All About Estates

An XS-Cessive Inheritance

This Blog was written by: Natalie Rouse

As some of you may have read in recent celebrity news such as the UK Mirror, the daughter of Michael Hutchence (a founding member and lead singer of rock band INXS) and Paula Yates (television personality), Heavenly Hiraani Tiger Lily (“Tiger”), is currently making headlines . She is set to inherit millions of pounds from her late father’s estate when she turns 21 years old on July 22nd. Tiger’s story is a sad one – her father committed suicide in 1997 when she was just 16 months old. Then, her mother died in 2000 of an accidental heroin overdose – Tiger was 4 years old at the time. She has been being raised by her mother’s ex-husband Bob Geldof, along with her three older half-sisters (who have/had equally fascinating names, by the way).

The 37 year old rock star, Hutchence, had a Will drawn up the year before he died. In it, Amnesty International and Greenpeace were to split a legacy of £300,000. One half of the residue was to go to his family members and Paula Yates, and the other half, to his only child, Tiger (for distribution at age 21). On his death, his family was shocked to learn from his Executor that Hutchence seemingly had no net worth. After paying his liabilities, including $670,000 in legal fees, his estate seemed to be reduced to zero. Amnesty International and Greenpeace confirmed that that they never received funds from the estate. The Hutchence family has claimed that they only received “a couple of small bowls, some awards, and a big poster of Brigitte Bardot…”

However, it was uncovered over time that there may be a number of “hidden” assets that were not included on the estate inventory. This seems to have included Hutchence’s Gold Coast properties, a villa in France, a house in London, a development in Indonesia, a number of luxury cars, and ongoing royalties from INXS. It’s believed that Hutchence had structured his affairs with a view to minimize tax and to prevent his fortune from falling into the wrong hands (such as, in his words, “thieving relatives” and “girlfriends”). These additional assets seem to have been held through a complex structure of companies and trusts which were domiciled anywhere from Liberia to the British Virgin Islands, ultimately controlled by an asset-protection trust called the “Vocals Trust”. The beneficiaries of the trust are unknown, but it appears that they were not all the same as those in his Will.

After a years-long battle that sounds much like something out of a Hollywood film, (as described in a recent TheAge.com article; questionable tax schemes, missing money, disbarred lawyers, and feuds between Paula Yates and Hutchence’s mother), Hutchence’s family settled out of court last May. In return for dropping their claim to find out details on the missing assets, they received a total of £160,000.

The lawyer who drafted the 1996 Will has commented that Hutchence’s “principal concern was his daughter, Tiger Lily, and that he had structured his financial affairs to help her.” Tiger is said to have received very little financial support from her father’s estate as she was growing up (though she has likely not been disadvantaged, with her legal guardian Bob Geldof having been a successful musician, businessman and activist himself). However, time has confirmed that her father’s intentions were true. The royalties from his music and record sales seem to have been accruing to a trust for Tiger ever since her father’s death nearly 20 years ago, and has now reached the millions. In the meantime, despite her celebrity background, Tiger has lived a relatively private life, out of the public eye. One wonders if this is bound to change with her impending inheritance.

Much of the story remains shrouded in mystery. It brings to mind many questions that may never be answered regarding why Hutchence structured his estate plan the way he did.

It also teaches us some lessons in terms of estate planning. Firstly, the Vocals Trust as an asset-protection trust could have been a successful way of protecting Hutchence’s assets during his lifetime, but could have been better structured to mirror the terms of his Will in order to accomplish what he intended (especially in the case of an insolvent estate) and reduce the chance for litigation. In addition, complex planning can be beneficial (as long as it’s not used for purposes like tax-avoidance), in certain situations. However, it loses its benefit if the settlor does not fully understand the result, which may be the case here. In terms of the trust for Tiger, while a trust for his minor daughter was wise planning, a complete payout at the young age of 21 is likely not practical or advisable. Instead, the trust could have been completely discretionary in terms of income and capital, with age distributions (and a final payout at age 35 instead, for example).

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About Paul Fensom
Scotiatrust offers a full range of estate, trust and philanthropic advisory services designed to meet a client’s personal objectives and designed to evolve across a variety of life stages and financial events. Email: paul.fensom@scotiawealth.com

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