Incapacity:Donald Sterling

Sterling and Incapacity

If you have been following the ongoing case of Los Angeles Clipper’s owner Donald Sterling (STORY HERE), you may have seen reports over the legal fight regarding Shelly Sterling’s sale of the team. Sterling’s situation, while extremely public and high profile, demonstrates the power of clauses common to many estate plans.

Does Your Revocable Living Trust Include “Sterling Language”

A common inclusion to Revocable Living Trusts is planning for incapacity. One way of addressing this is to provide for a change of control from trustee A to a different trustee, or trustee B, once it is established that trustee A is “incapacitated”. For Sterling, the key issues is whether Donald Sterling is incapacitated, leaving his wife as sole trustee over the trust assets, including the Los Angeles Clippers.

How Is Incapacity Determined?

To determine whether a second trustee could take over, incapacity must be demonstrated. A trust could provide varying ways of determining incapacity. This could include using a panel of individuals to make the determination, identifying narrow limited circumstances or medical conditions where incapacity would be determined to exist, or leaving it to be determined at the opinion of medical professionals. In the case of Donald Sterling, his trust allowed incapacity to be determined following the opinion of two physicians; after this occurred, Shelly is arguing that Donald was incapacitated, leaving her as the sole trustee in charge.

How does this Affect You?

The Sterling case is a great example of how incapacity clauses in a trust could work. If you have a revocable living trust in place, you should review they type of planning you have in place for incapacity, and whether the process that is provided for still makes sense. Intra-family lawsuits may be avoidable by simply keeping up with current wishes and preferences.

At Estrada-Legal, PC we believe your family is your most important asset. Call us at 602 635-7414 to discuss your planning needs.