A Not-So-Happy Accident: Bob Ross’s Estate Planning Failures Leave His Son With Next to Nothing—Part 2
Famous for his giant head of hair, his soothing baritone voice, his folksy demeanor, and his iconic landscapes, Bob Ross became an pop-culture icon while host of the PBS series The Joy of Paining. His brand followed many other artists in that, after his death in 1995, his artwork and image soared in popularity.
Bob’s philosophy in both painting and life was that there “were no mistakes in life… just happy little accidents.” Sadly, as detailed in the recent Netflix documentary Bob Ross: Happy Accidents, Betrayal & Greed, Bob’s failure to coordinate his business agreements with his Will and Trust was anything but happy, leaving his only son largely unable to benefit from his father’s fame and fortune.
Unfortunately, Bob’s son Steve lost the ugly court battle against Bob’s former business partners. Bob’s Wills and Trusts planning failures ultimately are what led Steve to become unable to benefit from the lucrative intellectual property rights to the Bob Ross brand. That is why we will take the time to explain the steps you can take to ensure that your loved ones don’t suffer from the same fate after your death.
Ensure Your Business Agreements Are In Accord With Your Estate Plan
As we learned last week, although Bob intended to leave all of his intellectual property rights to his son, Steve, and half-brother, Jimmie Cox, and he even changed his Will and Trust to transfer those rights to them, the court ruled that Bob couldn’t transfer those rights because Bob didn’t own those rights to begin with. The court ruled that Bob had transferred all rights to his intellectual property to Bob Ross Inc. (BRI) during his lifetime via oral contracts, and therefore it didn’t matter what his Will and Trust said, because those rights weren’t Bob’s to give away
Bob started BRI in 1985 with his wife Jane Ross, as well as with Walter and Annette Kowalski. The four were initially equal partners in the corporation, but following Jane’s death in 1992, the bylaws of BRI required that Jane’s share in the company be divided equally among the surviving three partners. As a result, Bob was reduced to owning just one-third of the company that bore his name and likeness, and this was the structure in place upon Bob’s death in 1995.
Bob’s situation is fairly common among business owners. Unfortunately, far too few business owners take the time to prepare for their company’s continued success following their retirement, death, or incapacity. When business owners first create their governing documents—operating agreements, bylaws, partnership agreements, etc.—they often aren’t thinking ahead. This leads to many not coordinating their Wills and Trusts and business dealings, or not taking proper precautions at all.
In other cases—and as we saw with Bob—business owners falsely assume that their Will and Trust will override any business agreements they are party to. This is not how an Will and Trust works. Whether it’s a partnership, LLC, corporation, or some other business structure, your Will and Trust does not have the power to modify, undo, or override any business agreements to which you are a party. In order to give rights to someone with your Will and Trust, you yourself must legally be to give them.
To sum it up, when it comes to the ownership of business assets, the legal agreements governing the ownership rights of a business are what determines who owns the business and its assets upon the death of an owner, regardless of what your Will and Trust says. We can help you determine that your business planning is working in cohesion with your Wills and Trusts planning as long as we know about all of your business holdings, including your intellectual property and business entities when we handle your Wills and Trusts planning with you.
Whether your business is just getting started or you’ve been in business for years, here are the steps you need to take to avoid making the same not-so-happy mistakes that affected Bob Ross and his family.
The Right Way To Plan
Starting a business is the best chance to begin coordinate your business agreements with your Will and Trust. This allows you to address ownership rights of all assets right from the beginning and never have a conflict similar to Bob.
When your business has multiple owners, keeping yourself fully aware of all agreements, not signing any documents that you do not understand, and using personalized documents versus formulaic or template documents will be crucial. Documents created from a form or with a template tend to be generalized to the point that they won’t necessarily hep you protect the valuable assets you truly care about. Even if you already have such documentation in your business, it might not be too late to resolve these issues – though tomorrow might be.
Personalized governing documents should intentionally address the ownership rights to all of the company’s assets. Furthermore, consider what happens to the company, and its assets, upon a sale, death, or disability of each owner of the company. When in doubt, bringing your governing documents to your Personal Family Lawyer®, who has experience in both intellectual property and Wills and Trusts planning, will ensure everything is documented and in alignment with your wishes.
