All posts by ronald2010

An Undue Influence Case Often Turns on the Existence of a Confidential Relationship

An Undue Influence Case Often Turns on Whether There Exists a Confidential Relationship between Donor and Donee

While the Multi-Party Claims Act (N.J.S.A. 17:16I-5) creates a presumption of validity of the naming of beneficiaries of a joint, POD or in trust for account, the terms of the statute can be overcome upon establishing that the naming of beneficiaries of the account was the product of undue influence.

Courts have found that once a confidential relationship is established between the owner of the account and the named beneficiary, the burden of proof shifts to the beneficiary of the account to establish that the account was the product of the owner’s free will.

In analyzing the question of a confidential relationship, the Ostlund decision is directly on point.  Estate of Ostlund v. Ostlund, 391 N.J. Super. 390 (App. Div. 2007).  And the factors to be considered in analyzing whether a confidential relationship exists include:

  1. whether trust and confidence between the parties actually exist;
  2. whether they are dealing on terms of equality;
  3. whether one side has superior knowledge of the details and effect of a proposed transaction based on a fiduciary relationship;
  4. whether one side has exerted over-mastering influence over the other; and
  5. whether one side is weak or dependent

Ostlund also requires a showing of a “reposed confidence and dominant and controlling position of the beneficiary of the transaction” in order to establish a confidential relationship.  Ostlund, 391 N.J.Super. at 402.  And the mere existence of a business and family relationship is not sufficient to show an inequality between the parties.  Id. at 403.

The above test proves crucial in evaluating the merits of an undue influence case in the context of joint, POD and in trust for accounts.

The Michael Jackson Estate

Is This It?

Every generation has its icons. We have People magazine, TMZ and the Enquirer to expose our superstars and their atypical lifestyles. Some are worshipped like a deity; their every move chronicled and criticized in the tabloids – until the stardom so desperately sought – becomes a curse and the fall from grace so painful. We’ve lost many superstars, but the loss of Michael Jackson was different – it was like losing a family member. We knew as children Michael Jackson was a star. Sitting on bean bags, we watched the Jackson Five cartoons and listened to “Rockin’ Robin”, “I’ll Be There” and “Ben” over and over again on the eight track tape player. As teenagers we thought Michael having a pet chimpanzee named Bubbles was the coolest thing. Some are good dancers – but he was a dancing machine. Who didn’t look ridiculous trying to emulate his patented Moonwalk? Who didn’t buy some vinyl when “Bad” was released? As a young man, I didn’t know what MTV was, until I watched “Thriller” and “Billie Jean”. That Halloween, all you needed was one white glove, some cuffed pants and loafers. As parents, our techno savvy children – over our objections – used Napster to fill our IPODs with HISstory.

Those who loved Michael, knew weirdness was just part of Michael. Neverland, was perhaps a product of Michael trying to re-live his childhood – a little strange. A marriage to Lisa Marie Presley, and one very awkward kiss – getting stranger. Allegations of touching or sleeping with young boys, and millions paid to settle such claims –  beyond strange. The metamorphosis of his skin, nose and cheekbones; strange on whole new level. But who knows what really happened … he seemed incapable of hurting a child. Who knew what combination of illness, injury and or vanity caused his facial disfiguration. He was Michael – not like other guys.  But despite all the monkey business, all the little birdies on Jaybird Street, loved to hear the robin go tweet tweet tweet. His awe inspiring lyrics, voice, dance and dress made the girls scream and his off the wall behavior earned him the “Wacko Jacko” title – but he was our Wacko Jacko and we weren’t ready for his final curtain call. If you shed a tear when he passed, you are not alone.

Throughout his lyrics, Michael made a pact with us, he’d bring salvation, he promised joy and laughter, he reached his hand out to us, crooned he’d be there to protect us, and all we had to do was call his name and he’d be there. He reminded husbands to be there in the morning when she wakes and show her that she’s your girl. In one of the few times we saw the world unite, it was at Michael’s calling. A plea that there comes a time, when we heed a certain call, when the world must come together as one, that people are dying, and we need to lend a hand, that after all, we’re all part of God’s family and change can only happen when we stand together as one.

And as our bones began to creak in early autumn, his “Earth Song” delivered the message that we are all just conservators of our planet, stewards entrusted to protect it for our children, that should we fail, our children or our grandchildren will ask; what about the sunrise? What about rain? What about the seas and the air we breathe? What about the holy land – torn apart – by creed? Yet, he encouraged us that we can heal the world, we can make this world a better place, for you and for me, and if we really try – for the entire human race. These borrowed and altered lyrics convey only his fervent belief that with love, comes laughter, joy, and peace. He entertained us, he moved us. His words transcended generations, races and nations. We embraced him into our homes for five decades. On June 25, 2009 Michael Jackson’s brilliant fire burned out, clearly he was gone too soon. Now we read blogs, we watch his thrillers on MTV  and we know, his loss – is our loss. Though some never can say goodbye, others joined in mass to say goodbye. The world mourned his loss and the media debated his checkered life. Though Michael’s life ended abruptly, his estate was born and has a life of its own.

Few could hold backs tears when, during the funeral service, his 11-year-old daughter Paris said, “Ever since I was born, Daddy has been the best father you could ever imagine, and I just want to say … I love him so much”. The Earth was weeping, the masses mourning and the reporters digging—but that’s just human nature. The fateful 911 call was made public, and reports quickly surfaced that a private physician may have injected Michael with propofol as a sleep aid, but instead the powerful anesthetic likely caused his death –  insight from Dr. Sanjay Gupta. And so, this is it? It ends here? Hardly. His spirit will live on through his music, through his children, and through his fans. No author, no biographer or no insider could provide you with more insight into Michael’s soul, than Michael himself when he addressed Oxford University in 2001 and said,

“Love, ladies and gentlemen, is the human family’s most precious legacy, its richest bequest, its golden inheritance. And it is a treasure that is handed down from one generation to another. Previous ages may not have had the wealth we enjoy. Their houses may have lacked electricity, and they squeezed their many kids into small homes without central heating. But those homes had no darkness, nor were they cold. They were lit bright with the glow of love and they were warmed snugly by the very heat of the human heart”

The terms of Michael Joseph Jackson’s three-and-a-half page Last Will and Testament dated July 7, 2002 were as easy as ABC.

Michael was well advised to appoint his trusted advisors as Executors. His long time attorney John Branca, music executive John McClain and accountant Barry Siegel were named in the Will to so serve. But the costs of administrating his estate, defending the lawsuits, all while preserving wealth for the beneficiaries — is a dangerous undertaking, one that long time accountant Barry Seigel refused to assume. “Unlike the typical estate, the operation of Michael Jackson’s estate is more akin to the operation of a multimillion dollar business enterprise,” the administrators’ attorney Jeryll S. Cohen said in the Court filing.  With all the craziness that surrounded Jackson life, he actually created a fairly effective estate plan, there’s still plenty of litigation and intrigue. The executors, lawyers and accountants will be working day and night for years to come to administer Michael’s estate.

Typically administering an estate is a process. Once someone dies, and their Will is offered for probate, the first thing probate clerks are  required to do, is to check the Will to make sure it was signed properly, that it was not tampered with or altered, that is was in fact, the Last Will signed and to allow any interested party to object to the Will as being a product of fraud, undue influence or claims that the testator lacked mental capacity. If the Will was signed properly, and if there are no objections, the Will should be admitted to probate and the nominated executors will be authorized to administer the estate in accordance with the Last Will and Testament. Michael Jackson’s Will was admitted to probate, but not before some histrionics. His estate will likely be the largest income producing estate in the history of the United States. His relationship with his father Joe Jackson was less than ideal.  Many will try to profit off his name and likeness and somebody will wanna be startin’ something. Therefore, it should come as no surprise that litigation would mark the birth of Michael’s estate.

The Los Angeles Superior Court respected Michael’s Will and appointed his mother as the children’s guardian, and John Branca and John McClain as co-executors. No one claimed victory, no one claimed triumph and there was no bad actor. Michael’s estate will take decades to close, and will undoubtedly be in and out of the Courts for years to come.

As to who shares in the assets of Michael’s estate; the Will directs that all assets, after the payments of debts and expenses are  all payable to the Michael Jackson Family Trust. Though the terms of the Family Trust aren’t recorded in the Surrogate’s office like a probated Will is, at least one credible source reported that his Mom is to get 40% held in a trust for her benefit, the children get 40% held in a trust for their benefit and 20% will pass to charities as selected by John Branca, John McClain and Katherine Jackson. However, before all the wealth can be transferred to the beneficiaries, the executors had to be appointed to marshal the assets and liabilities, settle all claims and pay the income and estate taxes. Just weeks after Michael died, the Courts were prevailed upon like fire marshals to extinguish the brush fires.

Three weeks after Michael died, a judge ruled that Michael Jackson’s longtime attorney and a family friend should take over the pop singer’s estate, rejecting a request from Jackson’s mother to be put in charge or share control.  Los Angeles Superior Court Judge Mitchell Beckloff backed attorney John Branca and music executive John McClain, who had been designated in Jackson’s 2002 will as the Co-Executors responsible to manage Jackson’s estate. Attorneys for the Katherine Jackson repeatedly objected to their appointment, but ultimately she respected the Court appointments which were consistent with Michael’s Will. Branca and McClain assumed a difficult task. Being an executor is typically a thankless job, but they seem to be doing an outstanding job protecting Michael’s estate, settling claims and distributing monies in accordance with Michael’s intentions.

Fiduciaries are individuals or institutions who assume responsibility to protect and preserve assets for the benefit of another. The Court appointed the co-executors, and also had to appoint a guardian to care for Michael’s children until they attain age 18. Initially there was concern that Debbie Rowe, or any of Michael’s children, or his father Joe Jackson would contest the plain language of Michael’s Will which named his mother Katherine as the guardian. Ultimately Katherine Jackson, then  79-years-young was appointed as guardian. Raising children is no easy task for a young energetic parent, but is quite an undertaking for a 79-year-old grandmother. Speculation turned to the possibility that MJ’s sister Janet would raise Prince, Paris and Blanket, others suggested Janet might not actually be the aunt who eventually rears the kids, rather, Michael’s 59-year-old sister, Rebbie, might help care for the children on a day-to-day basis. Meanwhile, Katherine has never complained  and Michael’s children must know the most important thing – that they’re loved. Quite sure they can hear their father saying “I just can’t stop loving you”.

Meanwhile, back at the executors’ headquarters, protecting Michael’s intellectual property rights and image was one of their highest priorities. They petitioned United States District Court Judge Dolly M. Gee who granted their request for a preliminary injunction enjoining the “Heal the World Foundation” from further exploiting the use of Michael Jackson’s name, image and likeness and also from using any Michael Jackson-related trademarks. The injunction resulted from a  lawsuit filed on September 29, 2009 in United States District Court in Los Angeles against two related entities operated by Melissa Johnson which had been using the “Heal the World” name.  While Michael had a Heal the World Foundation, it had been inactive for many years prior to his death on June 25.  The plaintiffs in the action are Jackson Estate Executors John Branca and John McClain, along with Triumph International Inc., a Michael Jackson company now owned by his Estate. In her written order, Judge Gee wrote that the websites of Ms. Johnson’s entities “convey to consumers a false affiliation with Michael Jackson and have, in fact, misled consumers into believing that Defendants are associated with Michael Jackson or Jackson’s foundations.”  She added that the decision by Ms. Johnson’s entities to use Michael Jackson-related trademarks in its websites and on products it sells “is clearly related to Michael Jackson’s commercial success.”

Next, the Co-Executors had to defend a multimillion-dollar lawsuit filed by a concert promoter against the late Michael Jackson over a failed reunion concert.  U.S. District Judge Harold Baer, Jr., granted a motion by lawyers for Jackson’s estate to dismiss the case, citing a lack of evidence that the late King of Pop, his estate, or family were under a binding agreement to perform at a reunion concern.  AllGood Entertainment, Inc., a company started in Morristown, N.J., sued Jackson for $40 million on June 10, 2009, roughly two weeks before his death. The lawsuit claimed the Jacksons and the then manager broke a contract for a Jackson reunion show.  AllGood later filed a creditor’s claim with Jackson’s estate, claiming the potential value of the lawsuit was at least $300 million.  Baer determined that there was a letter of intent between Jackson’s then-manager, Frank DiLeo and AllGood, but the letter of intent was never a binding enforceable contract.  The Court noted that neither Jackson nor any other members of the family who were to be involved in the show,  ever signed a contract. The plaintiffs tried to enforce a weak claim, and  Michael’s executors fought back, and beat it.

Settling claims is one thing, making money is another.  The executors were hard at work doing just that. They  restructured all of Jackson’s debts, which included getting creditors to significantly lower their high interest rates.  Secondly, the executors set their sights on generating revenue, beginning with the film, “This Is It”.  According to the reports,  the movie grossed $260,000,000, the most lucrative documentary film in history.  The soundtrack sold 5,000,000 copies, making it the 3rd biggest album in 2009.  The executors also republished the “Moonwalk” book, made mega-merchandising agreements, distributed a leather-bound coffee table book on the life of the King of Pop and renegotiated the singer’s royalty agreements with the record label.

It was only a matter of time until Joe Jackson stepped in and made his voice heard. A California court rejected a bid by Michael Jackson’s father to challenge the administration of his son’s lucrative estate.  A three-justice panel of the California Second District Court of Appeal unanimously backed the  probate judge’s ruling that Joe Jackson did not have standing to intervene in his son’s estate.  Despite being excluded from his son’s 2002 Will, Mr. Jackson tried to exert some control over the Estate’s financial affairs.  Lawyer Brian Oxman, who represents Mr. Jackson, said he would ask the Court to reconsider and might appeal to the California Supreme Court.  He insisted Mr. Jackson should have some say in post-death affairs involving his son.

Even Katherine Jackson voiced her concerns. The Executors of Michael Jackson’s Estate faced a showdown with Katherine after they launched a legal battle against one of her closest friends and business partners.  The Executors sent a “cease and desist” letter to Canadian entrepreneur, Howard Mann, demanding that he stop exploiting Michael’s  image for profit.  Estate attorney, Howard Weitzman, warned:  “His day is coming.  We will be taking the appropriate legal action against him.”  The move to ban Mann from peddling Jackson memorabilia through his Vintage Pop company enraged the singer’s mother, because it turns out, she formed a partnership with him earlier that year.  Together, they’re promoting a new lavish coffee table book, “Never Can Say Goodbye”, which features previously unseen family photos, as well as a Michael Jackson calendar.  Mann even managed to get the book mentioned on Oprah Winfrey’s show. Katherine, who had sole custody of Michael’s three children, insisted she needed extra income to bolster her personal monthly cash allowance from the estate.  The estate pays money every month to cover all expenses at Katherine and husband Joe’s family home in the Los Angeles suburb of Encino.  These disbursements cover a housekeeper, two nannies and private tuition fees for Prince Michael, 13, Paris, 12, and Prince Michael II, known as Blanket, 8.  But Katherine told the Los Angeles Times in an interview:  “I think I should be getting more.  I’m not greedy like people say.  It’s need, not greed.  I wish they would leave Howard alone and I wish they would leave me alone for working with him.”  The Jackson family matriarch, despite this clash said she believed executors John Branca and John McClain are doing “a very good job” managing her son’s multimillion dollar estate.

On February 17, 2011 a report surfaced that indicated Michael Jackson’s co-executors had collected an estimated $310 million in revenue from his film, album sales and other entertainment products lawfully recognized by the estate that he owned.  Income earned after someone dies is typically called income in respect of a decedent, (I.R.D.), and the estate of Michael Jackson is the King of I.R.D.  According to the report, the staggering earnings were accounted for from the time of his death in June 2009 until December 31, 2010.  The appointed administrators have already utilized  $159,000,000 to pay down debts which totaled more than $400,000,000 at the time he died.  Although there still remains unresolved creditor claims, pending litigation and additional challenging business, tax and legal issues, the co-executors have made substantial progress in reducing the estates debts.

Though the estate will continue defending legal actions and prosecuting claims to protect Michael Jackson’s estate, his legacy is not marred by probate litigation. His estate plan did not fail him. Instead, Michael will be remembered for who he was, an imperfect superstar who, as the best singer, dancer and performer of our time, earned the name King of Pop. He’d be happy if, as a result of his words,  just one person tried to make the world a better place, maybe if you take a look at yourself … you’ll make that change.

