The Legacy of Ray Charles - A Musical Genius

I found this article in the Los Angeles Times entitled Ray Charles' children battle over his legacy. The article demonstrates some of the potential pitfalls of organizing a well thought out plan, but not thinking through possible troubles not utilizing a corporate trustee may cause. Earlier this month we posted an article exploring the wisdom of using a corporate trustee to manage your trusts. (Click here to view: Six Reasons Why You Might Need to Consider Utilizing a Corporate Trustee)
Read the L.A. Times article and please share your thoughts on the situation of the Charles children and the choices Mr. Charles made in finalizing his legacy.

The Charles estate has several examples of how a plan failed to meet the objectives of its creator, here are two more issues that jumped out at me right away:

1. Talking to your heirs about your estate plan can sometimes just is not enough. (especially when the family structure is complicated and/or the estate is substantial).

2. If an estate plan involves the creation of a private charitable foundation, governance issues are doubly important.


1. Talking to your heirs about your estate plan can sometimes just is not enough.

If Ray Charles had engaged in preparing a strategic legacy plan to accompany his estate plan he clearly would have avoided the horrible situation that currently exists for his children. During the legacy planning process Ray would have documented his final thoughts and wishes beyond the estate planning documents. Ray's plan could have detailed why he created the family foundation and his wishes for how he desired his musical legacy to be used creatively in the future.

But what happened in reality is far removed from the above suggested result. Instead Ray simply gave an oral rendition to a varied audience who each had the ability to misunderstand, mis-remember, or have no recall of the details whatsoever.

Shortly before Christmas 2002, Ray Charles called a meeting of his 12 children at a hotel near Los Angeles International Airport. Ten of the twelve attended, ranging in age from 16 to 50 -- with 10 mothers among them -- they all listened as their father told them he was mortally ill and outlined what they could expect from his fortune.

Most of Charles' assets would be left to his charitable foundation. But $500,000 had been placed in trusts for each of the children to be paid out over the next five years, according to people at the meeting and a trust document.

Yet Charles' description left so much to the imagination that some of the children came away with the impression that he meant to leave them $1 million each. Charles also hinted that there would be more for them "down the line," which some interpreted to mean they would inherit the right to license his name and likeness for profit.

The confusion and contention that resulted from that family gathering, the only time so many of the children met with their father as a group, helps explain what has happened since. Charles exercised iron control over his music and recordings, but his legacy is in disarray, knotted up in legal disputes between the estate's management and his family members, according to interviews, court documents and correspondence from the California attorney general's office.

2. If an estate plan involves the creation of a private charitable foundation, governance issues are doubly important.

Governance issues are especially important when it comes to private foundations because after the founder is dead, generally speaking no one other than the state attorney has standing to step in and make sure the foundation is being properly run. And just because it's a charity don't assume the sins of humanity are somehow banished from its hallowed halls, as reported by NY Times reporter Stephanie Strom in Report Sketches Crime Costing Billions: Theft From Charities. The following excerpt from the linked-to LA Times piece makes clear the Ray Charles private foundation may be many things, but a beacon of good governance it's not:

In February 2006, Adams' stewardship of the foundation was questioned by Deputy Atty. Gen. Wendi A. Horwitz. After learning that Adams was serving simultaneously as chairman, president and treasurer of the foundation -- in violation of state law -- she gave Adams 30 days to comply. He appointed a new treasurer and a few months later added a majority of independent outsiders to the board.

The attorney general's office never took public action against the foundation. In December, Adams resigned as president of the foundation and of Ray Charles Enterprises. He was succeeded by Ivan Hoffman, a lawyer who had worked with the estate. However, a receptionist at Ray Charles Enterprises said last week that Hoffman was not currently its president. Hoffman and a company spokesman declined to comment.

Adams still exercises power at the organizations, the lawsuit filed by Den Bok alleges. It is unclear whether he still holds any formal titles. A spokesman for Atty. Gen. Jerry Brown, who succeeded Lockyer in 2006, had no comment.

Link to L.A. Times Article: Here