Now, you may be like Bob and many other business owners, and you failed to coordinate your company’s governing documents with your Will and Trust at the start of your business. In that case, you’ll need to hire a lawyer like us to review your company’s existing governing documents to determine how the documents address the ownership and succession of the company’s assets.
It could be that when you review the governing documents, you find that the ownership rights are not in alignment with your Wills and Trusts planning goals. Catching that early is great, and it may be possible to renegotiate the agreement with the other owners and amend the documents to better fit with your aims. However, if renegotiating the ownership rights proves unfeasible, at least your Personal Family Lawyer® will be aware of this fact, and we may be able to come up with an alternative solution to transfer ownership of these assets to your heirs. It’s certainly not the ideal situation, but it’s far better to learn this now while you are still alive, rather than learning it after your death as happened with Bob’s son Steve.
As illustrated by Bob Ross’s situation, not properly planning for the future of your business after you are no longer in the picture can have terrible consequences for your family. Whether you sell your business, retire from it, are no longer capable of managing it, or die, one day you will have to exit your business. A succession plan is designed to ensure that your company will continue to prosper once you are no longer running the show.
A Road Map For The Future Of Your Business
That said, it can be hard to imagine a clear goal for your business past your involvement in it. Multi-generational planning is by default something you’re almost certainly unfamiliar with. And, in fact, business strategies that worked for your grandfather and father might not have worked for you. So by the same token, what worked for you may not work for coming generations. This can make it feel impossible to even know where to begin with your plan, much less identify what problems might arise and how to address them.
This is where experienced Wills and Trusts planning lawyers like us come in. We can guide and support you to create a comprehensive Will and Trust to ensure the company and wealth you’ve worked so hard to build will last for generations to come. The core of what this means for you is putting in place a long-term business succession plan that not only names your successor but also provides a detailed roadmap for him or her to follow when you’re no longer around to offer your wisdom and advice.
If you’ve yet to create an Will and Trust that includes a comprehensive succession plan for your business’s future, meet with your Personal Family Lawyer® right away to take care of this vital responsibility. For example, Steve Ross, was left with virtually nothing, while the business built on his father’s name and persona continues to bring in millions of dollars every year, due to poor Wills and Trusts planning on his father’s part.
If you already have a plan in place, you could benefit by having us review it to make certain you’ve covered all your bases, as this is one of the areas we have seen being overlooked the most. Doing this will lift a weight off of your shoulders, because not only will you know that you have protected and provided for your family, but you have also laid the groundwork for taking your business to the next level.
Leveraging Your Intellectual Property For Future Generations
After creating your succession plan, you may want to consider separating your operating activities and your intellectual property. In that case, you’ll want to protect and transfer the ownership of your intellectual property rights to your heirs.
Using a trust, you can spell out exactly how you’d like your intellectual property distributed to your beneficiaries. Additionally, you’ll also want to think about which of your loved ones is best suited for owning and managing these intangible assets. Then you can leave behind a detailed plan for them on how to best use these assets for the benefit of them and your other loved ones.
There are different ways to utilize intellectual property. Your beneficiaries could simply sell your intellectual property assets outright, use the intellectual property as collateral to take out a loan, or license the use of your intellectual property to others. As we saw with Bob Ross’s case when properly managed, the licensing fees for a company’s intellectual property can generate millions in revenue, and that income stream has the potential to continue for generations to come.
Avoiding A Not-So-Happy Accident
Don’t let what happened to Bob Ross’s family happen to yours. If you own a business, it’s absolutely crucial that you put in place an effective Will and Trust that works hand-in-hand with your business agreements and include a comprehensive succession plan to ensure that all of the wealth and assets you’ve worked so hard to build will be properly passed on to your loved when needed.
As your Personal Family Lawyer®, we know that your business is one of your family’s most precious assets, and with our support and guidance, we can ensure that it will continue to provide the maximum benefit for your loved ones following your death or incapacity. If you haven’t taken the time to put proper Wills and Trusts planning in place, consult with us, your Personal Family Lawyer® today, so we can help you find the Wills and Trusts planning strategies best suited for your asset profile and family dynamics.
And if you already have an Will and Trust—even one created by another lawyer—you should have us review your plan to ensure it will work as intended and that it’s properly coordinated with your business agreements. Contact us today to get started.
This article is a service of Levi Alexander, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.