Legacy Lesson #23: Raising Helen

There’s just no replacement for a parents. But any child who suffers the loss of his or her parents before attaining the age of majority will be raised by a guardian. In the movie, “Raising Helen”, a car accident claimed the lives of a young couple with three children. Shocked by the loss of her sister and brother-in-law,  our protagonist, Helen, is even more stunned to learn she was appointed as the children’s guardian. Sometimes it makes sense to talk with the proposed guardian and see if their even willing to assume such a role, but sometimes, its better to keep such a decision to yourself you may change your mind after any Christmas holiday, and then be phased with the prospect of either letting them know you changed your mind, or risk them being surprised to find out they’ve been removed. In choosing  the guardian of minor children consider the following factors:

  1. Age of the guardian and actuarial likelihood of being able to raise children until the minor attains the age of majority;
  2. Religion;
  3. Their willingness to assume the responsibility;
  4. The guardian’s financial status;
  5. State of residence;
  6. Whether the proposed guardian has children of their own;
  7. The health of the guardian;
  8. Who the children would be most comfortable with;
  9. The value system and moral code of the proposed guardian;
  10. Review these consideration periodically as today’s decision may be very different than tomorrow’s.

Michael Jackson named his mother as guardian of his children. The problem is, though he was probably incredibly confident of his mother’s ability and willingness to assume such a role, sometimes age is an issue. Michaels Mom was  79 at the time, and Blanket was only 7 years old. She’ll, God willing, be 90 when Blanket attains the age of majority. If she predeceased or was unable mentally or physically to raise the children, then the successor guardian would be Diana Ross. Would Diana Ross assume the responsibility? Would her appointment be in the children’s best interest? Something tells me Joe Jackson would have a comment or two. Would Aunt Remmie or Aunt Janet be good choices as successor guardian if Katherine couldn’t serve? Only Michael would know that, but, there’s a lesson here – name Guardians who actuarially are likely to survive until the last minor attains the age of majority and someone the children would be comfortable with on a day to day basis.

Legacy Lesson #24: If You Want Privacy, Use A Revocable Trust

Leona Helmsley’s Will was offered for probate and  available for all to see. So too was Jerry Garcia’s Will.  Anthony Marshall’s Will, woops, sorry, Brooke Astor’s Will, and all three Codicils are available for all to see in the Westchester County Surrogate’s Court. Any individual who seeks privacy, or who prefers to keep the terms of their Will out of public view should utilize a Pour Over Will and a Revocable Trust. Michael’s Pour Over Will simply named his family members, executors and guardians, then poured-over the assets into an existing Michael Jackson Family Trust. That Jackson Family Trust document will not be offered for probate and therefore should not be publically viewed. After a lifetime of over­exposure, the terms of his family trust should remain private.  When Elizabeth Taylor died, her assets were also transferred into a Revocable Trust and the terms of the trust are not available to the public.

The Pour  Over Will and Revocable Trust technique may also be appropriate if you own property in another state or country. The goal might be to avoid what’s called ancillary estate administration in a foreign jurisdiction. If such property is re-titled in the name of the Revocable Trust, then it avoids the necessity to file a second probate – or an ancillary estate proceeding.

Legacy Lesson #25: The Business of the Business

Could Michael have done more planning? If his net estate, after the payment of debts and administration expenses was a modest $100,000,000 less a charitable deduction of 20%, the balance ($80,000,000) less the then death time exclusion of $3,500,000 multiplied by 45%, (the then estate tax rate), the federal estate tax would be a whopping $26,775,000.  These numbers are not authenticated but are for illustrative purposes only. But the point is, should Michael have done more planning? The answer isn’t black or white –  it’s red or green.  Michael built an empire and could have done more to protect his estate from the devastation of the estate tax bite.

For those who’ve spent a lifetime growing a business, or working for the family business,  you know how emotionally charged the idea of passing the torch to the next generation could be. Just the thought of it could be paralyzing because you don’t know where to start. The fear is, you pull one thread, and the whole tent could come down. But without a business succession plan such an eventuality is likely to become a reality. Just ask the brothers Koch.

One of the largest family businesses in the United States, Koch Industries could generate  over $100,000,000,000 of revenue. Perhaps not as well known as the Mars family or the family Kardashian, but make no mistake, the Koch family is no less  scintillating.  Started in 1940 by Fred C. Koch, who once owned approximately 84% of the company stock and J. Howard Marshall II, who owned the other 16% of the stock,  these two brilliant titans built this Company into one of the largest privately owned petroleum refinement, energy and chemical  conglomerates in the United States.   But money doesn’t buy happiness, just ask the heirs of J. Howard Marshall II.

In the office, Fred C. Koch was quite the visionary, but from afar, he seemed blind when it came to nurturing his sons. He was called a monarch and a severe taskmaster who instilled the fear of God in his four children Frederick, Charles, David and William. If they failed to live up to his expectations, they’d  fear being deemed worthless in his eyes. Sadly their childhood, instead of being collectively enriched by enormous wealth was burdened with unrealistic demands and expectations.  Troubled over who was sent away to boarding school, or who was banished from the family for allegedly stealing $700.00, or who was the apple of Dad’s  eye and who was the eyesore – these siblings were not brothers in arms, but rather armed brothers destined for divisive acrimony. The writing was on the wall.

Rich or poor, it’s no curse to be part of a  dysfunctional family. Lord knows, the Koch brothers are not the only children pitted against each other by a tyrannical parent.  But to expect that after the patriarch died they’d all play well together in the Koch Industries sandbox was equivalent to pointing the oil pipeline straight up into the air and expecting the crude to fill freighters. It defies the laws of physics. The predictable result of course is a toxic mess that’s near impossible to clean up – and that’s just what they suffered after Fred C. Koch died.

In one of the longest running family feuds in the history of our country, the brothers Koch certainly didn’t universally embrace their father’s counsel, to be kind and generous with one another, as such wealth could be a blessing or a curse. The enormous wealth proved a curse as to the brother’s relationships. But once again, true to form, family relationships, sibling rivalries and favoritism are often factors that are pre-cursors to probate litigation – it’s the classic dysfunctional family syndrome. The trouble started early. Though the father, Fred C. Koch did proactively gift shares of the business to his children, his son Frederick received significantly less than the other brothers … a hangover from a $700.00 dispute and Dad’s act of frowning on that which Frederick did or didn’t do. Then after he died, though Charles was the named successor, the other brothers sought to buy up shares from others and stage a coup. The failed coup set the stage for two brothers, William and Frederick to be cashed out. Though valuation experts were hired, including Goldman Sachs, and brothers William and Frederick received $1,100,000,000 said amount would become the source of intense litigation. After the sale, the two claimed that the disclosures in the valuations weren’t complete and there was a scheme to conceal the true value of the business. The lawsuit claimed that fraudulent accounting practices resulted in their being shorted some $2,000,000,000. Their litigation odyssey brought them to the United States District Court for the Northern District of Oklahoma, United States District Court for the District of Kansas, United States District Court for the District of Utah and the United States Supreme Court. The litigation spanned two generations and the brothers were intent on crushing each other, scorched earth, in search of a result that couldn’t be judicially constructed – to be loved, trusted, accepted and praised for their respective accomplishments.

Ideally a business succession plan would have been created by Fred C. Koch before he died.  A successor should have been appointed. A valuation methodology should have been established that would be binding on all heirs. Methods to redeem shares in the company for cash should have been created so that any child could hold onto the Koch Industries shares, or redeem them over a defined period of time at an agreed upon sale price. Short of such planning in advance, and given the less harmonious family history the scorched earth mentality that fueled the Koch family litigation was pre-ordained.

Business succession planning requires the owners of their prized possession to take a step back and re-define goals for generations to come. It requires time, attention to detail and resources with a team of professionals who embrace  your goals and objectives. Children may embrace the process, avoid the process, or not even know about the process.  But somewhere down the line, someone will thank you for your efforts and appreciate that you took your precious time and resources to protect them as best as you could. The survivors may not all agree with your decisions, but should respect the fact that you did your best to balance the equities and directed the ship into calm waters.

Where to begin?

To start the process, learn about the process first. Begin with questions – lots of questions:

  1. How did the business start?
  2. What was the goal of the business at that time?
  3. Were there partners? How many and what happened to them?
  4. What’s the business model now?
  5. Who’s the leader?
  6. What’s the competition?
  7. If we looked at the tax returns for the past 10 years, what would a chart of the income look like?
  8. Is the entity an S-Corp, C-Corp, Limited Liability Company, sole proprietorship, partnership?
  9. Are there corporate books, minutes and by-laws?
  10. Is there a buy sell agreement and are shares or units properly allocated amongst the owners?
  11. Is there an exit strategy?
  12. Are any family members interested in getting involved?
  13. Are any family members qualified to one day assume control?
  14. If some children want to be involved in management of the business and others don’t, should the business be transferred to all equally? Should the successor leaders be all of the children, or just those who together will get along and forward the best interests of the company for all equity owners?
  15. Or would it be better to leave the business only to those children who are truly interested, and leave other children an equalizing bequest of cash?
  16. What’s the value of the business? When is the last time the business has been valued? What’s the cost basis?
  17. Who are the advisors: accountant, attorney, insurance professional, investment advisor and banker?
  18. If you could wave the magic wand and see this business 20 years from now – what would you like to see?
  19. What’s the best part and what’s the worst part of being involved in this business?
  20. What’s keeps you up at night? (limit the answer to business issues only please)

These questions are just a starting point, but the answers will help chart a direction which could run the gamut from, no action, to an ah ha moment, that makes it clear the time to plan is now. Before designing a business succession plan, learn the process.

A valuation of the business interest may be the next step.  The valuation of a closely held company requires a thorough understanding and analysis of all relevant facts surrounding the company, past, present and future.  There is no general formula that applies to any specific industry or type of business; rather, the approach to valuation must be tailored to fit the particular type of business and the current economic conditions.

In order to maximize the tax benefits of a business succession plan, all valuations used for estate and gift tax planning must comply with the applicable tax law provisions.  In this regard, the Internal Revenue Service guidance through at least eight fundamental factors it considers essential in providing a proper valuation of a company:

  1. The nature of the business and the history of the enterprise from its inception.
  2. The general economic outlook, as well as the specific condition and outlook of the industry engaged in by the subject company.
  3. The book value of the company’s stock and the financial condition of the business.
  4. The earning capacity of the company.
  5. The dividend-paying capacity of the company.
  6. The company’s goodwill and any other intangible assets of the business.
  7. The prior sales of the company’s stock and the size of the block of stock to be valued.
  8. The market price for stock of corporations that are engaged in the same or similar lines of business, the stock of which is actively traded on the open market (either on an exchange or over-the-counter). Typically a valuation company or an accounting firm will prepare the valuation study and then be asked to value 1% of the company’s stock, or limited liabilities company’s units.

When asked to value only a 1% interest in a company, typically a corporation or limited liability company, most valuation experts will opine that a percentage of the whole is less attractive to sell, and  there’s less of a market to sell too.  Since the percentage of the company being valued is small, it’s a minority interest, and therefore, a discount should be attached to it’s value. There are numerous types of discounts, but the following represents the discounts most typically utilized:

  • Lack of marketability discounts.
  • Minority interest discounts.
  • Information access and reliability discounts.
  • Key manager or thin management discounts.
  • Comparability discounts.
  • Investment company discounts.
  • Market absorption or blockage discounts.
  • Built-in capital gains discounts.

The amount of the discount is totally dependent upon the factors unique to the company. As a general rule of thumb however:

  • the more liquid the underlying assets is, the smaller the discount;
  • the more illiquid the company is, the more difficult it is to sell company interests;
  • the more restrictive the buy sell agreement is, the larger the applicable discount.

The range of discounts as added cumulatively could vary from 10% to 50%.  Once the value of a share has been determined and the amount of income that a share generates, the range of planning options can be considered. Conceptually, the options fall under two categories: gifts and sales.

Starting with the basics, 1% of the limited liability company (LLC) membership interest, or 1% of the issued stock in a S-Corporation,  could be gifted, or transferred outright, free of trust to an adult heir, or transferred into a trust for the benefit of an heir. If the business interest is gifted outright, a gift tax return must filed with an attachment of the business valuation and an allocation of the value of the gift against the current $5,000,000 lifetime gift tax exemption. To illustrate, utilizing a fictional entity MJ Enterprises, LLC that was valued at $7,500,000, less a discount for lack of marketability,  lack of transferability and a key person, which cumulatively equaled 33.3%, then the enterprise value for gift tax purposes would be approximately $5,000,000.  If the entity had 100 units, then each unit would be valued at  $50,000.  If each unit generates 6% the needed data is established to analyze a transaction. In this case, the units could be transferred without causing gift tax. Even if the value was $15,000,000 and the business owner was married, both husband and wife could use their lifetime exemption amount, $10,000,000 combined, and after the discounts, they could gift the entire amount outright to their children, or in trust for their benefit.

But if the value exceeded $15,000,000 then, gifts of all the LLC units would cause gift taxation over the exemption amount of $5,000,000 per spouse. Since the current gift tax rate is at a historic low of 35%, many wealthy business owners are choosing to pay the gift tax now because:   a) the valuation of the underlying assets are low given recent economic downturns; and b) gift tax rates have historically ranged from 45% to 55%.  Therefore, now may prove to be a meaningful opportunity to transfer wealth – even if it means paying gift tax. But before taking out the checkbook, consider more advanced gift transactions that reduce the value of the gift beyond just the valuation discounts.

One example is a trust affectionately known as a Grantor Retained Annuity Trust (“GRAT”). Though a possible violation of the no legalese rule, this trust can easily be broken down into plain English. The GRAT is just a trust where the owners transfer a portion of their wealth into the GRAT, and retain a benefit for a term of years. At the end of the tem, the remaining assets pass to their children or other heirs. The key is that when valuing the gift for gift tax purposes, the value is reduced by the owner’s retained interest. If an owner retains a benefit for ten years, then the current value of the gift for the children, who have to wait ten years,  is actuarially reduced. If they have to wait twenty years, the current value of the gift is reduced even more. One catch – best to live the term of the GRAT, or risk the entire trust, or a portion depending on how the trust is drafted, being pulled back into the estate at its then value. But should you cooperate and live the term of the GRAT, and your business interest grows at the rate of 10% a year, then the GRAT was a home run and allowed you and your spouse the right to transfer not $15,000,000 of LLC units, but $30,000,000 of LLC units.

Creating combinations of gifts and sales structures takes a lot of time, it’s not an inexpensive project, but when valuations are low, when interest rates are low, when the exemption is at an all time high, and your company could out perform the benchmarks – you can move the mother load. Mix in some charitable planning, and there’s no limit, a legacy is all but assured. The result of the planning can truly be thrilling … or at least very satisfying.  Could Michael Jackson have planned for a potentially huge estate tax by doing more succession planning during his lifetime – it certainly seems so.

Nina Wang – A Sweet and Sour Legacy

If you’re talking about kidnapping, ransom, murder, forged Wills and the richest woman in Hong Kong – then you’d be talking about Nina Wang.  Richer than the Queen of England and more colorful than Madonna, this eccentric billionaire could be seen around town wearing plaid miniskirts and pigtails dyed electric blue. No swank sushi bar for this parsimonious celebrity, she lived on a salary of $400 a month and was a regular at McDonalds. She was so popular among the masses that she was dubbed “Little Sweetie” for her likeness to a much loved Japanese cartoon character.

Born as Kung Yu Sum in 1937, she grew up in Shanghai with her childhood friend Teddy Wang. Teddy’s father, Wang Din-shin, owned a paint and chemical company, and after Teddy’s family fled Shanghai during the revolution and moved to Hong Kong, Teddy sent for her.  Though Teddy’s family never liked her, because supposedly,  she was stubborn and could not cook, the two nevertheless married in 1955. Nina was only 18-years-young. They worked tirelessly together, never had children and built the chemical and pharmaceutical company, Chinachem,  into a one of the largest private property developers in all of Hong Kong.  As is so often the case, part of their fortune was attributable to a little luck; they purchased properties once deemed worthless, held them and after a population explosion in the heart of the city,  their “worthless” properties once developed became the kern of the major suburbs of Hong Kong.

But despite being billionaires, gossip circulated at how that the couple would turn up at lavish dinner parties with Tupperware containers to take food home with them.  It was this penny pinching attitude, this miserly behavior that was, in part, the cause of Teddy’s first abduction. Teddy refused to pay for bodyguards, and in 1983 both Teddy and Nina were kidnapped by a Taiwanese gang.   Nina was released so she could pay the ransom of $11,000,000 while Teddy was left shackled to a bed. After Nina paid the ransom in full, Teddy was found alive stuffed into a refrigerator. After  hearing Nina didn’t haggle with the kidnappers and instead paid the ransom in full, Teddy was angered.  On April 10, 1990 only seven years later, Teddy was kidnapped again, but this time Nina did haggle, paying only $30 million – half of the requested ransom.  Her haggling didn’t work out well – Teddy would never be seen again, nor would his body ever be found. Eventually, six men involved in the kidnapping would be incarcerated, and one of the kidnappers claimed they bound and gagged Teddy before throwing him off a small boat into Hong Kong Harbor.  One has to wonder, would he be alive today if had hired bodyguards? Was being chintzy part of his undoing?  Water under the bridge now, but in retrospect he clearly should have employed security guards.

