The following is an excerpt from the book "Trial & Heirs" by Andrew and Danielle Mayoras.
Whitney Houston is no stranger to family fights in court. In 2002, the entertainment company owned by her father, John Houston, sued her. John Houston said publicly that his company was owed $100 million and he expected his daughter to repay it. He died in February of 2003, and the case was dismissed not long thereafter. Reportedly, Whitney Houston did not attend her father's funeral service or burial.
John's wife, Barbara, filed her own lawsuit against Whitney in December of 2008. Whitney was the sole beneficiary of a $1 million life insurance policy of her late father.
Barbara Houston claims that Whitney had agreed with her father that the money would be used to pay off a mortgage that Whitney held over John and Barbara Houston's home. Apparently, Whitney lent her father $723,000 in 1990 and this loan was secured by a mortgage against his house, payable to Whitney.
Barbara's lawsuit alleges that the life insurance was purchased to pay off this mortgage, and the remaining balance was to be turned over to Barbara.
Apparently, even though five years had passed since John Houston died, Whitney never gave any money to Barbara. Barbara also says in her lawsuit that Whitney did not even release the mortgage. So did Whitney give in? We all know she has plenty of money already, right?
Heck No! Instead, Whitney filed a counterclaim. She claimed the life insurance was intended to repay Whitney for other money she had lent her father, not payoff the mortgage. To top it off, Whitney also counter-sued her late father's wife to force her to repay the mortgage. And she even wanted interest on the mortgage... $1.6 million in total.
But there was an encore to the fireworks! Whitney decided to use the countersuit as a prime opportunity to slam her "stepmother." She pointed out that Barbara was 40 years younger than her father, how she dated her father for three years before the divorce from Whitney's mother, and how Barbara met John as a maid cleaning his house. Remember, lawsuits are public record, so Whitney knew that airing all of this dirty laundry would be in public.
So who is telling the truth? Did John Houston really want Whitney to keep the money as a repayment for other money owed, or had he trusted Whitney to pay off the mortgage and give the rest of the money to Barbara?
The problem is, we don't know. John shouldn't have relied on naming Whitney as his life insurance beneficiary without an agreement or other writing clarifying why he did so. Or, even better, he should have created a trust, named it as a beneficiary of the insurance, and then his trust could have directed exactly who should receive the money and why.
Instead of clearly documenting his intent, John took a shortcut. Now, because of his shortcut, his wife and famous daughter are bearing their nails and teeth at one another, in public.
Once again, this is an ongoing case. Be sure to visit TrialAndHeirs.com to keep up with Whitney and Barbara's next moves.
Who is named as the beneficiary of your life insurance, IRA or annuity?
Avoid a family fight!
Never, ever name someone as a beneficiary of your life insurance policy unless you want that person to keep the money. It's not worth leaving it up to faith and trust. If the life insurance has significant value (which most life insurance policies do), create a trust, and name the trust as your beneficiary on the insurance policy. Then you can dictate exactly how the money is to be split, and under what conditions.
Once you die, the beneficiary of your insurance can claim the money immediately, without notifying anyone else and without going through probate court. If the rest of your family has to start a lawsuit to get the money back, they have to sue right away or the beneficiary can collect (and spend) the money before anyone else even knows it's gone. In Whitney's case, she has the assets to repay the $1 million if a court orders her to do so. But in most families, this is not the case. Whenever families fight over who really should have the insurance proceeds, they have no choice but to file lawsuits quickly before the money is gone.