Fixing David Bowie’s Will

David Bowie died on January 10, 2016, just two days after the release of his final album, Blackstar. The last song on the album, “I Can’t Give Everything Away,” seems prophetic both in its title and its initial verse. “I know something is very wrong.”

News stories estimate Bowie’s estate at $100 million. His legal name is David Robert Jones. He was a citizen of the United Kingdom and a resident of the United States (New York City). He left a Will dated August 25, 2004, and a Codicil to the Will dated May 4, 2007. David Bowie was married to his second wife, Iman Mohamed Abdulmagid (“Iman”) at the time of his death. David has a daughter with Iman, Alexandria Zahra Jones (“Lexi”) who is 15 years old. He also had a son from his first marriage, Duncan Jones (“Duncan”). Duncan is 44 years old, married, and is expecting his first child (Bowie’s first grandchild) in June of this year. Iman has a daughter, Zulekha Haywood (“Zulekha”), from her first marriage.

Bowie named Co-Executors of his Will, Bill Zysblat (“Bill’), and Paddy Grafton Green (“Paddy”). Bill is a Certified Public Accountant and Bowie’s business manager. Paddy is a media lawyer from London. Paddy declined to serve as Co-Executor, leaving Bill to serve as sole Executor.

The Will directs Bill to distribute Bowie’s estate as follows: (1) distribute personal property (other than copyrights) per Bowie’s wishes, as previously made known to Bill, (2) pay $2 million and the shares of Opossum, Inc., to his friend, Corinne Schwab (“Coco”), (3) pay $1 million to his friend, Marion Skene (“Marion”), (4) transfer his Ulster County, New York, vacation home to Lexi, (5) transfer his other residences to Iman, and (6) distribute the remainder of his estate 50% to a trust for Iman, 25% to a trust for Lexi, and 25% outright to Duncan.

Iman’s trust is a QTIP Trust. Bill is required to distribute all trust income to her and distribute principal for Iman’s health, education, maintenance, and support. Upon her death, the remainder of Iman’s QTIP Trust is to be distributed one-half to Duncan and one-half to Lexi.

Until she reaches age 21, the trust for Lexi provides Bill discretion to distribute income and principal to Lexi. Upon Lexi’s attaining age 21, all trust income must be paid to her. At age 25, the trust terminates and is distributed outright to Lexi.

It is likely Bowie’s estate will be subject to estate or inheritance tax in both the United States and the United Kingdom. His U.S. estate should receive a credit for any taxes paid to the U.K. His Will provides that all estate and inheritance taxes shall be borne by Duncan and Lexi (under U.S. law, assets that pass to a spouse in a designated manner are not subject to estate tax until the death of the spouse). Thus, Iman’s share of the estate will not be subject to estate tax in the U.S. until after she passes away. Because of the manner in which the Will was written, Duncan and Lexi would be responsible for any estate or inheritance taxes attributable to the gifts that are distributed to Coco and Marion.

It is unknown why Bowie chose to use a Will rather than a Revocable Living Trust to dispose of his estate. A Will requires a probate proceeding, which means that Bowie’s finances and the identity of his heirs become public record. The probate process can take months, or even years, to complete and can cost thousands (or in Bowie’s case, hundreds of thousands, in legal and executor’s fees). A trust could have obviated the need for probate, which would have kept information about his estate and his heirs private. It likely also would have reduced the amount of legal and administration expenses.

Bowie’s Will provides that the residual of Iman’s QTIP Trust shall be payable outright to Duncan and Lexi at Iman’s death (assuming Lexi is 25 at that time). Had he left the residual of her trust in trust for Duncan and Lexi, their inheritances could have been protected from divorce and creditors. Provisions also could have been made for a portion of the estate to pass to Duncan and Lexi’s children (assuming Lexi has children in the future), free of generation-skipping transfer taxes. By leaving all his residences other than the Ulster vacation home outright to Iman, he has exposed these properties to her creditors. The outright gift also allows her to dispose of the properties as she wishes, potentially giving them to a boyfriend, new husband, or even to Zulekha, whom it does not appear Bowie intended to benefit. Had the properties been a part of the QTIP Trust, Iman would have had full use of them during her life and they could have passed to Bowie’s two children upon her death.

Duncan’s outright gift of 25% of the estate also could have been left to him in trust. If properly drafted, it could have provided him with divorce and asset protection, while still allowing him to receive the trust income and use of the trust assets during his lifetime. Duncan could have acted as co-trustee of his trust or had the power to remove and replace the trustee (provided the replacement trustee was not himself, his wife, a close relative, or a subordinate employee). The trust could have provided for tax-favored distribution of the residual to Duncan’s descendants upon his death, but also allowed him flexibility to add his wife or charities if Bowie wanted to offer him that option.

The trust for Lexi also could have been extended to last for her lifetime. The Ulster residence also could have been placed in trust for Lexi. The trust could have been changed to provide for discretionary distributions of income and principal, which could have provided her with maximum asset protection and kept her inheritance safe from a future divorcing spouse. She could serve as co-trustee or have similar trustee removal and replacement powers like Duncan. She also could have had tax-favored distribution of the residual to her descendants upon her death, but also allowed her the same type of flexibility to add or change beneficiaries among a designated class.

While some of these changes may not be possible at this time, the decanting and modification statutes under New York law may allow for many of these recommendations to be implemented despite Bowie’s untimely death. Iman, Duncan, and court appointed guardians for Lexi and the unborn grandchild (conceived prior to Bowie’s death) would have to consent to the changes.

Our firm is experienced in drafting and post-mortem administration of trusts. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up-to-date with information regarding new developments and planning strategies. You can get more information about a complimentary review of your clients’ existing estate plans and our estate planning, probate, and trust administration services by calling our office.\

Quoted from American Academy of Estate Planning Attorneys