Since Teddy was missing, but not declared dead, for the next seven years, Nina assumed the helm of Chinachem and was so empowered because she was the agent on the Power of Attorney that Teddy had executed before his disappearance. In 1999 when Teddy was legally declared dead, Nina became  Chairwomen of Chinachem and, seemingly, heir to the Chinachem empire. But, you’ll recall Teddy’s parents thought Nina was stubborn and didn’t cook and, almost 50 years after their marriage, Teddy’s father filed a lawsuit seeking to set aside the Will which named Nina as the beneficiary. Instead of mourning in peace, instead of having peace, her time was about to be consumed in probate litigation,  fighting with her father in law, Wang Din-Shin.  The issue: which of Teddy’s Wills were to govern the distribution of his estate. The first Will signed in 1960 directed that the empire was to be split between Nina and Teddy’s father.  However, Teddy’s father then claimed that he found a subsequent Will signed in 1968 in which Teddy disinherited his wife (supposedly because she had an affair with one of their warehouse workers) and left everything to him.  Nina insisted that she and Teddy had long since reconciled and she produced a Last Will executed in 1990, just before his second kidnapping and that Will left everything to her.

Nina’s life was about to sour.

On November 21, 2002 after over 170 days of trial, the High Court held that the 1990 Will, which was witnessed only by the butler, was a forgery and therefore 1968 Will governed. To add insult to injury, Nina Wang was then charged with forgery, attempting to pervert the course of justice and had to post bail of $7 million. A disheartened Nina Wang appealed the Courts decision, and lost. She  then appealed to the Court of Final Appeals and finally in 2005, after more than 15 years since Teddy’s second kidnapping,  the Court of Final Appeals set aside the lower court’s rulings and approved the 1990 Will making “Little Sweetie” the richest woman in Hong Kong.

But the stress took a toll on Nina. In January 2004 while in litigation with her father in law,  she was diagnosed with cancer and by December 2005 her treatment was limited to palliative  care.  On April 3, 2007 Nina Wang only 69-years-old, died. Her legacy  as the colorful, quirky, billionaire of Hong Kong would quickly be overshadowed by the acts of the Antagonist.

Though loved by the Hong Kong masses, their time to mourn was interrupted by sensationalism. Only days after her death, Hong Kong’s next probate litigation saga was getting cued up in the press and again it involved the family Wang. The legacy of Nina & Teddy’s fortune’s would, once  again,  be decided not by their own hand and seal, but by a Court of Competent jurisdiction.   Nina Wang’s estate, valued somewhere between $4 to $12 billion, depending on the valuation of the real estate holdings, would either pass to Tony Chan, her Feng Shui paramour, or to the Chinachem Charitable Foundation to support charitable causes that she had been so committed during her lifetime. A tale of two Wills would ensue;  the 2002 Will favored the Chinachem Charitable Foundation vs. the  2006 Will which favored Tony Chan. Both were offered for probate, and this time, Nina’s intent had to be judicially determined. To the victor goes the spoils.  The war was on and allegations of fraud, undue influence and lack of capacity were aired publicly and years later Nina Wang’s last wish would be judicially determined.

As the story unfolded, shortly after her husband’s second disappearance, Nina had consulted Chan Chun Chuen (known as Tony Chan), a former bartender, turned feng shui master, to help find her missing husband. Perhaps the relationship started off innocently, but according to Chan, it progressed from there to cooking, traveling, building model helicopters and romance. From an outsiders point of view, Nina Wang seemed easy prey and in need of a spiritual lift and Tony Chan seemed a skilled hunter in need of an economic lift – a deceased husband’s worst nightmare. Supposedly the two, in furtherance of their respective needs,  dug over 80 feng shui holes on Chinachem properties all over the city in order to bury gems and truckloads of cash worth millions.

Chan, a man of modest means before meeting Nina,  lived the life of a kept man after meeting Nina.  He resided in a $30 million dollar home and owned a publicly traded company called RCG funded by an angel, his little sweetie. Chan acknowledges that his affair with Nina occurred at a time when he himself was a newlywed, but denies any other wrongdoing. He claimed  the riches bestowed upon him by Nina were just  payments for feng shui massages and other such services and gifts as well as commercial investments in his Company.   Chang argued that the October 26, 2006 Will, which he had nothing to do with,  was signed by Nina and properly witnessed. This document known as the 2006 Will, Specific Bequest Will or Feng Shui Will left the Teddy & Nina Wang fortunes, to this fortune teller.  Gag me with a chop stick.

The Plaintiff, The Chinachem Charitable Foundation, offered the 2002 Will for probate. This Will’s authenticity was not in question, and if admitted to probate, would direct the Chinachem billions to pass to the Chinachem Charitable Foundation with directions to provide for her in-laws, siblings and their children.  The Plaintiff claims that neither Nina’s siblings or Chinachem executives knew of any spiritual or romantic relationship between the two, and that Nina Wang was busy giving millions to the Foundation, appointing it’s board and finalizing the mission statement for the Foundation.  Accordingly any bequest for Tony Chan, would be a departure from her long stated intentions. The Foundation argued that the 2006 Will was executed at a time that Nina was ill, lacked capacity and was unduly influenced by Chan. The Chinachem Team surmises that if Nina executed the 2006 Feng Shui Will, it was only for feng shui purposes so that she would receive eternal life, but was not intended as her Last Will & Testament.

The fate of Nina’s empire was heard in the High Court of Hong Kong, Probate Action #8 of 2007 in the Court of First Instance. The case captioned,  In the Estate of Nina Kung, also known as Nina Wang, between Chinachem Charitable Foundation Limited, Plaintiff and Chan Chun Chuen,  1st Defendant, began in May of 2009.  The case was heard by Honorable Judge Lam who, after forty days of trial,  wrote a detailed 260 page decision covering 935 points.  Summarized below are some of the issues the Court would decide:

  1. whether the 2006 Will was executed by Nina;
  2. whether the 2006 Will was the same document the witnesses saw her sign on 16 October 2006;
  3. whether Nina had the requisite capacity to execute the 2006 Will;
  4. whether Nina knew and approved of the contents of the 2006 Will
  5. whether Nina had testamentary intention in relation to the 2006 Will;
  6. whether the execution of the 2006 Will was obtained by undue influence of the 1st Defendant;
  7. whether the 2006 Will was only a partial will.

On February 2, 2010 the Court issued a Judgment and began with the following observation:

“1. The late Nina Wang (“Nina”) was the Chairwoman of the Chinachem group and was one of the richest woman in Asia. But wealth cannot offer an answer to all the problems in life, particularly in the wake of the final rest that every human being has to face eventually. Rather, wealth may bring about a problem as to how one should deal with it after one’s death. Making a will is an option. However, when there is more than one wills (sp.) it may lead to litigation. This is what happened in this case.”

 

The Court noted; the long marriage between Nina and Teddy, that they worked long hours and had no children,  that Teddy was kidnapped twice, the second time resulting in him being declared dead, that Nina was both patriotic and  philanthropic, that she spoke often of leaving the Chinachem fortunes to the Chinachem Charitable Foundation, that the validity of and authenticity of the 2002 Will was not in question and, she and Tony Chang had a relationship.

The Court ultimately did not find Tony Chan to be a credible witness and concluded that he was prepared to say anything to advance his claim, that he lied and withheld evidence.  In addition to lacking credibility, the Court found he had exerted great influence over Nina at a time when she was weakened both by her illness and the treatments. Further, and yet another nail in Chan’s coffin,  the Court reasoned that the purported Will leaving the Wang empire to Tony Chan would be entirely inconsistent with Nina’s public statements that she would bequeath everything to charity hoping to advance certain charitable causes including educational, medical, and agricultural needs.

The Court took great care in hearing from handwriting experts to determine if the 2006 Will was a forgery and if another document intended as a Codicil to Nina’s 2002 Will which created a specific bequest to Tony Chan was enforceable.

The Nina Wang Signature

A handwriting expert, referred to as Mr. Radley, initially identified 17 features in the questioned signature of Nina Wang, that he regarded as significant, some of which had no matches to other specimens he was provided with.

Feature number Description of feature Judge’s findings
(i) & (ii) The left-hand downward stroke of the “N” and its slightly angular turn to traverse horizontally The 2 features are  dependent and should be treated as one  3 matches found out of 81 specimens.  This is a “more significant” feature
(iii) The rounded pen movement before the right hand upward stroke of the “N” 3 matches found out of 81 specimens.  This is a “more significant feature
(v) The relative proportion of the “I” in “Nina” and the subsequent looping up/down pen movements form “na” 5 matches found out of 81 specimens.  This is a “more significant” feature
(vi) The “I” dot in “Nina” 2 matches found out of 81 specimens.  This is a “more significant” feature.
(vii) & (viii) The “T”-bar in “T.H” The 2 features are in substance one feature and should be considered together.  No match found.  This feature falls outside the range of variations, though “less significant” than the other features mentioned.
(ix) The downstroke of the “T” and the mimicking full stop next to it. This feature is relatively prone to variations, not helpful for the purpose of identification 9or non-identification.
(x) The “H” in “T.H.” Not appropriate to split this into 3 sub-features, as the 3 elements are combined to form the whole character of “H”.  No match found.  This feature is out of range.  This is a “more significant feature.
(xi) The slope of the initial downstroke of the “W” 5 matches found out of 82 specimens.
(xiv) The rhythm of “an” in “Wang”, instead of the mimicking pen strokes in “an” and the stroke leading to the top loop of “g” of “Wang”, the “an” was written in a significantly different manner with a diversity of slopes. No match found.  This feature is out of range.  This is a “more significant” feature.
(xv) The top loop or eyelet of the “g” in “Wang” The top loop of the “g” manifested itself in a great variety of forms in the specimens, not a very distinct feature and does not add much to what feature (xiv) already demonstrates.
(xvii) The stepped alignments of the four components of the signature The specimen signatures show a great variety in pattern for this feature, not a distinctive feature for the purpose of identification or non-identification

The judge considered both handwriting expert reports and dedicated approximately thirty pages of his written decision to these expert opinions and concluded that the Nina Wang signature was a highly skilled simulation.

After considering all the facts, testimony and law, the Court ruled that the 2006 Will that left the empire to Tony Chan was a forgery. Allegations of another document, a Specific Bequest Will, or a Codicil which also was supposedly executed by Nina leaving him a fixed sum certain, also known as a bequest, could not be located, was not offered for probate, so  it’s of no consequence. Accordingly, the 2002 Will which left the fortunes to Chinachem was accepted into probate, and Mr. Chan was ordered to pay the costs incurred by the Chinachem Charitable Foundation.

Not satisfied with the Honorable Judge Lam take, Chan appealed.  Ironic that on February 14, 2011 Little Sweetie’s 2002 Will was upheld and  Chan’s charms soured. Thereafter, Tony Chan was in a deep hole, and no ritual would right his wrongs. The  publicity of losing the trial, losing the appeal, angering the masses, then the having to post bail, and it seemed Chan’s good fortunes were long over. But once again, it’s the tax collectors who deliver the final blow. Presumably watching the media circus and reading the tabloids and the Court Judgments, the tax collectors went after Tony Chan seeking income tax on the transfers of wealth that Chan himself testified were just payments for feng shui services. Another Antagonist falling on his sword.

Legacy Lesson #19: A Stitch In Time Saves Nine

After you sign your estate planning documents,  keep the original in your own fireproof safe and keep a set of copies in a separate location. Destroy prior Wills or powers of attorney that have been superceded. Let your trusted executors know how to get access to the safe in the event of your death or disability. Make sure your attorney, accountant, financial planner and or banker has copies of and access to,  not just your estate planning documents, but also any and all buy-sell agreements, business valuations, life insurance policies, deeds, titles and all current account statements. If these documents,  are then summarized in an spreadsheet including  how each asset is titled, your executors will thank you and so too will your heirs. These measures are basic, but could have changed Nina’s life – and her legacy.

Legacy Lesson #20: Respecting the Formalities of a Will Signing

The last ten years of Nina Wang’s life were consumed fighting over Teddy’s $4.2 billion estate.  Why? Because when Teddy signed his Will in 1990, only the butler witnessed his signature. It took years of litigation, 170 days of trial, losing in the lower Court, then appealing to the Court of Final Appeals before the 1990 Will was final respected. The litigation also took a toll on Nina’s life that simply cannot be quantified. Some practical counsel;   know how to sign a Will. The testator (a male signing a Will) or a testatrix (a female signing a Will) should sign in the presence of two witnesses and a notary public. The lawyer supervising the signing should establish that you’re over age 18, of sound mind, not under any undue influence and that you understand the contents of the Will. Pause before having any children or potential heirs in the room when meeting with counsel or signing documents. If the terms of a proposed Will favor the child who was in the room and participating in the discussion, any document that follows thereafter is as good as flash paper. If you anticipate any Antagonist challenging the Will take all necessary precautions. Some have a psychological evaluation completed right around the time the Will is signed to thwart a lack of mental capacity claim, some video tape the Will signing, some read a prepared statement into the record explaining in detail why an heir is being cut out. Why a billionaire would sign a Will without taking any such precautions? Simply reckless, like tossing a match into an oil well.

Legacy Lesson #21: Clarity v. Ambiguity

What Nina Wang went through trying to settle her husband’s estate was completely avoidable. The precautions are basic, though too many overlook the basics. The irony is she too exposed her estate to the same fate. If she had a relationship with Tony Chan and wanted to provide for him, she had enough wealth to do so; she had lawyers available at her beck and call. She knew what happened to Teddy’s estate, yet she dug the same hole. Had she prepared a new Will and left a fixed bequest to the feng shui cause, or to Tony Chan and documented her reason for so doing, few would blink. Yet she signed a document that could have been a Codicil or partial Will and supposedly it couldn’t be found. With her legacy on the line, and billions at stake, such shenanigans should not have occurred. Was she naïve, in love, embarrassed or the victim of a fraud? Knowing she was ill, perhaps her lawyers should have updated her Will just to insure it was in fact her last Will.

Is Nina’s story so different from you neighbors? After one loses a spouse, they’re vulnerable. Thinking the end is near, combined with the anxiety of being alone, any widow or widower could be easy prey.  A white knight, a spiritual healer or helpful neighbor can be so well received … and perhaps that’s just what the doer of good deeds seeks. So, how do you protect yourself? Again, back to basics, use your team of advisors prudently. Talk to them, email them, write them and let them know what’s on your mind. Professionals who care will understand your concerns and advise you. Once the advisors know, it’s much more difficult for an Antagonist to undermine your stated intentions. Probate Parts, Surrogate Courts, Orphan Courts, and apparently even Bankruptcy Courts spend far too much time trying to interpret the intentions of the deceased. So the best counsel is to make your intentions known to your advisors, or to your family, or those you trust, and document those intentions in an estate and business succession plan. Short thereof, heirs will be digging for riches, and legacies marred by those looking to fill their wheelbarrows.

Legacy Lesson #22: Video Taping a Will Signing

Why wonder if it’s Nina’s signature? Why pay experts, take up the Court’s time, and leave billions up to the discretion of the Court. If you have meaningful assets, and you are concerned about an Antagonist challenging your Will, there are several precautionary measures to consider, but certainly an option often dismissed as being expensive or not necessary, is in fact, not expensive and is necessary – video tape the signing of your Will. Since the signing ceremony will be on tape, better not to take an extra Xanax, or other slur, as then the video tape could be evidence that your are incapacitated or under the influence of medication, or just the crack in the door that the Antagonist looks for.

Lessons from the Leona Helmsley Estate

The Benevolent Queen of Mean

When billionaire hotelier Leona Helmsley died on August 7, 2007 at the age of 87, there were no prayer vigils outside her hotels nor did the masses tearfully gather in her send off.  Instead, both big people and little people alike read the headlines which trumpeted that the wicked witch was dead.  The reflections and remembrances all seemed to vilify the “Queen of Mean,” and recounted her tyrannical behavior, her  mistreatment of employees and her stint in jail for tax fraud. Once her Last Will and Testament was made public, her dog, “Trouble”, captured the headlines.

