most people know, I am a huge football fan. My love of football
sometimes crosses paths with my professional experience and,
unfortunately, provides a talking point on estate planning.
Last month, I detailed the tragic estate issues impacting Sean
Taylor’s loved ones after his death. This month the estate of another
professional football player - Steve McNair –will provide another lesson
on how to prepare for the worst. I will not go into the details or
pass judgment on Steve McNair; I will only say that he was shot and
killed on July 4, 2009. As with the Taylor estate, the tragedy only
grows from there.
According to reports, McNair made over $90 million during his 13-year
career playing for the Tennessee Titans and the Baltimore Ravens.
McNair was survived by his wife and two minor sons from that marriage.
McNair was also the alleged father of two other minor children from
before he was married. A thorough search of McNair’s properties was
conducted and it was determined no will existed. At the time of his
death McNair was reported to have a net worth around $20 million with
most of the property listed in his name only. Simple math makes me
wonder where $70 million went, but, as I said, I won’t judge.
On July 15, 2009, McNair’s wife, Mechelle McNair, filed Emergency
Petition for Letters of Administration to the court, naming only her two
sons heirs to the estate and seeking to be appointed the personal
representative. The court appointed Mechelle McNair personal
representative to McNair’s estate and required her to file with the
court in 60 days an inventory listing all of McNair’s property with an
estimate of its fair market value. Mechelle McNair stated the two
children born out of wedlock should file claims for their inheritance
with the estate.
The inventory of McNair’s estate was recently filed listing estate
assets at around $19.6 million. Most of this money (about $16.9
million) was invested in stocks and bonds. McNair also owned at least
two corporations, one of which was a cattle business called McNair
Farms, Inc., located in Mississippi. This was not all of the property
owned by McNair because any jointly owned property would have passed
outside of probate and would not have needed to be listed.
Tennessee law allows for a widow’s election, meaning that Mechelle
McNair can elect to receive a different amount from the estate then what
she’s otherwise entitled to get. In Tennessee, this means 40% of the
assets, rather than the one-third share she’d get under the intestate
law. She recently filed to receive the 40% election.
Here is my quick analysis, likely outcome and suggestions from this tragedy.
As Steve McNair’s spouse, Mechelle McNair, probably lost the most
from the lack of a will. The 40% elective share that Mechelle McNair
took is reduced by the value of any assets she received through joint
tenancy, or otherwise, outside of the estate. Because she chose the 40%
option, it suggests Mechelle didn’t receive as much outside the estate
via joint tenancy of property like the McNair’s home or joint bank
accounts. A simple sweetheart will, leaving everything to Mechelle,
would have given her the entire estate.
McNair’s four minor children are also financially impacted by the
lack of a will. Assuming that the paternity of the two minor children
born out of wedlock is proven; they will each receive a one-fourth share
of what is left after Mechelle McNair takes her portion. Since all the
children are minors, each mother of the minors will have to petition the
court to be appointed legal guardian of the minors’ inheritance, since
it will be put in a trust account. Their guardianship lasts until each
child turns eighteen. On their eighteenth birthday, each McNair child
will receive their entire inheritance free and clear of any strings.
The proverbial spendthrift child buying a Porsche comes to my mind. Some
type of trust, either revocable living trust or testamentary trust,
would allow McNair or his trustee’s some control over his minor
If there are losers, then there must also be winners. In this case,
the professional advisors utilized in creating a post-estate plan -
lawyers, accountants and financial professionals will likely be the
first winner. Spending a little money up front in creating an estate
plan with an attorney in conjunction with other financial professionals
would have saved thousands of dollars in the long term. Lawyers will
petition the court for establishing the trust accounts and dealing with
non-normal distributions of the trust account or for changes to the
account, since the courts will likely take an active roll in any
If McNair had established a trust for his children, then he could have
named a trustee whose judgment he valued, to watch over the inheritance
instead of the court. Second, he could have established conditions
under which inheritance would be turned over to his children’s control
to mitigate wanton spending habits such as establishing appropriate age
Further, since McNair had a business located in another state,
ancillary probate will have to be opened in Mississippi to determine the
ownership of the cattle business which will also drive up the probate
costs for the estate. Creating an estate plan with ownership of the
cattle business in trust or other business succession plan would have
likely negated ancillary probate.
The other big winner in McNair’s estate is the state of Tennessee and
Federal government’s tax coffers. By not drafting an estate plan that
would take tax liability into account, McNair’s estate lost numerous tax
sheltering arrangements. A few steps would lower the Federal and State
estate tax bill. Instead, McNair’s estate will owe millions in taxes.
In 2009, the Federal Estate Tax exemption on estates was $3.5 million.
Any estate over that amount will be assessed at a rate of fifty-five
percent. This ignores whatever the estate tax rate is in Tennessee and
qualifying exemption. Taking a very simplistic view, ignoring the state
estate tax liability, election, etc and their impact on Federal estate
taxes, McNair’s estate would owe $8.855 million dollars to the U.S.
Taking a few steps, like moving property into a trust, transferring
assets into a joint tenant account with his wife or taking other taxes
advantageous transactions, would have saved McNair millions. While it
is hard to begrudge someone that still has millions of dollars left
after paying the tax man, I doubt McNair would have wanted the millions
of dollars he earned playing football to simply disappear rather than go
to support his family.