Probate Court to Decide if Sterling Can Block the Sale of the Clippers

Clippers and SterlingWe’re hoping some of our readers are not tired of hearing about Donald Sterling, his derogatory racial comments and the proposed sale of the Clippers by his wife, Shelly, over his objections. If you’re still reading, you’ve made the right choice because in this article, we’ll take a look at the situation from a legal standpoint and explain how a probate court wields the power to put Donald Sterling back at the helm.

The Clippers are owned by the Sterling Family Trust

First of all, as we’ve written many times, trusts are a very useful estate planning tool. A trust holds assets for the benefit of selected beneficiaries — which may include the grantor or grantors who established the trust in the first place — and protects assets from avoidable taxes and future creditors. Trusts may be revocable or irrevocable depending on which set of pros and cons best serve your needs and circumstances.

In this case, based on multiple media reports of court documents and public statements made by Donald or Shelly, the Sterling Family Trust is a revocable living trust and at least one asset of the trust is the Clippers basketball franchise. Donald and Shelly established the trust and retained authority to manage trust assets as joint trustees. (It’s not clear who are the other beneficiaries besides Donald and Shelly, if any, or what other assets are held by the Sterling Family Trust, but those issues are not relevant to this article.)

Shelly had Donald removed as trustee

After the story broke about Donald’s derogatory remarks and the NBA’s plan to strip the Clippers from Sterling, Shelly acted on a clause in the trust which allows either of the joint trustees to have the other removed based on mental incompetence. According to a media report citing court documents, two doctors examined Donald and concluded he suffers from mild cognitive impairment consistent with early Alzheimer’s Disease or some other forms of brain disease.

Thereafter, as sole trustee, Shelly entered into a sales contract with former Microsoft CEO Steve Ballmer to sell the Clippers franchise for $2 billion. Ballmer (or his bright attorney) was understandably skeptical about Shelly’s sole authority and her ability to overcome legal objections to the sale, so Ballmer is requiring either Donald’s consent to the sale or a final, non-appealable court order affirming Shelly’s authority to act as sole trustee of the Sterling Family Trust.

Donald cried foul and is asking a probate court judge to reinstate him

Donald’s attorneys have asked the probate court to render Shelly’s actions void and reinstate him as co-trustee of the family trust. He has been granted an expedited trial date on July 7, with a pretrial hearing set on June 30.

If Donald wins on the competency issue, he will be reinstated as co-trustee, which means he will have the authority to block the sale of the Clippers to Ballmer. We’ll be keeping an eye on the outcome of the probate court proceedings.

Call to find out how a trust can protect you and your assets

After watching the Sterling drama unfold, you may decide to avoid a joint trustee scenario, but trusts remain a powerful estate planning and tax saving tool. At Peterson Law Group, we help clients create customized trusts and prepare for any events in the future by developing comprehensive estate plans. Make an appointment with an experienced Bryan, Texas estate planning lawyer by calling 979-703-7014 or 936-337-4681, or visit us online to request a meeting.

About Chris Peterson

Chris Peterson is an attorney and the owner and founder of Peterson Law Group, a Texas law firm with offices in Bryan/College Station and Kingwood. He mainly practices in the areas of Estate Planning and Business Planning. Chris is also a Certified Estate Planner. Besides his law practice, Chris is a serial entrepreneur and community volunteer. He is known for his cutting edge law practice that utilizes technology to deliver efficient, excellent work.