But lost in the media blitz was an enormous act of goodwill. Leona gave back, in mammoth proportions to charitable causes  which will likely fund hospitals, health care providers, museums, schools, medical research and yes, animals, in perpetuity.  Such largess didn’t grab the headlines.  Were such acts of benevolence an attempt to curry favor with our Maker, or to spite individuals who wouldn’t inherit the motherload? Did she only seek to reduce her estate tax liability or was she truly philanthropic? In the end, only she knows. But if homeless families have shelter, if cures for diseases are discovered, if lands are preserved, animals cared for and the hungry fed –  in part from the Leona M. and Harry B.  Helmsley Foundation –  then we little people must give the devil her do.

Daughter of a hat-maker and high school drop-out, Leona Mindy Rosenthal Roberts Panzirer Lubin Helmsley started at the bottom, but with drive, smarts, determination and sheer moxie, she became one of New York’s more successful real estate brokers. That drive, that moxie that something caught the eye of real estate magnate Harry Helmsley. By 1972, Harry Helmsley already one of the largest real estate owners in Manhattan,  was smitten by Leona,   and left his wife Eve of 33 years to marry this up-and-comer.  Once on top of, and seemingly in control of Helmsley Enterprises as Chairwomen and Chief Executive, Leona ruled with a notoriously heavy hand.  Together, Harry and Leona owned, in whole or part, the Empire State Building, 230 Park Avenue, the Tudor City apartment Complex, the New York Helmsley Hotel, The Ritz Carlton hotels, The Helmsley Windsor, the Harley Hotel chain, The Carlton House hotels, the Helmsley Middletowne and as well as various Florida resorts to name only a few of the properties collectively valued at approximately $5,000,000,000 give or take.

Though prior to marriage Harry lived a quiet, humble lifestyle, after the marriage to Leona they lived a lifestyle worthy of royalty. Their residences which included a nine-room New York City  penthouse with a swimming pool overlooking Central Park;  a private estate in Greenwich Connecticut called Dunnellen Hall,  a Palm Beach getaway and a mountaintop hideaway near Phoenix. Add in the 100 seat private jet complete with a bedroom, a chauffer, a chef for Trouble, and unlimited purchasing power and, well, you could understand why she’d be wild about Harry. But good fortune, fame and power didn’t bring out the best of Leona. Instead she nickel-and-dimed merchants, stiffed contractors and publically terrorized employees. Granted, not everyone has read How to Win Friends and Influence People, and some just don’t have bedside manner – but Leona was different.

A reporter Ransdell Pierson published a book entitled, The Queen of Mean and in it he quoted His Honor, Mayor Ed Koch who called Leona, the “Wicked Witch of the West” and added, for “a billionaires to be so chintzy distresses people … the things she did are so vile”,  you know her image needed a makeover. Maybe she just needed finishing school. Even The Donald tried to show his softer side when he described her as a sick women and added, “ I can feel sorry for my worst enemy, but I cannot feel sorry for Leona Helmsley.” But Mayor Koch and Donald Trump actually echoed the sentiments of the masses,.  It was her behavior, and her tyrannical abuse of power that would cause people to come together, to get her back, to expose her and to testify against her. She made their job easy.

Apparently Leona bought $40,000 of jewelry at Van Cleef and Arpels, and was unwilling to pay New York City sales tax. That tidbit leaked into the pages of the New York Times and consequently, Leona was required to testify in front of two state Grand Juries. Thereafter, a general contracting firm which oversaw the $8,000,000 renovation of Dunnellen Hall had to sue to get paid. During the litigation it was alleged that, though his company billed the renovation costs to the Helmsley’s personally, Leona ordered that the invoices be “fixed” so the renovations would instead be billed to Helmsley Hotels or Helmsley Enterprises. Once “fixed” the renovations became deductions on the corporate income tax returns. Knowingly filing false income tax returns could be a real problem – just ask Al Capone.  Turned out that this disgruntled contractor sent a stack of “fixed” invoices to Ransdell Pierson, then a NY Post reporter who inked two articles about the way the Helmsley’s did business. It wasn’t long after these articles landed on a prosecutors desk that investigation started and eventually lead to The New York State Attorney General’s Office and the Manhattan District Attorney’s Office working together to secure indictments. Harry and Leona were in serious legal trouble with the IRS, faced jail time if convicted and their reputations were about to irreparably tarnished.

Though it took three years, eventually the Helmsley’s were indicted. In The People of the State of New York v. Leona M. Helmsley et al, she faced a 188 count indictment filed by the State and a 47 Count indictment brought by Uncle Sam. As reported in 864 F2d 266 United States of America v. Harry B. Helmsley, Leona M. Helmsley and others, Circuit Court Judge Cardamone in summarizing the facts and procedural history wrote:

“The 47 Count indictment charges Leona M. Helmsley and her husband, Harry B. Helmsley and two officers of the Helmsley Corporations with using their control of a large group of real estate, hotels, insurance and related business over the period from June 1983 to October 1986 with conspiracy to defraud the United States and the Internal Revenue Service. In addition to conspiracy, the Defendants are charged with tax evasion of approximately $1,200,000, filing false returns, mail fraud – involving an allegedly fraudulent use of corporate funds to pay for the renovation of “Dunnellen Hall” in Greenwich Connecticut – and extortion. The last charge alleges the defendant Helmsley demanded kickbacks of goods and services for Dunnellen Hall from certain contractors and vendors doing business with the Helmsley organization, threatening them that Helmsley business would be withheld unless kickbacks were paid”.

Perhaps fortunately, Harry was deemed mentally incompetent to stand trial so Leona took the brunt of the storm she created. During Trial some of the most damaging testimony came from the former housekeeper who testified that she heard Leona say “We don’t pay taxes.  Only little people pay taxes.”  It was a pompous quote, but one that unfortunately for her, helped seal her fate. In 1989 after a lengthy trial, Leona was ultimately convicted for tax evasion and was sentenced to four years in prison, though she only served eighteen months. Her sentence started on April 15, 1992 and she was released on January 26, 1994.

Freedom regained and fortunes restored, but her life would never be the same. Harry Helmsley was not well and he departed this earth on January 4, 1997.  He left a Last Will and Testament dated January 25, 1994, oddly enough,  the day before Leona was released from the big house. In Article 6th (A) of his Will, he left his residuary estate to Leona.  Leona now a widow,  resumed her place at the helm. Recognizing her own mortality she executed a new Will on July 15, 2005 and on August 20, 2007 she passed away.  Once again, Leona, this time posthumously, captured the headlines in almost every NY tabloid detailing the peculiar terms of her Will.

Her beloved husband, Harry, predeceased her. So too did her only son, Jay Panzirer. She was survived by four grandchildren and her brother, though they would not be the primary beneficiaries of her largess. She provided for two of her four grandchildren,  and her brother, threw her chauffeur a trinket, and a king size bone for Trouble, it was clearly the Leona M. and Harry B. Helmsley Charitable Trust  that  was to benefit from roughly 99% of the multi-billion fortune. But it was the bequest to Trouble, that bitch of a Maltese that captured the headlines.

Leona’s Will cut out two of her four grandchildren. Though her Estate was worth conservatively $5,000,000,000 her grandson Craig Panzirer and granddaughter  Meegan Panzirer were to receive nothing, “for reasons that are known to them,” she wrote.  The other two grandchildren, David and Walter each received $5,000,000 outright, as well as $5,000,000 in a charitable remainder unitrust  that is to pay out  5% of the trusts’ fair market value for their lifetimes after which the money would further fund the Leona M. and Harry B. Helmsley Charitable Trust. Similarly her brother Alvin received $5,000,000 outright and $10,000,000 in a charitable remainder trust  paying Alvin 5% of the trusts fair market value every year until his death, then the remainder is to add to the Charitable Trust.

But even these relatively modest provisions for her two grandchildren came with strings attached. Leona required that her grandchildren, David and Walter, must visit their father’s grave site at least once a year – preferably on the anniversary of his passing, and when visiting, they must sign into the registry. Failure to comply, failure to sign in and their interest in the Trust ends.  So Leona.

Additionally, Leona ordered that anything with the name “Helmsley” be maintained in mint condition.  She also left detailed instructions as to the disposition of her body and set aside $3,000,000 in a perpetual trust to maintain the Helmsley Mausoleum. The Trustees were required to maintain, clean, and preserve the  Helmsley’s final resting place including an acid wash or steam wash at least once a year. She wanted to be interred beside her husband with her wedding ring on, and directed that nobody else could be laid to rest except her brother and his wife, and of course, that diamond studded, nippy little fluff ball –  Trouble.

But it wasn’t the creation of two $5,000,000 charitable remainder trusts that was for the benefit of only two of her four grandchildren, leaving the other two grandchildren with ugatz that grabbed so much media attention, nor was it her leaving billions to charity for the benefit of the poor, the hungry or the sick that filled the tabloids – no, it was the $12,000,000  to for the benefit of Trouble that really got the press barking. When Leona was alive, Trouble had it all according to Leona’s former housekeeper Zamfira Sfara.  “Pampered” apparently does not even begin to describe the way the little Maltese was treated.  “I never saw a human being so in love with an animal,” said Sfara of Leona, “[she] would like the do tongue to tongue.”  But Sfara maintains that diamond-collared Trouble was trouble, and often bit people without warning.  “Everyone was bitten,” Sfara said, “bodyguards, the head of security, even customers.”  Sfara, who sued Leona in 2005 after Trouble allegedly bit her hand and caused nerve damage, also said that the dog was prepared daily meals by the hotel chef.  Once the meal was ready, Sfara was made to get down on her knees and feed the dog with two fingers.

Between cutting out two grandchildren, leaving $12,000,000 to Trouble and not clearly identifying the purpose of the enormous distribution to The Leona M. and Harry B. Helmsley Charitable Trust, it was a certainty that her Will would be subject to litigation and it would either be settled quickly or it would be a battle royale –  a real dogfight. Fortunately reason prevailed. The two disinherited  grandchildren and the Executors of Leona Helmsley’s estate agreed to a settlement which  Surrogate Court Judge Renee Roth approved on April 20, 2008.  Under the terms of the agreement, reportedly,  the two disinherited grandchildren divided $6,000,000 and other bequests were reduced.  After the details of the settlement were revealed on June 16, 2008 it became clear that the Court really screwed the pooch. The Court ordered a $10,000,000 haircut to Trouble’s trust, leaving the snappy little pooch a paltry $2,000,000. On the news the following spoof hit the internet:

“Trouble, late real estate billionaire Leona Helmsley’s pet dog, who was left $12,000,000 by the “Queen of Mean” has been found dead in her hotel suite – she got into trash and died after eating a snickers bar – according to the hotel manager – who now stands to inherit the bulk of the dogs remaining fortune.

A Manhattan Judge had switched the $10,000,000 from the nine year-old Maltese’s trust fund to Mrs. Helmsley’s charitable foundation only yesterday – however that switch is now null and void after the dogs sudden and unexpected demise – as the dog had yet to sign the legal papers.

Trouble had been living at the Helmsley Sandcastle Hotel in Florida – where according to manager Carl Lekic the dogs annual expenses came to $190,000 – the bulk of which was spent on high class hookers, cigarettes and Champagne.

“I know it sounds ridiculous” said Lekic – “but that dog loved them girls – and loved champagne and smoking – and of course the cars – well she’s dead now, so you really can’t check…can you?”

Trouble was found dead by Lekic who then produced a Will, he claims was dictated to him by the dog and signed with Trouble’s paw which left all the animals remaining assets to him.

“I suppose I was her only friend” smiled Lekic “and to think, if the dog hadn’t have eaten that chocolate on exactly the same day as the judge’s ruling I would only have gotten $2,000,000. It is very sad though – I am not sure how the chocolate got in her room…..”

However some are claiming foul play.

“Tiddles”, a 5-year-old Persian cat who also lives in the hotel claims that Trouble promised him a cut of her millions while several German Shepherds are claiming they were lovers of the dead dog – and want their cut.

Franz Hitlerberg, a sheep farmer from Bavaria told me “We were very close – intimate even – I used to take her for walks and one thing led to another. I think that she would have wanted me to have that cash.”

A funeral for Trouble was held at the hotels incinerator late last night.”*

* http://www.thespoof.com/news/spoof.cfm?headline=s3i37062

It is funny. The press had lots of fun too. But, what about Leona’s Last Will and Testament? Were her intentions honored? She wanted to cut out two grandchildren, yet they inherited millions, she wanted to be buried with her Trouble but turns out, New York law doesn’t allow animals to be buried with humans (Leona that is) and she wanted $12,000,000 held in trust for the pooch, but Trouble was thrown only a $2,000,000 bone. Point is, with all her resources, her intentions were not honored.

Even the residuary beneficiary of her Will – The Leona M. and Harry B. Helmsley Charitable Trust which was funded with billions of dollars, started in litigation. And again the question was, what did she intend. Seems Leona signed two mission statements in addition to the Helmsley Charitable Trust Agreement.

The second mission statement deleted any reference to improving medical services for indigents and children, and she omitted any reference to building a new hospital or contributing to an existing hospital to further the cause. It’s not clear why this language was removed. I don’t think even the Queen of Mean would be mad at indigents, ill children and hospitals. Right? But they’re out. Therefore, one could conclude the primary beneficiary of the Helmsley Charitable Trust should be “for purposes related to the provision of dogs,” whatever that means, and “such other charitable activities as the Trustees shall determine.”  That’s it. That’s the language that governs the distribution of what will likely be over $25,000,000 a year – forever.

Certainly the Humane Society of the United States, The American Society for the Prevention and Cruelty to Animals and Maddies Fund had high expectations. They had reasonable grounds to believe that themselves,  and like causes, would be the primary beneficiaries. The Trustees of the Helmsley Trust not wanting to be caught in the cross hairs of this dog fight, did the right thing. They petitioned the Court and asked for a determination as to the scope of their discretion in distributing monies to the charities. On a cold dog day afternoon in February 2009 the New York County Surrogate’s Court issued an Order. The Court held that the 2004 mission statement was “of no consequence” because the governing Helmsley Charitable Trust Agreement as amended on May 11, 2004 makes it clear that the “Trustees discretion to apply trust funds for charitable purposes is not limited by any mission statement settlor may have executed”, and accordingly “the Trustees may apply trust funds for such charitable purposes and in such amounts as they may, in their discretion, determine”.   The Trustees of the Leona M. and Harry B. Helmsley Charitable Trust responded with a clear exercise of discretion as follows:

“In April 2009, the Trust announced the first grants since Leona Helmsley’s death, totaling $36 million; the vast majority went to health and medical research for humans, and $1 million went to dog-related charities.”  One or more dog-related charities undertook a publicity campaign, claiming that the Trustees had acted improperly and ignored Mrs. Helmsley’s instructions—a claim widely reported in the media.

Did Leona Helmsley intend for this charitable trust to focus on the care and help of dogs, rather than people? Absolutely not. Have the trustees of this vast fortune acted improperly and ignored Mrs. Helmsley’s instructions? Again, absolutely not.

These are the facts:

  • Mrs. Helmsley died on August 20, 2007. Her will left nearly her entire fortune to The Leona M. And Harry B. Helmsley Charitable Trust, which she had established in 1999. Until her death, Mrs. Helmsley was the sole trustee of the Trust.
  • Between 1999 and her death, Mrs. Helmsley signed a number of documents relating to the Trust, including several amendments and two so-called “mission statements.” The totality of these documents clearly provided that the trustees, in the language of the document establishing the Trust, “may, in their sole discretion, distribute the net income and principal of the Trust Fund to and among such one or more Charitable Organizations and in such amounts or proportions as the Trustees, in their sole discretion, shall determine.”
  • That is the language of the Trust itself, not a characterization. Moreover, numerous other provisions of the Trust documents fully supported our belief that Mrs. Helmsley had entrusted her successor trustees with, in the twice-stated language of the Trust itself, “sole discretion” to distribute the Trust’s money to charities the trustees consider worthy.
  • Yet we chose instead to act not simply on our reading of the operative language, but with the full imprimatur of the law. There is a procedure under New York law that allows trustees to present weighty issues to the Surrogate’s Court, and to seek that Court’s guidance, or what the statute calls the Court’s “advice and direction”. We did precisely that, filing a petition in Surrogate’s Court, asking that court to review and confirm our reading of the documents.
  • The petition disclosed and presented to the Court every conceivably relevant document, the original Trust instrument, the amendments, the “mission statements,” and others. The petition presented a detailed analysis of the documents, leading inescapably to the conclusion that the “sole discretion” granted by the Trust to the trustees should be honored. Before filing the petition, we served a copy on the Attorney General of New York State — the legal authority charged with assuring that charities function with integrity to their intended purposes.
  • Before the Court ruled, the Attorney General submitted a written response to the petition, agreeing with us. The Surrogate’s Court upheld our position in a decision rendered on February 23, 2009, unambiguously ruling: [T]he court finds that the trustees may apply trust funds for such charitable purposes and in such amounts as they may, in their sole discretion, determine.”
  • Until the Court ruled, we made no grants. In the interim, because of the high probability that the Court would rule that the Trust’s language means what it says, we undertook extensive due diligence regarding a variety of charities, so that once the Court ruled we could hit the ground running. And, indeed, we did. The Trust’s grants to hospitals, medical research efforts, other healthcare facilities, and organizations providing food and shelter to people in dire need, and other grants, will substantially alleviate human suffering and create healthier and more fulfilling lives for millions of people across the globe. And the billions of dollars the Trust will continue to donate will multiply that impact enormously.
  • One final thought. Mrs. Helmsley was not known for reticence. Here, her actions spoke as clearly as the words of the Trust documents. In the eight years between the formation of the Trust and her death, Mrs. Helmsley contributed (as the sole trustee of this Trust and otherwise) over $55 million to charitable causes. Of that amount, she made only one gift to a dog-related charity, for one thousand dollars.
  • Even more telling is this: The claim that the Trust was established for dog-related purposes relies on a document entitled “Mission Statement” signed by Mrs. Helmsley in 2004. Between her signing that document and her death — during which time she alone controlled the Trust — Mrs. Helmsley and the Trust gave over $29 million to charities; of that, the amount she and the Trust gave to dog-related charities was exactly zero.”*

 

On April 21, 2009, the trustees of The Leona M. and Harry B. Helmsley Charitable Trust gave $136,000,000 to hospitals, medical foundations and homeless programs.  To animal and dog charities, the trustees gave $1,000,000 to split between 10 organizations, including the Humane Society.  Wayne Pacelle, chief executive of the Human Society of the United States, believed the Trustees’ move went against Helmsley’s express wishes, “giving less than 1 percent of the allocation to dog-related charities is a trifling amount and not consistent with Leona’s Helmsley’s expressed intention” Pacelle said afterwards.

