this is not the right relationship.

David Lenok:

Coming back off our small prenuptial agreement tangent here and getting back to sort of the Jack Cassidy story. You mentioned that this whole thing sort of revolves around a loose end that planners sort of neglected to tie up. And in this case, it was a life insurance policy. What are some of the typical loose ends you see that get overlooked and in situations of divorce where they’re not tied up?

Christopher Melcher:

Some loose ends that get overlooked in divorce are: the bank account, survivorship rights, beneficiary, designations, or survivor designations on retirement accounts.

Besides updating the life insurance policy, we’re trying to encourage the client to go through, look at all those things, go to the bank, change the survivor beneficiary designations, same with the retirement account.

Those are some of the obvious ones, obviously, the life insurance. In addition to that, from the Cassidy example, the deeds on property, they may have a judgment or a marital settlement agreement that awards some real estate to one party, but then they never changed the title. And then maybe it’s joint tenancy, and one dies. And now we have this huge dispute.

What I’ve done in my documents as a high net worth divorce lawyer is that I kind of anticipate that people are going to have a Cassidy problem. So I have language in there that says that any failure to update any of these designations or estate plans, trust was all unintentional.

And that our intent was to disinherit the other party and that they should get nothing. And if that surviving party winds up with something from my client. That they hold it in trust and to pay over to my client’s estate. I learned that from Cassidy and having some saving language in there because if you ever read the life insurance company in North America versus Cassidy case, you’ll see there was an opinion by another justice, Justice Bird, who would’ve given the policy to Shirley Jones and was not convinced that the divorce was sufficient in indication of intent, that she should not receive that life insurance benefit and had judge Bird prevailed in the California Supreme Court Shirley would’ve gotten the money. So that’s why I have that language in there saying, “Hey, we’re divorced. And we don’t want each other getting anything from the other in the event of a death.”

David Lenok:

Yeah. And I think that’s an interesting point to bring up too because, in my opinion, that is the more intuitive interpretation, then I would think it would work that way, right. Okay, well, not specifically disinherited somewhere. And this designation is made out to me just because we’re divorced. Doesn’t implicitly mean that I get nothing ever. That’s how at least I would think as one of the parties to this if I want a lawyer. So I think this highlights the importance of, with a role advisers and lawyers, complainants would have. Hey, listen, this is how this works. And make sure that the clients are apprised of exactly how these designations work when they divorce. What that means so that everyone is going into this with full knowledge.

Christopher Melcher:

That’s right. Because we can’t ask Jack what he intended, just reading tea leaves. Did he intend for Shirley to get this money on the event of his death? And if we look back at the history that at least again, it was reported on the internet is that he reached out to Shirley the night before he died to ask her to dinner, and she declined. So it’s within really hours of his death. He wanted to go to dinner with her, maybe Justice Birds, interpretations weren’t wrong. Anytime we’re asking a judge to read the tea leaves and figure out what a dead party intended we’re in trouble. We have, I think our role as advisors is to anticipate a Cassidy problem and think that number one, we should get them to finish those loose ends. But then, on top of that, we should anticipate they’re not going to follow our advice and then put in some saving language like I have in my divorce judgments that say, “Hey, if we mess something up, didn’t cross that T that was unintentional.”

David Lenok:

So one interesting thing does what you do or how you address this problem change at all in the instance of sort of the increasingly common instance of sort of multiple divorce?

Christopher Melcher:

Yeah. I mean, there’s definitely serial spouses.

There could be obligations that are in a judgment from divorce one that remain into marriage to life. Insurance is kind of a common protection that a spouse would receive in a divorce to make sure that money’s available to replace support if their former spouse were to die.

We’re looking at these provisions to make sure that in marriage number two, whether we’re doing a prenup for that person, or we’re getting them divorced a second time, that we’re aware of what their obligations were from their prior spouse.

David Lenok:

We’re just about out of time here, but let’s try to, as I like to do, and put my guests on the spot a little bit is try to take a very complicated, broad topic and really just tie-up with a nice little bow in a way that’s absolutely impossible. If there’s one lesson to take away from this Cassidy situation for advisors, what would that lesson be?

Christopher Melcher:

The lesson is, tie up the loose ends. We’re running a race. It doesn’t count until you cross the finish line. Make sure you finish that race.

And then anticipate that your client is not going to follow your advice and try to have some backup provisions in there so that the court has no question about what the intention was if there was unfinished business.

David Lenok:

That’s about all the time we have for this week. I’d like to thank celebrity lawyer Christopher C. Melcher for just being a fantastic guest. And for all our listeners, I’ll see you, or I guess you’ll hear me on the next episode of Celebrity Estates: Wills of the Rich and Famous.