Tom Clancy estate dispute ends in favour of his widow

Tom Clancy estate dispute has been resolved in favour of his second wife.

Tom Clancy estate dispute has been resolved in favour of his second wife.

Thomas Leo Clancy , Jr. (April 12, 1947 – October 1, 2013) known as Tom Clancy, was a world famous novelist and author.  Some of his greatest works include: The Hunt for Red October, Patriot Games,  and the Sum of All Fears.  His attention to detail in writing about espionage make his works captivating to millions of fans around the world.

Tom Clancy passed away on October 1, 2013 as a result of an undisclosed illness.  At the time of his death, his estate is estimated to have been worth $86 million.  His death revealed that his original estate plan had been modified after he remarried.  A recent online story found here outlines the problems created after the change.  The main issue of the Tom Clancy estate dispute is a common problem faced when a person remarries.  A choice has to be made how to divide the estate between the new spouse and children from any previous marriages.

This dispute was initially litigated in Baltimore, Maryland before the Baltimore City Orphans’ Court.  As a result, whatever Tom Clancy left to his second wife would not have been taxed until she passed away.  Whatever he left to his children from his first marriage would be taxed when he passed away.

Estate plan used a Qualified Terminable Interest Property Trust

Tom Clancy elected to solve the above problem by creating what is known as a Qualified Terminable Interest Property Trust.  This would allow his second wife to receive income from this trust while she is alive.  This also allows the second wife to defer tax on the principal in the trust to when it passes to his children.

Tom Clancy’s will left real estate and personal property to his second wife and divided the rest of his estate into three portions: a trust solely to his second wife, a trust to his second wife and the daughter he had with her, and a trust for his four children from his first marriage.  The trust left solely to his second wife would avoid taxes at the time of his death, while the other two would pay those taxes.

The estate dispute apparently arose as a result of Tom Clancy modifying the original will by codicil to include the above-mentioned Qualified Terminable Interest Property Trust provision to the trust given to his second wife and her daughter.

Although few financial figures were disclosed, the modified estate plan created two alternatives: the four older children’s trust valued at approximately $28.5 million having to pay $11.8 million in tax, or alternatively, a higher amount of approximately $15.7 million in tax being split between the four older children’s trust, and the trust left to the second wife and her daughter.  Full details concerning the initial story are found here.

The initial decision in this dispute was in favour of Tom Clancy’s second wife.  This was upheld on appeal. As a result, the tax burden will be absorbed by his children.

Tom Clancy estate dispute teaches the importance of estate tax planning

This dispute is an excellent example of the importance of estate tax planning.  A provision in the amending codicil addressing the allocation of of estate tax would have been helpful.  Furthermore, remarriage and the birth of a child are major life events.  Estate plans need to be modified from the ground up if necessary, in order to ensure the testator’s testamentary intentions are captured accurately.  The fact that there were two options with respect to which of the trusts would be responsible for the estate tax confirms that Tom Clancy’s estate plan was insufficient.

As a result, the beneficiaries had to litigate and to get the Courts involved.  Fortunately, the dispute is over and it will not tarnish Tom Clancy’s legacy further.

More on this story here.