Regardless of which charities benefitted, the Helmsley wealth is in fact benefitting good causes. The question is what did Leona intend? Were her intentions clearly expressed? You decide. Detailed below is a summary of distributions to various charitable entities from October 2010 until March 2011.

Table 4.1: The Leona M. and Harry B. Helmsley Charitable Trust Grants

 

The National Geographic Society 10/15/2010 $90,000
FasterCures – The Milken Institute 10/19/2010 $125,000
Court House, Inc. 10/19/2010 $100,000
Island Conservation 11/8/2010 $527,000
Ashley Medical Center 11/8/2010 $343,740
National Audobon Society, Inc. 11/8/2010 $697,000
Catholic Health Initiatives 11/8/2010 $2,406,933
Presentation Medical Center 11/8/2010 $488,046
St. Aloisius Hospital, Inc. 11/8/2010 $332,175
Alvera St. Luke’s Hospital 11/8/2010 $369,660
University of Iowa 11/10/2010 $987,790
St. Andrews Health Center Foundation 11/8/2010 $357,260
Campbell County Memorial Hospital District 11/8/2010 $1,892,648
Memorial Hospital of Sweetwater County Foundation 11/8/2010 $563,623
Avera McKenna Hospital and University Health Center 11/8/2010 $719,343
Dells Area Health Center 11/8/2010 $430,503
New York Presbyterian 12/20/2010 $5,000,000
The Weizmann Institute of Science 12/20/2010 $5,200,000
Technion – Israel Institute of Technology 12/20/2010 $5,000,000
Turnaround for Children 12/13/2010 $2,750,000
Catholic Health Initiatives 12/13/2010 $493,171
Sanford Health Foundation 12/13/2010 $2,060,151
Banner Health 12/13/2010 $471,285
National Summer Learning Association 12/13/2010 $17,700
South Lincoln Medical Center 12/13/2010 $419,101
Heart of America Medical Center 12/13/2010 $432,052
Towner Country Medical Center, Inc. 12/13/2010 $311,394
Memorial Hospital of Converse County 12/13/2010 $2,378,539
The Fund For Public Schools, Inc. 12/13/2010 $1,000,000
Center For Excellence In Health Care Journalism 12/13/2010 $1,097,000
Banner Health dba Platte County Memorial Hospital 12/13/2010 $471,285
University of the State of New York, Regents Research Fund 12/13/2010 $1,500,000
Baldwin Center 1/10/2011 $350,000
Forgotten Harvest 1/10/2011 $350,000
Detroit Rescue Mission Ministries 1/10/2011 $200,000
Gleaners Community Food Bank 1/10/2011 $200,000
The Salvation Army Eastern Michigan Div. 1/10/2011 $200,000
Diabetes Hands Foundation 2/14/2011 $150,000
Defensa Ambiental del Noroeste (DAN) 2/14/2011 $300,000
International Community Foundation 3/1/2011 $46,000
Foundation for Annie Jeffrey 3/1/2011 $548,754
Brodstone Memorial Hospital 3/1/2011 $472,968
Johnson County Hospital Foundation 3/1/2011 $530,161
Litzenberg Health Care Foundation 3/1/2011 $508,421
McKenzie County Healthcare Systems, Inc. 3/1/2011 $860,264
Future Generations Health Care Foundation 3/1/2011 $339,600
St. Andrews Health Care Center Foundation 3/1/2011 $336,872

Source: As published on Helmsley Trust.org

Many good and just causes will benefit from the billions Leona preserved for the Leona M. and Harry B. Helmsley Charitable Trust. But does such generosity change Leona’s legacy? In the eyes of our Maker, does the Benevolent Queen of Mean get a pass? Maybe she was just misunderstood … or maybe she was really mean – but had a big heart. But if you asked, “Were Leona Helmsley’s last wishes carried out to a T,” the answer is categorically no. So be forewarned, if Leona should crossover into the mind of John Edwards, or should she appear in a dream like Fruma Sarah, someone’s getting fired, but the good news is – food, medical care  and housing may be available.

Legacy Lesson #14: Protect The Pooch

Many little people love their pets just like Leona loved Trouble. We too should provide for our furry friends, but naming a caretaker and providing a fixed bequest for their needs is too often overlooked in the estate planning process.  Perhaps you should start such planning by  asking the individual you’d like to nominate as the pets’ caretaker if they’re willing to assume this responsibility and give  an assurance that adequate funds will be provided so the caretaker doesn’t have any financial burden. Clearly, Leona’s bequest of $12,000,000 to Trouble was a little over the top, but there are annual costs that can be quantified over the lifetime of the pet. The flamboyant Liberace,  on the other hand was another celebrity who created a pet trust for the benefit of his fifty dogs and though his intentions were good, the trust fund was exhausted before the last dog died, so in his case, the pet trust was underfunded.

Grooming, feeding and veterinary costs can be substantial over the life of a pet, but try to quantify these costs. Then either create an outright bequest in your Will or a Trust, called a Testamentary Pet Trust funded with an amount equal to your estimated costs and name a caretaker who’s willing to care for your furry friends.  Typically, the amount devised would not warrant the utilization of a trust.  However, without a trust, such a bequest would not guarantee that the funds will be used as intended. For those who have numerous pets, needy pets, or prefer an accountability, a trust may be preferable to an outright bequest.

The New York City Bar Association issued an informative booklet called “Planning for Your Pets in Your Will” and in it are sample clauses that may be used in drafting a Will or Trust.  Detailed below are just four examples from the booklet that have been slightly  modified.

Example #1 -Friend As Caretaker And A Fixed Bequest  

I give my dog Snowy, and any other animals which I may own at the time of my death, to Leona Helmsley, with the request that she treat them with love and care. If she is unable or unwilling to accept my animals, I give such animals to Liberace with the request that he treat them with love and care.  I direct my Executor to give Ten Thousand ($10,000) Dollars from my estate to the person who accepts Snowy, and any of my other animals. I request, but do not direct, that these funds be used for the care of my animals.

Example #2 – Humane Shelter As Caretaker And A Fixed Bequest

I give my dog Snowy, and any other animals I may have, to the Humane Shelter with the following requests:

  • that the Humane Shelter take possession of and care for all my animals and search for good homes for them;
  • that until homes are found for my animals, the animals be placed in foster homes rather than in cages at the shelter;
  • that if it is necessary to keep some of the animals in cages while making arrangements to find permanent homes, in no event should any animal stay more than a total of 2 weeks in a cage;
  • that each animal should receive appropriate veterinary care, as needed;
  • that the shelter make every effort to assure that none of my animals are ever used for medical research or product testing or painful experimentation under any circumstances;
  • that, after placement, shelter personnel make follow-up visits to assure that my animals are receiving proper care in their new homes;

If the Humane Shelter is in existence at the time of my death and is able to accept my animals, I give the sum of Ten Thousand ($10,000) Dollars to the Humane Shelter. If the Humane Shelter is unable to accept my animals, I give my animals and the sum $10,000 to one or more similar charitable organizations as my Executor shall select, subject to the requests made above.

Example #3 – Trust For The Care of Pets

I give the sum of One Hundred Thousand ($100,000) Dollars and all of my dogs, cats, and any other animals of mine living at the time of my death to the trustee hereunder, IN TRUST,  for the following purposes and subject to the following terms and conditions:

This trust is created for the benefit of all of my dogs, cats, and any other animals of mine living at the time of my death (the “Beneficiaries” herein).

The trust shall terminate upon the earlier to occur of the following events:  the last to die of the Beneficiaries, or if required by law, twenty-one (21) years from the date of my death.

During the term of the trust, the trustee shall apply for the benefit of the Beneficiaries, any or all of the net income of the trust and so much or all of the principal of the trust from time to time, as the trustee shall in the trustee’s discretion determine to be advisable for the care, including veterinary care, of the Beneficiaries.  Any income accrued but not distributed for the benefit of the Beneficiaries shall be added to the principal of the trust.

I appoint Warren Buffet to be the trustee of such trust.  If such person has predeceased me or for any other reason is unable to act as such trustee, I appoint Bill Gates to be the trustee of such trust.

I designate Dr. Doolittle to be the caretaker of the Beneficiaries.  If such person has predeceased me or for any other reason is unable to act as such caretaker, I designate Dr. Seuss to be the caretaker of the Beneficiaries.  If such person has predeceased me or for any other reason is unable to act as such caretaker, the trustee shall select another person to act as caretaker of the Beneficiaries.  The Trustee, in the trustee’s discretion, may pay a stipend from the trust to the person acting as such caretaker.

I am creating this trust to provide for the care of my animals and the trustee does not need to consider the interests of the remainderpersons when making distributions.  The trustee, in the trustee’s discretion, may use all of the trust property for the benefit of my animals; even if the result is that nothing will pass to the remainderpersons.

Upon the termination of the trust, if any property remains in the trust at the time of termination, the trustee shall distribute any such income and/or principal to the Humane Shelter. If such charitable organization is not in existence at the time of termination, I give the trust remainder, if any, to a charitable organization that benefits animals described in Section 170(c) and 2055(a) of the Internal Revenue Code, to be selected by the trustee.

Example #4- Trust For Farm Animals

I give my horses, farm animals, and any other animals which I may own or have in my possession at the time of my death, and the sum of Two Hundred Thousand ($200,000) Dollars, to my trustees named hereunder,  IN TRUST, to hold and arrange for the care of such animals and to invest and reinvest such funds and to pay for the expenses of the care of such animals from such property as my trustees shall in their discretion determine.  This trust is created for the benefit of my horses, farm animals and other domestic animals.  My trustees may board my animals with a suitable boarding facility, or may rent a property where the animals can live and hire a caretaker to care for the animals.  The trustees shall make appropriate arrangements for the proper care of my animals, including veterinary care, during their lives.  The animals are not to be sold, but the trustees may place one  or more of my animals with animal sanctuary, if the trustees, in their discretion, determine that it is in the best interests of such animals.  The trustee may continue to pay for the care of such animals at such sanctuary, or make such other arrangements as may be beneficial to my animals.  I designate Pete Friendly, or if such person is unable or unwilling to act in such capacity, Haus Friendly, as the person to enforce the trust, if necessary.

This trust shall terminate upon the earlier to occur of the following events; the last to die of my animals, or if required by law, twenty-one (21) years from the date of my death.  Upon the termination of the trust, if any animals of mine are then living, or if any income and/or principal remains in the trust at the time of termination, the trustees shall distribute any surviving animals and any such remaining income and/or principal to Animal Friendly Sanctuary.   If such sanctuary is not in existence at the time of termination, the trustees shall distribute any surviving animals and any remaining income and/or principal to an animal sanctuary or sanctuaries, to be selected by my trustees, in their discretion.

Legacy Lesson #15: The Grim Reaper’s Silver Lining

When Leona Helmsley died in 2007, the federal estate tax rate was 45% on assets over $2,000,000. If her estate was valued,  after administration costs, at $5,000,000,000 less the $2,000,000 federal estate exemption amount, her estate tax liability could have exceeded  $2,200,000,000.  Instead of incurring such an enormous liability, Leona Helmsley chose to provide her brother, Alvin, with an outright bequest of $10,000,000 and $5,000,000 to two of her grandchildren, David and Walter. In addition to the outright bequests, her Will  created three separate charitable remainder unitrusts; one funded with $10,000,000 for Alvin for his lifetime, one for her grandson David funded with $5,000,000 and another for her grandson Walter, also funded with $5,000,000. The terms of these Trusts are straightforward. The trustees are to determine the value of each Trust annually, then pay out to the beneficiaries 5% of the net fair market value of the trust for the beneficiaries’ lifetimes. As an example, if the Trusts values were constant, Alvin would receive $500,000 a year for life, and each grandchild would receive $250,000 a year for life.

By creating these trusts, Leona accomplished three objectives:

  • First, these payments for life, combined with the fixed bequests in her Will, gave her assurances that all three would always have a roof over their heads and enough money to survive without worrying.
  • Second, her estate would be entitled to an estate tax deduction equal to the value of the remainder interest going to her Foundation. By way of example, if her grandsons were both 45-years-old, the Foundation would have to wait approximately 38 years before receiving the balance of the trust funds. Therefore, depending on interest rates, her estate would receive an estate tax charitable deduction of approximately 20% of the $5,000,000 contributed into the trust or $1,000,000. However, if her brother Alvin was 80-years-old at the time of her demise, the Foundation would have to wait approximately only 10 years until actuarially, Alvin dies, and depending on the then interest rate, her estate would be entitled to an estate tax charitable deduction of approximately 67% of the $10,000,000 contributed into his trust, or $6,700,000.
  • Third, Leona knew with certainty that after each beneficiary dies, their trust would further fund the Helmsley Charitable Trust.

A win win for all.

By so structuring the distribution of her estate, Leona utilized less than 1% of her total estate value for family members and the remaining 99% of the Helmsley empire would earn the estate a charitable deduction. Whether she planned her estate to avoid estate taxation,  or was truly philanthropic, or more likely a combination of both, we’ll never know. But one thing’s for sure, the estate tax changes how wealthy individuals distribute their estates. The problem however is that Congress has historically made it difficult for Americans to plan their estates with certainty. A review of the federal estate tax system from 1997 to 2013 exposes the roller coaster ride that we the little people have been forced to endure.

Table 4.2: Historical and Future Federal Estate Tax Exemptions and Rates

Year Estate Tax Exemption Top Estate Tax Rate
1997 $600,000 55%
1998 $625,000 55%
1999 $650,000 55%
2000 $675,000 55%
2001 $675,000 55%
2002 $1,000,000 50%
2003 $1,000,000 49%
2004 $1,500,000 48%
2005 $1,500,000 47%
2006 $2,000,000 46%
2007 $2,000,000 45%
2008 $2,000,000 45%
2009 $3,500,000 45%
2010 $0  0%
2011 $5,000,000 35%
2012 $5,000,000 35%
2013 $1,000,000 55%

 

Tax years 2010 through 2012 are based on the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act that was signed into law by President Obama on December 17, 2010. This law is only good until it sunsets on December 31, 2012 and then we return to the estate tax structure as it was in 2002. Numbers on a chart simply don’t tell the story. So to better illustrate the point, if your estate was valued at $3,000,000 as a constant, from 1997 through 2013,  then your federal estate tax liability could be estimated as follows:

Table 4.3: The Estate Tax Rollercoaster

Year Estate Tax Exemption Estimated Estate Tax Liability
1997 $600,000 $1,320,000
1998 $625,000 $1,306,250
1999 $650,000 $1,292,500
2000 $675,000 $1,278,750
2001 $675,000 $1,278,750
2002 $1,000,000 $1,000,000
2003 $1,000,000 $1,000,000
2004 $1,500,000 $720,000
2005 $1,500,000 $720,000
2006 $2,000,000 $460,000
2007 $2,000,000 $450,000
2008 $2,000,000 $450,000
2009 $3,500,000 $0
*2010 $0  $0
2011 $5,000,000 $0
2012 $5,000,000  $0
2013 $1,000,000 $1,100,000

Families who have accumulated modest wealth don’t know if they should anticipate being subjected to the estate tax and planning their estates accordingly, or spin the wheel and hope to die in a year that their estate can pass free of federal estate tax. The Boss, George Steinbrenner died on July 13, 2010 with an estate estimated at $1.1 billion and since there was no estate tax in 2010, his heirs got a $500,000,000 windfall. In an article entitled, The Disappering Billions, by Ivan Taback and Yvonne M. Perez-Zarraga it was estimated that our federal government will lose $8.75 billion of revenue as a result of the 2010 estate tax repeal. In addition to that lost revenue, would billionaires such as Leona Helmsley leave all or a portion of their fortunes to charity if there was no estate tax  deduction?  If charities weren’t supported by wealthy donors, who would support them?

Legacy Lesson #16: A Generation Skipped

Leona intended to provide for two of her grandchildren, while cutting out two other grandchildren.  However, she did not provide her reasoning which could have been instructive to a Court if her intentions were ever challenged – and challenged they were.  In fact,  her 18 page Will only said “I have not made any provisions in this Will for my grandson CRAIG PANZIRER or my granddaughter MEEGAN PANZIRER for reasons which are known to them”.  Outsiders could only speculate that when Leona’s only son Jay died,  Leona had reportedly tormented her daughter-in- law,  and perhaps by so doing, put the relationship with her grandchildren at risk.  Given the fact that she was a multi-billionaire, and she left millions to her other grandchildren,  she should have been much more precise in expressing her intentions. Perhaps her lack of specificity was for the best.

Leaving a bequest, or a trust for the benefit of grandchildren is a wonderful sentiment and typically, grandchildren never forget such acts of kindness. But be careful.  Congress may view an act of kindness as an attempt to avoid estate taxation. In short, if a grandparent left a bequest of $10,000,000 to a grandchild, and such wealth  wouldn’t be subject to estate tax until the grandchild died, the Treasury would have to wait a long time before collecting any estate tax from that grandchild. The U.S. Treasury apparently isn’t that patient and viewed such a transaction as a tax loophole. Its preference is to collect monies on each and every estate that exceeds the exemption amount, not every other estate. So to close this loophole, Congress enacted the generation skipping transfer tax. This tax, which is assessed in addition to the estate tax, would all but absorb any wealth passed to a generation two or more generations below the transferor – in this example a grandparent to a grandchild. There is however a generation skipping transfer tax exempt amount, currently $5,000,000 per individual, which is not subject to this confiscatory tax. Here’s the rub, the exemption amount is a moving target. From 2001 to 2013 the exemption from the generation skipping transfer tax has or will change seven times. In addition, there is also a predeceased ancestor exemption such that if a child predeceased a parent, the parent may leave the bequest to the grandchild without incurring the generation skipping transfer tax.  But the question is, do you want to provide meaningful wealth to grandchildren if:  a) you don’t yet know them; b) if you don’t know the spouse; or c) if such wealth would take the incentive out of working hard and climbing the proverbial ladder?  Creating a generation skipping transfer trust of $5,000,000 is a great thought, but drill down.  Will you be upset if instead of inheriting $5,000,000 you instead receive the income of the trust for life, and after you die it passes to your children?

Legacy Lesson #17: Buried, But Not Resting Peacefully

When Harry Helmsley died, his Will included specific burial instructions as follows:

“I, HARRY B. HELMSLEY, do make this Will, hereby revoking all wills and codicils previously made by me.  Any reference to my Will shall include any codicil thereto.  I direct that my remains be interred at the Helmsley Mausoleum at Woodlawn Cemetery, The Bronx, New York.  I further direct that permission be granted as the need arises for the interment in the Helmsley Mausoleum of the remains of my wife, LEONA M. HELMSLEY (“my wife), her brother, ALVIN ROSENTHAL, and her brother’s wife, SUSAN ROSENTHAL, but for no other person.”

After Harry B. Helmsley died, his wishes were respected … for a while anyway.  He was in fact buried in the Bronx at the Woodlawn Cemetery, but Leona soon became disenchanted with the lack of ambiance surrounding the Helmsley Mausoleum.  Since every real estate agent’s mantra is location, location, location – Leona found a better location for her Harry. But the mechanics of moving a body at rest isn’t so easy. Leona sued, seeking to disinter the body claiming the Bronx Cemetery no longer provided perpetual beauty and peaceful solitude, but instead had become an eyesore.

Leona’s protests and pleadings worked. Harry’s remains were  disinterred and moved uptown into a  $1,400,000 mausoleum at Sleepy Hollow Cemetery  in Westchester, New York. The new location, where Harry and Leona Helmsley are interred, sits imposingly on the crest of a hill bearing the name Helmsley. Two real estate tycoons resting comfortably.

Leona Helmsley is not the only one who has had to sue to move the deceased from one gravesite to another. And, it’s certainly not the kind of issue unique to celebrities. In fact, in unreported probate litigation matter a judge was told the story of  a dying man who once called his son down to the basement and explained that though still married to his mother for more than forty years, it had been a lifetime of bickering. Not believing in divorce,  both he and his wife agreed to live separate lives and to some degree, the détente worked. But now, facing his own mortality, he had made an important decision, and asked his son to see to it that his intentions were honored. This dying man wanted to be buried next to his father. He explained that if he was buried in a single plot next to his father, he would surely have eternal peace. But, if buried in a double plot, and his wife later interred on top of him, he would be condemned to an eternity of bickering.

With that in mind,  he asked his son to go to the cemetery and buy the plot next to his father. The son, honoring the wish of a dying man  complied. Hours later, he returned to the basement, plot deed in hand and assured his father he can and will rest in peace. To be sure that buying the plot deed was enough, the father asked the son to call the family lawyer and ask if burial instructions had to be part of a Will. The call was made, and the attorney opined that the deceased are buried before a Will is probated, and therefore, the purchase of the plot deed reflected his intentions and would be sufficient. Relieved, the dying man closed his eyes for the last time. Though some describe this family as dysfunctional, the morning of the funeral they dressed in dark clothes,  attended  mass and rode in black limousines which followed the hearse like every other family in mourning. But on this morning, the hearse went one way, and the limousine carrying the son and two of the five siblings went another way. When the son’s limousine reached what was to be his father’s final resting place, there were no other cars and the plot had not been prepared for his father’s burial.  The son quickly phoned the main office and was informed that his mother had, just one day prior, purchased a double plot and made arrangements for her deceased husband to be buried such that when she died, she could be interred on top. The son, enraged, didn’t attend his father’s burial, instead he called a lawyer hoping to stop the burial.

The sympathetic lawyer understood and immediately filed an Order To Show Cause seeking to disinter the body and bury the deceased as he had requested.  A judge was called, he read the relief requested and ordered all parties to appear in Court one week later. The family members arrived at Court in different cars, all dressed in dark suits and appropriately subdued dresses like any other family. The son who petitioned the Court took the stand first and tearfully explained his father’s charge and his promise to honor the wish of a dying man. The lawyer too testified that the decedent had called and asked if he needed to update his Will to include his wish that he be buried with his father. The lawyer offered a detailed summary of the call, his thought process and the advice he offered. The widow was then called to testify. She put her hand on the bible and swore to tell the truth.   Her lawyer offered into evidence the ten-year-old year Last Will and Testament of her now deceased husband. He asked her to read aloud from Article 2nd of that Last Will and Testament. Slowly she read the words which directed that the Executrix shall have the power to bury the decedent in such manner as she, in her sole discretion shall determine reasonable.  The Court having heard testimony from all who appeared that morning took a one hour break and then issued a decision. The order was clear. The Court reasoned that after death,  there’s only one document that speaks the words of the dead and that’s why the document is called a Last Will.  Accordingly, the terms of the decedent’s Last Will governed, not the purchase of a cemetery plot, not the call to a lawyer nor oral discussions with a son.

So then its clear, to assure your intentions are honored, you must document your burial intentions in your Last Will and Testament. Ted Williams, one of the greatest baseball players to ever play the game did just that on December 20, 1996 when he signed his Last Will and Testament.

In his Last Will and Testament, Ted Williams expressed his wishes to be cremated and his ashes sprinkled at sea off the coast of Florida where the water is very deep.  He also directed that no funeral or memorial service of any kind should be held for him and that neither his family nor his friends should sponsor any such service for him.

However, on November 2, 2000 the Splendid Splinter allegedly signed a handwritten note, which conflicted with Article 1 of his Will. This note, stained with motor oil, and allegedly bearing the signatures of Ted, John Henry, and his sister, Claudia claims that they all agree to be put into Bio-Stasis after they die so they can be together for the future, even if there is only a chance.

Almost immediately after his death, Ted Williams’ body was flown to an Arizona cryonics lab to be cryonically suspended.  His head was removed in neuroseparation surgery, a procedure that billed John Henry $120,000 plus $16,000 for the cost of flying the body to Arizona.  The Hall of Famer’s head and body are being stored in separate containers.  His head, which been cracked as many as ten times, supposedly because of changing temperatures, and has two dime size holes in it, is stored in a silver container marked as ID #A-1949.  This burial request resulted in litigation amongst the siblings, but the damage was already done, he was already in pieces,  and now the siblings relationship is also in a state of deep thaw.

So whether you want your remains cremated, launched into space, frozen, buried at sea, stored in an urn or sitting on a mantle over the fireplace like Jack Burns’ father in “Meet the Parents”, you must clearly express these intentions in your Will. Same applies to the purchasing of any plot deeds,  or written funeral plans. Give thought to who you choose as your Executor, because ultimately, it’s the Executor who’ll tuck you in for the big sleep.

Legacy Lesson #18: The Mission Statement: A Legacy Builder or Buster

How many rooms could be filled with closing binders of all the properties Harry Helmsley bought and sold?  How many hours did the Helmsleys, their lawyers, accountants and employees dedicate to ironing out the details of complex commercial real estate transactions?  It took decades to build the Helmsley empire. Yet, how much thought went into defining the purpose of the Leona B. and Harry M. Charitable Trust? The trust was established years before Leona died, and was clearly to be one of New York’s largest private charitable trusts. And if you go by the last signed Mission Statement the Trustees were directed to hold, administer and manage the assets for:

“(1) purposes related to the provision of care for dogs; and

(2) such other charitable activities as the Trustees shall determine.”

That’s it – that’s the mission statement? Dogs and whatever you think … really? And, a little help please, like, what percentage should be distributed for the benefit of dogs, and what percentage should be distributed at the discretion of the trustees? That ambiguity was certainly cleared up by the Court. The dogs were left out in the cold and distributions were left entirely to the discretion of the trustees. And by the way, from an outsider’s point looking in, it looks like the trustees are doing an outstanding job – no issue there.  The website is informative and monies are going to great causes. That’s not the point. The point is, given the enormous amount of wealth being bestowed upon the trustees, and the great responsibilities they’ve been asked to assume, you would think the Helmsley Mission Statement would be a work of art, detailed with lots of strings attached and conditions precedent and other such Helmsley imprimaturs. But instead,  the first and second amended mission statements lacked any such forethought. The Helmsley Mission Statements didn’t get the attention that you’d think worthy of a multi billion dollar fortune that could be held for the benefit of charities … forever.

What did the donor intend? Though the judicial intervention required to determine whether or not the Trustees of the Leona B. and Harry M. Charitable Trust had absolute discretion or not was resolved quickly – that’s atypical. Usually the words “quick and efficient” are not associated with litigation.  Giving money to charity is a good thing. It usually makes both the donor and the charity feel good. But that magnanimous feeling can quickly turn sour if the donor, or some other interested family members questions the utilization of the gifted dough. Just ask the Robertson’s. Charles Robertson was a Princeton graduate, class of 1926. His wife Marie inherited a fortune through her grandfather, the founder of the Great Atlantic & Pacific Tea Company now known as A&P. In 1961, the Robertson’s created the Robertson Foundation and funded it with $35 million worth of A&P stock. The certificate of incorporation, much like a mission statement, clearly stated the purposes of the Foundation:

“To establish or maintain and support, at Princeton University, and as a part of the Woodrow Wilson School, a Graduate School, where men and women dedicated to public service may prepare themselves for careers in government service, with particular emphasis on the education of such persons for careers in those areas of the Federal Government that are concerned with international relations and affairs….”

The Robertson’s wanted their gift to be used for graduate training in international affairs with the hope that that most of the students who benefitted from the gift, would one day work for the federal government. In a 1962 letter, Charles Robertson wrote about his desires: “If substantial numbers of persons trained in the School do not go into government service … then no matter how excellent their training may have been, the basic purpose of the School is not being  achieved”. To assure that the gift was properly managed, The Robertson Foundation was created with seven board members. Four were to be appointed by Princeton University and three by the Robertson family, including naming Charles Robertson as Chairman of the Foundation who dutifully served until his death in 1981. The  trouble is that Princeton trustees sought to expand the meaning of the mission and control the management of the Foundation funds, while the Robertson heirs sought to narrow the scope of the mission and objected to the Princeton University Investment Company being retained as the investment managers. Add the accelerant;  the 1961 gift of $35,000,000 appreciated over the years to over  $900,000,000 and the molten lava was ready to blow.

This volcano erupted in 2002 when the Robertson trustees sued Princeton University, and the trustees appointed by Princeton University. The Robertson’s as Plaintiffs sought to sever the Foundations ties to Princeton University, regain control of the Foundation themselves, terminate Princeton University Investment Company as the investment manager and hold the University accountable for alleged inappropriate transactions. Princeton University refuted the claims by emphasizing that it operated, supervised and ultimately controlled the Foundation, and as such, had academic independence that broadened the scope of the mission when necessary.

After forty years of peacefully fulfilling the donors intention, the hinges had come off, and the next six and half years was nothing short of a four alarm fire. Over eighty individuals had their depositions taken and that task alone took 125 days. Experts were retained from Duke University, Johns Hopkins University, New York University, the IRS and  top accounting firms, to opine as to what’s right, only to be refuted by experts hired by the adversary opining what’s wrong. Though both sides had the funds to wage war, there’s nothing worse than money intended to benefit charities going up in smoke. The Plaintiffs had funded this firefight through another charitable foundation called the Banbury Fund and the price tag – over $20,000,000. Perhaps well over $20,000,000 as in December of 2008, the litigation was finally settled, and the claims extinguished by a settlement agreement that provided:

  1. That Robertson Foundation Funds would be used to reimburse the Plaintiffs Banbury Funds $40,000,000 payable over three years.
  2. That The Robertson Foundation would fund a new Foundation funded with $50,000,000 over ten years and the funds would be used strictly to prepare students for careers in government service.
  3. That the Robertson Foundation would thereafter be dissolved, and the funds transferred to an endowment fund at Princeton University with the same mission and purpose as understood and interpreted by Princeton University.

There is a right way and a wrong way to create a mission statement. Ideally, the perfect mission statement would be a clear and concise. It would reflect your intentions and provide the trustees with some inspiration and guidance. Mechanically, the mission statement could name the specific charitable causes and allocate  percentages of distributions to each one, or it can name numerous charitable causes or types of causes  and allow the trustees the right to allocate amongst them as they determine. A key component to a well drafted mission statement is determining how much discretion the trustees or board members are granted.  The advice and input from family members and  advisors should be sought, as they may be responsible to see the mission through as employees, advisors, board members and or trustees and you want assurances that they are willing to so serve. The term of the mission should also be established; as some charitable foundations or trusts operate in perpetuity,  others only for a term of years. A mission statement could be  a true legacy builder, a reflection of your good intentions and giving back to communities or causes that move you. It’s a worthy undertaking, but it does take time, attention and some diplomacy.  In the process of trying to do good, you don’t want to poison the waters and taint the intent of a gift.

The Astor Disaster: A Legacy of Influence and Undue Influence

Just how un-entitled to the Astor fortunes was Anthony Marshall?

Consider that John Jacob Astor, the nation’s first multi-millionaire had earned his fortune the old fashioned way, through hard work, an entrepreneurial spirit, and perseverance.  First, he built an international fur trading empire.  Then, he turned his attention and resources to buying New York City properties – lots of New York City properties. He bought so many that when he died in 1848, his estate was valued at over $20,000,000 – back when that was real money.

His son, William Backhouse Astor, Sr., though not the dynamo his father had been, managed and preserved the properties such that at the time of his death in 1875, he was one of the wealthiest men in America – leaving an estate of over $50,000,000.

By the time his sons, John Jacob Astor, III, and William Backhouse, Jr., assumed the helm of the Astor riches, the family aristocracy, now in its third generation, was firmly entrenched in the world of arts, philanthropy, and social circles befitting only to royalty.

Most notable in the fourth generation of the Astor influence was John Jacob Astor, IV who, during his first marriage, fathered Vincent Astor and Ava Astor.  He later divorced, and, in an apparent mid-life crisis, married 18-year-old Madeline Talmadge. To avoid the media frenzy, they decided to honeymoon abroad.  During their travels, Madeleine conceived, and the couple decided to return home in 1912 and boarded the Titanic for its maiden voyage to New York.  Unfortunately, an iceberg altered their plans, and Madeleine, in her delicate state, was ushered into a lifeboat. John Jacob Astor, IV, the wealthiest man on the ship, died in the icy Atlantic waters.  His son, Vincent Astor, then 19-years-old, inherited his father’s estate of approximately $200,000,000 and was soon dubbed “the richest boy in America”.  The fifth generation of Astor wealth had surfaced.

It’s been said that money doesn’t buy happiness, and Vincent’s first marriage to Helen Dinsmore Huntington proved that point.  Second time’s a charm?  Not quite.  Marriage number two to Minnie Cushing also ended in divorce. But as a condition of the divorce, Minnie agreed to find Vincent a new spouse – one who was charming, energetic and happy – everything that Vincent was not.

Far from the Astor circles, Roberta Brooke Russell, at the tender age of 17,  had married her first husband, J. Dryden Kuser and had her first – and only child – Anthony Dryden Kuser. That  marriage ended in divorce and turned out to be one of Brooke’s few regrets in life. “Too young to marry, you’re not jelled yet”, she said looking back. So in 1932 Roberta Brooke Russell married her second husband, Charles H. Marshall the love of her life. Anthony too thought well of Charles H. Marshall, so much so that he changed his name from Anthony Dryden Kuser to Anthony D. Marshall.  Twenty years into the marriage, Charles H. Marshall died in the year 1952.

Just one year later, in 1953, knowing Brooke was a widow and had all the attributes suitable for twice divorced Vincent Astor,   Minnie the matchmaker set the stage for the third marriage for both Vincent Astor and Brooke Russell. It would in fact be the last marriage for both of them, as less than 6 years later Vincent Astor died of a heart attack in 1959 leaving Brooke as the last Mrs. Astor, and the beneficiary of the Astor fortune. Brooke Astor came upon riches that she had probably never dreamt of, and she too earned her fortune the old fashioned way – she married into it.

But the transference of wealth from Vincent’s estate to Brooke wasn’t without notable controversy. In fact, Vincent’s death set the stage for the first Astor will contest. When the Titanic was sinking, Madeline was ushered to safety in lifeboat #104.  Five months later she gave birth to John Jacob Astor V.  But Jack was never recognized as a real  Astor; he never inherited the Astor fortunes, and seemed a red-headed step child to the true Astor Aristocracy.  However, when Vincent died, Jack Astor sued, seeking to tap into Astor wealth.  His claim seeking to set aside Vincent Astor’s Last Will and Testament dated June 26, 1958 was interesting, and likely something Brooke Astor never forgot. An excerpt of the actual petition reads as follows:

The claim was odd in that, if a Will is set aside for any reason, than the prior valid Will governs and is admitted to probate. But Vincent’s prior Will reportedly didn’t name his half-brother as a beneficiary either.  In fact, Vincent didn’t care for his half brother, didn’t recognize him as an Astor, and shared in his characterization as Jack Ass-Tor. This was shaping up to be a real dis-Astor. So, before Brooke Astor was to inherit much of the vast Astor fortunes and control of the Vincent Astor Foundation, the undue influence claim and lack of capacity claim had to be resolved. Therefore, in light of its weak legal footing, the case was settled and John Jacob Astor, V was paid the sum of $250,000 in exchange for his dismissal of his claim. Given the fact that estate litigation cases can take years to resolve, and since the subject matter was that of Astor wealth and a potential cause célèbre for newspapers, settling the claim quickly and for a modest sum was prudent. Now acutely aware of the vast fortune she inherited and controlled, and knowing full well that a Will could be contested, Brooke Astor had to prepare an estate plan of her own, a plan that would reflect her intentions and honor the Astor legacy.  Note, Anthony D. Marshall was neither an Astor, nor an employee of an Astor enterprise, nor an intended beneficiary of his second step-father.

Thus, from 1959 to the year of her death in 2007, Brooke Russell Astor became one of New York’s most endeared charitable benefactors, dedicating her life to numerous causes including:  the New York Public Library, The Metropolitan Museum of Art, The Animal Medical Center, New York University, St. Mary & Saint Jude’s, Trinity Episcopal Church, the Central Park Conservancy, New York Zoological Society, Carnegie Hall, The Brooklyn Museum, The United Nations and The Marine Corps University Foundation to name just a few. Clearly, her cause, her legacy, her life’s work, was that of helping others, of giving back, of staying true to many Astor causes. She was an outstanding stewardess of Astor wealth. During her lifetime donated over $200,000,000 to charities in the Astor name and  there was still enough wealth to amply provide for her son from her first marriage, Anthony D. Marshall. Her good cheer, impeccable dress, big heart and charitable ways endeared her to the likes of Henry Kissinger, Oscar de la Renta and his wife Annette de la Renta,  David Rockefeller, and Nancy Reagan.

Longevity took its toll however, and in the last few years of her life, signs of senility, and more shockingly, signs of elder abuse hit the tabloids. The New York Daily News printed a front page article on July 26, 2006 entitled “Battle of New York Blue Bloods! Vicious court fight rocks the world of Manhattan’s one-time society queen”.  The staff writer Helen Peterson reported that Philip Marshall, Anthony Marshall’s son, stated, “My grandmother is one of the greatest philanthropists of all our time.  The sad and deplorable state of my family’s affairs has compelled me to bring this guardianship action”.  The legal action Philip commenced was to remove his father, Anthony Marshall, as agent under his grandmother’s power of attorney, and ask the Court to appoint a more caring guardian and financially neutral guardian of her wealth. Salacious – yes.  Front page news – yes.   Possible that Anthony Marshall would become villainized?  Yes! But it appeared Philip Marshall had one goal – to protect his grandmother at any, or anyone’s, expense.  Did Philip Marshall know how this would turn out?  Not by a long shot.

Brooke Astor was a legend, loved by all, and worth over $100,000,000 – even after giving away over $200,000,000 of Astor wealth to various charities. One would think that Philip’s proactive legal action to protect Brooke from her only son would make even the hairs on the back of this Iwo Jima veteran stand on end.  One would also think that Anthony Marshall would have vigorously defended his actions and that any attempt to sully his alleged blue blood pedigree would cause a battle royale – right? Anticipating this, Philip Marshall’s Petition and the supporting Affidavits had to be the truth, had to be compelling, and the concerns had to be shared by numerous independent parties.  Joining in on the Affidavits were members of Astor’s staff, who were as loyal to Brooke, as they were angered by Marshall’s unnecessary belt-tightening restrictions placed on his mother’s care. Henry Kissinger, David Rockefeller and Annette de la Renta, who were all very close to Brooke, supported Philip’s  application to the Court.  The Complaint, once filed, was to be heard in the New York Supreme Court before the Honorable John E.H. Stackhouse and the relief requested (legally speaking) was to remove Anthony Marshall as power of attorney over his mother’s affairs, as well as to appoint one of Brooke Astor’s best friends, Annette de la Renta, as guardian of her person, and JP Morgan Chase Bank as Guardian of her property.

The allegations contained in the numerous Affidavits were simply astounding:

  1. That Brooke Astor, 104-years-old, was supposed to be cared for by her son, even though “he refuses to spend money for her care.”
  2. That Anthony Marshall “cut back on everything from Brooke’s doctor visits to the brand of make-up she uses.”
  3. That he “wouldn’t give Astor a hospital bed fitted with rails, even though she had fallen from her bed.”
  4. That, on her 104th birthday, he “wouldn’t allow the nurses to buy his mother a new outfit.”
  5. Though Astor doted on her dogs, Boysie and Girlsie, she hadn’t seen them in six months, “because they were kept locked up in the pantry to keep from damaging the apartment.”
  6. That despite her numerous ailments, “her bedroom is so cold that she’s forced to sleep in the TV room in torn nightgowns on a couch that smells, probably from dog urine.”
  7. That Marshall denied a request for hair bonnets and non skid socks so “the nurses bought them themselves.”
  8. An enzyme supplement “to promote a healthy heart … which costs $60.00 per bottle, was stopped at the instruction of Charlene Marshall, Anthony’s wife. She then told the aids to buy the medicine off the internet, a diluted version which costs $26.00 for three bottles.”

The allegations went on and on, and the theme was consistent; that Anthony and his wife Charlene, were mismanaging the care that the last Mrs. Astor deserved.  Added to these allegations, were claims of self dealing and financial impropriety at a time when New York’s beloved Brooke Astor was weak and suffering from dementia. In the world of public opinion, Anthony and Charlene Marshall looked like villains, or at the very least, neglectful caretakers. But their worst days were ahead of them.

With little likelihood of success and potential exposure of financial transgressions on the front page of every tabloid, Anthony Marshall, with wife Charlene in tow, consented to the requested relief, and the Court acted accordingly. Anthony Marshall’s powers granted by his mother’s power of attorney were effectively terminated, and Annette de la Renta was appointed in his stead as Guardian of Brooke Astor and JP Morgan Chase, was appointed as Guardian of her property.  Subsequently, JP Morgan Chase sought to have their powers extended by the Court to allow for broader discovery, such that they could account for Anthony Marshall’s actions and possibly commence litigation against him if assets were inappropriately transferred to him. Indeed, reports that Marshall had looted and pilfered Astor wealth for his own benefit, and at the expense of Brooke Astor’s charities were leaking to the outside world. A cloud of impropriety shadowed a series of transactions which conferred riches from Brooke Astor to Anthony Marshall, both during her lifetime, and through a new set of Codicils to her Will – all during a period of time when her capacity was diminished. Chief amongst the alleged pilfering claims were:

  1. Marshall’s sale of Brooke’s prized Childe Hassam painting for $10,000,000 and his pocketing a $2,000,000 brokerage commission;
  2. a $5,000,000 taxable gift from Brooke to Anthony;
  3. a self adjusted pay raise of $2,380,000 for managing Brooke’s affairs – an amount five times his annual salary of $450,000;
  4. two checks each of $250,000 payable to Anthony Marshall’s theater production company;
  5. additional gifts of jewels, artwork and cash; and
  6. a deed transfer from Brooke to Anthony of the coveted Coves End property as well as monies to maintain the property.

But for the alleged gifts, these same assets may otherwise have been bequeathed to charities under Brooke’s Will. Though alarming and totaling as much as $18,000,000, the Court denied JP Morgan’s request for expanded powers finding instead that the powers granted to the Bank were temporary in nature and that the Executors of Brooke’s estate, as appointed by her Will or the Court could later prepare an accounting.  By doing so, the stage was set for a much anticipated Will contest. When Brooke Russell Astor died on August 13, 2007, it didn’t take long for the sparks to ignite.

Typically, a Will contest is filed by an heir who files a Complaint in the Surrogate’s Court of the county where the decedent resided. The Complaint may seek to set aside a Will for fraud, undue influence or lack of capacity. Typically, the Court must first appoint the Executor or Administrator of the estate until such time as a Court adjudicates the heir’s claims.  It was no different in the Estate of Brooke Astor. The Westchester County Surrogate’s Court had jurisdiction, and the Astor legacy may be distributed in accordance with her Will and three subsequent Codicils. Brooke Astor’s Last Will and Testament dated January 30, 2002 seemed well thought out and perfectly reasonable. Excerpts of her Last Will and Testament follow:

LAST WILL AND TESTAMENT OF BROOKE RUSSELL ASTOR

I, BROOKE RUSSELL ASTOR, a resident of Westchester County, New York, do make this Will, hereby revoking all ‘wills previously made by me.

FIRST:

I direct that my funeral service be held at St. Thomas Church in New York City, that I be interred in Sleepy Hollow Cemetery in North Tarrytown, New York, next to the grave of my late husband, Vincent Astor, and that a suitable memorial be erected by my Executors on the site of my grave. I ask that my gravestone be inscribed “I had a wonderful life.”

SECOND:  Partially omitted.

All taxes paid by my Executors under this Article shall be paid as administration expenses out of my residuary estate, except that any tax payable upon property passing under ,Articles THIRD, FOURTH and FIFTH hereof shall be equitably allocated to, and shall be payable by, my son, Anthony Marshall.

THIRD:

I devise all real property and all interests in real property situated in Westchester County, New York which I shall own at the time of my death to my son, ANTHONY MARSHALL, if he shall survive me. Subject to the provisions of Articles SIXTH and SEVENTH hereof, I bequeath to my son, if he shall survive ‘me, all furniture, household effects and furnishings (excluding any works of art), all books, and all household and garden equipment which I shall own at the time of my death and which. then shall be located on, or customarily used in connection with, such real property.

FOURTH:

I devise all real property and all interests in real property situated in the State of Maine which I shall own at the time of my death to my son, ANTHONY MARSHALL, if he shall survive me.  Subject to the provisions of Articles SIXTH and SEVENTH hereof, I bequeath to my son, if he shall survive me, all furniture, household effects and furnishings, all books and all household and garden equipment which I shall own at the time of my death and which then shall be located on, or customarily used in connection with, such real property.  My grandson, Philip Marshall, has visited me in Maine with his wife and children to our common pleasure. I hope that he will keep visiting his father there after my death, and that his father will leave him an interest in the Maine. property upon his death, if Philip still would like to own and use my home in Maine when that time comes.

FIFTH;

I bequeath to my son, ANTHONY MARSHALL, if he shall survive me, all interests which I shall own at the time of my death in my cooperative apartment located at 778 Park Avenue, New York, New York, including but without limitation all securities of any corporation owning the building in which such apartment is located and any lease or other agreement with such corporation covering such apartment. Subject to the provisions of Articles SIXTH and SEVENTH hereof, I bequeath to my son, if he shall survive me, all furniture, household effects and furnishings (excluding any works of art), all books, and all household equipment which I shall own at the time of my death and which then shall be located in, or customarily used in connection with such apartment.

SIXTH:

I bequeath to such of the following persons as shall survive me the articles set forth after their respective names, if I shall own the same at the time of my death.

(A) To each of my grandsons, ALEXANDER MARSHALL and PHILIP MARSHALL, and to each of my great-granddaughter, HILARY BROOKE MARSHALL (child of my grandson, Alexander Marshall), my great- grandson, WINSLOW MARSHALL (child of my grandson, Philip Marshall), and my. great-granddaughter, SOPHIE MARSHALL (child of my grandson, Philip Marshall), such one item of furniture or furnishings (of a value not to exceed Twenty-five thousand Dollars) which is not otherwise specifically bequeathed under this Will which shall be selected for her or him as a remembrance of me by my son, Anthony Marshall;

(B) To my son, ANTHONY MARSHALL, all my papers, correspondence, and manuscripts and the Marshall monogrammed silver;

(C) To THE NEW YORK PUBLIC LIBRARY, ASTOR, LENOX AND TILDEN FOUNDATIONS, of New York, New York, all of my books formerly belonging to any member of the Astor family and all of my books with the Marshall family bookplate which are in my apartment at 778 Park Avenue, New York, New York, to be housed together at said Library in a room in the names of James Lenox and John Jacob Astor, along with the portrait of my late husband, Vincent Astor, as a Captain in the United States Naval Reserve which I have already given to said Library to hang in such room as a gift from the descendants of John Jacob Astor and Charles Henry Marshall. I make this bequest subject to a life estate in my son, ANTHONY MARSHALL, should he wish to retain the books in his library for his lifetime;

(D) To my friend, LAURENCE S. ROCKEFELLER, my head of Hypnos, as a remembrance of our many years of friendship;

(E) To my friend, DAVID ROCKEFELLER, the stone Buddha head sculpture in the library of my apartment, as a remembrance of our many years of friendship;

(F) To my dear friend, ANNETTE ENGLEHARD DE LA RENTA, such four of my dog paintings from the staircase at Holly Hill as she may select by notice given to my Executors within three months after the date of my death, in fond remembrance of me;

(G) To my daughter-in-law, CHARLENE MARSHALL, my diamond snowflake necklace set with three hundred sixty-seven round diamonds, ‘as a token of my affection for her;

(H) To my friend, FREDERICK A. MELHADO, the pair of cachepots in my Blue Room, as a remembrance of me;

(I) To my friend and attorney, HENRY CHRISTENSEN III, the oil painting of an Englishman dressed as an Arab in the library of my apartment, together with its wooden stand, as a fond remembrance of me;

(J) I have recently spent very happy times with my great- grandchildren, Hilary Brooke Marshall and Winslow Marshall, the children of my. grandson, Philip Marshall. I plan to give each of them a personal item in remembrance of me, but if my son, Anthony Marshall, determines that I have not made such a gift to Hilary and Winslow prior to my death, I ask that my son set aside an appropriate picture or piece of jewelry, in neither case having a value greater than Ten thousand Dollars, as a personal remembrance of me. This is in addition to the gift they shall receive under Part (A) hereof, as a special thank you from ma for the pleasure they have brought to me; and

(K) I have discussed with my son, Anthony Marshall, gifts of I individual items of my personal property to certain family members and friends, and he knows what I would like to do. I ask that he make these gifts in my name, as fond remembrances of me.

SEVENTH:

(A) I bequeath the two large English silver candelabra, the large French silver tureen, all china marked “WA,” all Astor table silver, the cafe and finger bowls marked with the Astor crest, the red-wine glasses in red glass marked “WA,” the set of gold Bohemian glasses marked with the Astor crest, and the dessert forks and knives in gold marked with the Astor crest, in each case if I shall own the same at the time of my death, to my. friend, WILLIAM WALDORF ASTOR, 4th Viscount Astor, of Ginge Manor, near Wantage, Oxon, England 0X12 8QT, or, if he shall not survive me, to his issue surviving me, per stirpes; provided, however, that any person receiving property under this Part shall pay all expenses of storage, shipping and insurance in connection with such property and its delivery. If neither William Waldorf Astor nor any issue of his shall accept this bequest upon the terms hereof, I direct that all such items be sold and that the net proceeds thereof be added to my general estate.

(B) I bequeath the portrait of the Astor family in the drawing room of the Astor House painted in 1886 by Grossi, now located in the living room of my apartment, and the portrait of General Armstrong by Vanderlyn, now located in my home at Holly Hill, in each case if I shall own the same at the time of my death, to THE NEW YORK PUBLIC LIBRARY, ASTOR, LENOX AND TILDEN FOUNDATIONS, of New York, New York; provided, however, that said Library shall agree within three months after the date of my death, in form satisfactory to my Executors, to hang such paintings at said Library in the Lenox and Astor room described in Part (C) of Article SIXTH hereof, and not to store such paintings or to deaccession them. (Balance of paragraph omitted)

(C)   (i) I direct that all jewelry not otherwise. disposed of under this Will which I shall own at the time of my death and having a value of more than One thousand Dollars per item be sold by my Executors, and that the net proceeds thereof be distributed to such charitable organization or organizations, bequests to which shall be deductible for Federal estate tax purposes, and on such terms, as my Executors shall determine within two years after the date of my death, to assist education and teachers in New York City.

(ii) I bequeath such items of jewelry not otherwise disposed of under this Will which I shall own at the time of my death and having a value of no more than One thousand Dollars per item as my Executors shall select in their discretion to such of my family, friends and employees as my Executors shall select in their discretion, having reference to any list I may leave for them.

(D) Subject to my gift under Part (F) of Article SIXTH hereof to my friend, Annette Englebard de la Renta, I direct that all pictures of dogs which I shall own at the time of my death be sold by my Executors, and that the net proceeds thereof be distributed to THE ANIMAL MEDICAL CENTER, of New York, New York, for its general purposes, with the request that they install a suitable plaque in memory of my many pet dachshunds.

(E) I bequeath the drawing of donkeys by Giovanni Battista Tiepolo which is in the drawing room of my apartment at 778 Park Avenue, New York, New York, my gouache of Carroll Spence, and my several sculptures of animals by Haseltine, in each case if I shall own the same at the time of my death, to my son, ANTHONY MARSHALL, if he shall survive me.

(F)I bequeath all of the drawings not otherwise disposed of under this Will• which I shall own at the time of my death to such organization or organizations, bequests to which shall be deductible for Federal estate tax purposes, as my Executors shall select in their discretion, upon such terms as they may establish. It is my preference that such drawings pass to The Metropolitan Museum of Art or The Pierpont Morgan Library, but I leave this decision to my Executors, asking that they obtain assurance satisfactory to them that any part of such drawings passing to a single institution be permanently maintained and displayed as coming from my collection (to be hung together, with other appropriate drawings in such institution’s collection, and not in a separate room containing only my collection).

(G)(i) I bequeath my good mink coat and my chinchilla short coat, in each case if I shall own the same at the time of my death, to my daughter-in-law, CHARLENE MARSHALL, if she shall survive me and shall wish to have the same.

(ii) Subject to the provisions of subdivision (i) of this Part (G), I bequeath such of the clothing, including furs, as I shall own at the time of my death as my Executors shall select in their discretion to such of my family, friends and employees as my Executors shall select in their discretion, having reference to any list I may leave for them

(H) I bequeath all jewelry, clothing and furs not otherwise disposed of under this Will which I shall own at the time of my death to such charitable organization or organizations, bequests to which shall be deductible for Federal estate tax purposes, as my Executors shall select in their discretion.

EIGHTH:

(A) I direct that all paintings and works of art not otherwise disposed of under this Will which I shall own at the time of my death be sold by my Executors, and that the net proceeds thereof be added to my general estate.

(B) I bequeath all tangible personal property of any nature (other than stocks, bonds, cash, bank accounts or other evidences of investments) not otherwise disposed of under this Will which I shall own at the time of my death to my son, ANTHONY MARSHALL, if he shall survive me

NINTH:

In the event of any question as to which items of tangible personal property pass under any particular bequests or dispositions of tangible personalty under any of the foregoing provisions of this Will, I direct that the decision of my Executor other than my son, Anthony Marshall, shall be final and binding.

TENTH: (A) I make the following bequests, in each case if the individual shall survive me:

To my son, ANTHONY MARSHALL, the sum of Five million Dollars, with my thanks for his devoted work in managing my financial affairs, and I direct that such sum be paid as soon as possible after my death in cash, or if my son shall request, in such works of art not bequeathed under this Will as he shall select at their value as finally determined for Federal estate tax purposes; and

(ii)To each of my grandsons, PHILIP MARSHALL ALEXANDER MARSHALL, the sum of One million Dollars

(iii)To my son, ANTHONY MARSHALL, the sum of Three hundred thousand Dollars. I request, but do not direct, that my son use such sum over time to assist in meeting the educational expenses of my great- grandchildren, HILARY BROOKE MARSHALL, WINSLOW MARSHALL and SOPHIE MARSHALL.

(B) I bequeath to each of CHRISTOPHER ELY. and STEVE HAMMER who shall survive me and shall be employed by me at the time of my death the sum of Fifty thousand Dollars, in each case in gratitude for his years o devoted service to me.

I have made arrangements for my other long-time employees whose employment will end with my death

ELEVENTH:

Under Article SIXTH of the last will and testament of my late husband, Vincent Astor, which was admitted to probate in the Surrogate’s Court of Dutchess County, New York, I was given a general testamentary power of appointment. I hereby elect to exercise said power and direct that the property subject to said power shall be paid over and distributed as follows:

(A) I direct that the trustees of the trust under Article SIXTH of the last will and testament of my late husband pay to my Executors, or directly to the appropriate payee, such amount or amounts as may be necessary to pay all of my debts, reasonable funeral expenses and expenses of my last illness, and all expenses, fees and commissions incurred in the administration of my estate in the United States of America, but I direct that all estate, inheritance or similar taxes of my estate shall be paid as provided in Article SECOND hereof, and not from the trust under my late husband’s will. I direct that said trustees shall be authorized to rely absolutely upon certificates from my Executors as to such amounts of debts, expenses, fees and commissions. The ‘balance of the property subject to said power shall be paid over and distributed to the following organizations, provided in all instances that the organization is a charitable organization as hereinafter defined, as follows:

(B) The sum of Two million Dollars to NEW YORK UNIVERSITY, of New York, New York, to establish an endowment fund, the income of which is to be used for the purposes of its School of Education to endow an Astor Fellows program generally in accordance with the plan I have discussed with .them, the details to be confirmed with my Executors. This program is intended to provide foreign travel opportunities for a selected group of outstanding New York City public school teachers each year, who would be nominated by their schools, students or parents of their students and selected and honored each year, as Astor Fellows, by a panel whose members are named by the School of Education, but include one member named by the Mayor of the City of New York, if the Mayor chooses to name a member. While the foreign travel would generally provide learning opportunities to the Fellows related to their teaching specialties, and while the School of Education may also offer career enhancement courses or seminars to the Fellows, it is my earnest wish that the Fellows, and their spouses, enjoy their travel abroad as a personal reward for their outstanding efforts on behalf of New York City’s children.

I made a pledge to New York University on April 17, 1972, for the purposes of the Institute of Fine Arts. I am advised that pledge is not enforceable, and I do not intend to fulfill it. Nevertheless, my gift to New York University hereunder, for the purposes of its School of Education, is conditioned upon my Executors receiving from the Institute of Fine Arts within six months after the date of my death a release of any claim to my April 17, 1972 pledge, in form satisfactory to my Executors;

(C) The sum of One hundred thousand Dollars to THE ISLAND FOUNDATION, to be added to the permanent endowment of its ASTICOU AZALEA GARDEN, in Northeast Harbor, Maine, so that its income may be used to support the garden and allow it to provide Pleasure and solitude for visitors well into the future.  I make this gift in honor of my friend, David Rockefeller;

(D)The sum of Fifty thousand Dollars to the NORTHEAST HARBOR LIBRARY, of Northeast Harbor, Maine, for its general purposes;

(E) The sum of Twenty-five thousand Dollars to ST. MARY’s & ST. JUDE’s, of Northeast Harbor, Maine, for its general purposes;

(F)The sum of Ten thousand Dollars to TRINITY’ EPISCOPAL CHURCH, of Ossining, New York, for its general purposes

(G)The balance of said property, plus any amount under the foregoing Parts (B) through (F) of this Article which shall lapse or fail for any reason, shall be paid over and distributed as follows:

(1) Twenty-five percent thereof to THE NEW YORK PUBLIC LIBRARY, ASTOR, LENOX AND TILDEN FOUNDATIONS, of New York, New York, to create and maintain in perpetuity the room in the names of James Lenox and John Jacob Astor described in Part (C) of Article SIXTH hereof, and, to the extent such amount shall not so be used, for the use of its research library and branch libraries, such use to be determined in consultation with my son, Anthony Marshall;

(2)Twenty-five percent thereof to THE METROPOLITAN MUSEUM OF ART, of New York, New York, to establish an endowment fund, the income of which is to be used to provide additional compensation and financial support to curators and their families, Particularly in the Asian Department, in. consultation with my son, Anthony Marshall, or, to the extent my son shall approve, for other purposes of said Museum–

(3) Eleven percent thereof to such charitable organization or organizations as my Executors shall select in their discretion for the purpose of establishing a permanent endowment fund to assist New York City public school teachers by providing funds to identify and reward outstanding teachers. I grant full authority to my Executors to determine the terms and conditions upon which such endowment shall be established and to select such projects in support of New York City public school teachers as they may deem necessary or appropriate, in consultation with the recipient charitable organization or organizations. I suggest, but do not direct, that my Executors choose to supplement the bequest under Part (B) of this Article or, if they are not satisfied with that purpose, that they establish a separate trust fund for this purpose in my name under the New York Community Trust;

(4)Seven percent thereof to THE ROCKEFELLER UNIVERSITY, of New York, New York, for its general purposes;

(5) Six percent thereof to such charitable organization or organizations as my Executors may determine (including but not limited to , the CENTRAL PARK CONSERVANCY and the PROSPECT PARK ALLIANCE), for the long-term sustenance and enrichment of Central Park and Prospect Park, two of New York City’s great treasures, through endowment or otherwise;

(6) Five percent -thereof- to-NEW-YORK-ZOOLOGICAL SOCIETY, of New York, New York, for its education programs for the children of New York City, as may be determined, in consultation with my son, Anthony Marshall;

(7)Four percent thereof to THE PIERPONT MORGAN LIBRARY, of New York, New York, for its general purposes;

(8) Three percent thereof to THE NEW YORK PUBLIC LIBRARY, ASTOR, LENOX AND TILDEN FOUNDATIONS to establish an endowment fund, the income of which is to be used to develop reading and literacy programs for disadvantaged children in New York City;

(9)Three percent thereof to such charitable organization or organizations as my Executors shall select in their discretion for the purpose of designing and building innovative and attractive playgrounds for children in New York City, either by direct grant to build the same or by the establishment of endowment funds for this purpose at appropriate charitable organizations;

 

(10)Two percent thereof to CARNEGIE HALL CORPORATION, of New York, New York, for its general purposes, in honor of my late and honored friend, Isaac Stern;

(11)Two percent thereof to THE BROOKLYN MUSEUM, of Brooklyn, New York, to establish an endowment fund, the income of which is to be used to fund a curatorship in Asian or American art, provide funding for Asian and American exhibitions, or otherwise as may be determined, in consultation with my Executors;

(12) Two percent thereof to MARINE CORPS UNIVERSITY FOUNDATION, of Quantico, Virginia, to establish an endowed chair in memory of my father, who was the Marine Corps Commandant, for such purposes as may be determined by my son, Anthony Marshall, who also served with distinction in the Marine Corps, and whom I wish to honor by this gift;

(13) One percent thereof to HISTORIC HUDSON VALLEY, of Tarrytown, New York, for its general purposes;

(14) One percent thereof to UNITED NATIONS, of New York, New York, to fund such of its activities as may be chosen by the Secretary General, Kofi Annan, or his ‘successor, in recognition of the cultural richness which the United Nations brings to New York City;

(15) One percent thereof to SOCIETY OF NEW YORK HOSPITAL, of New York, New York, to be used for such purpose or purposes at the New York Hospital facility of New York- Presbyterian Hospital as Dr. R.A. Rees Pritchett may select, with my thanks to Dr. Pritchett for his many years of devoted care for me.

(16) One percent thereof to COLLEGE OF THE ATLANTIC, of Bar Harbor, Maine, to establish an endowment fund, the income of which is to be used to assist needy students from the State of Maine. I make this gift in honor of my daughter- in-law, Charlene Marshall; and

(17) One percent thereof to such charitable organization or organizations, bequests to which shall be deductible for Federal estate tax purposes, as my Executors shall select for the purpose of assisting high school programs which will best prepare the children of Northeast Harbor, Maine for productive careers. I suggest, but do not direct, that my Executors establish a separate trust fund for – such-purposes in my name with the Maine Community Foundation, Inc.

TWELFTH;

All of the residue of my estate of every kind an  description (including lapsed legacies and devises) I devise and bequeath to my Trustees, to hold upon a separate trust. My Trustees shall manage, invest and reinvest the same and collect the income thereof, and in each taxable year of the trust during the life of my son, ANTHONY MARSHALL, my Trustees shall pay to him a unitrust amount equal to seven percent of the net fair market value of the assets of the trust valued as of the first day of each taxable year of the trust (hereinafter referred to as the “valuation date”). (Balance of paragraph omitted).

 

Upon the death of my son, my Trustees shall pay over and distribute the principal of the trust, as then constituted, together with any remaining net income not required for payment of the final year’s unitrust amount (or if my son shall not survive me, I devise and bequeath my residuary estate), to such charitable organization or organizations, and in such shares, as shall have been designated by my son, by written instrument delivered from time to time to my Trustees (with power in my son to revoke and replace any designation by later written instrument delivered to my Trustees), or to the extent my son shill not have designated ultimate beneficiaries, to such charitable organization or organizations and in such shares as my Trustees (or my Executors) in their discretion shall designate, having reference to (but not being bound in any way by) gifts I have made under Article ELEVENTH hereof, and in any event to have a primary purpose of improving education in New York City. (Balance of Paragraph omitted.)

 

THIRTEENTH:

The term “charitable organization” as used in this Will shall mean only a corporation or trust, or other entity, bequests to which are deductible under the Federal estate tax law at the date of my death or at the • date of death of the income beneficiary of the trust hereunder, whichever is applicable.

FOURTEENTH: Omitted

FIFTEENTH:  Omitted

SIXTEENTH: Omitted

SEVENTEENTH: Omitted

EIGHTEENTH: Omitted

NINETEENTH:

I appoint my son, ANTHONY MARSHALL, and my friend and attorney, HENRY CHRISTENSEN II, of 125 Broad Street, New York, New York, Executors of and Trustees under this Will. I authorize my Executors to designate a bank or trust company to act as co-Executor or co-Trustee, but only upon such terms as my Executors in their sole discretion shall determine. I further authorize my Executors in their discretion to remove any bank or trust company acting as a co-Executor or co- Trustee and to replace such co-Executor or co-Trustee with another bank or trust company.

I direct that my son shall have no substitute or successor as an Executor or Trustee.

In the event that Henry Christensen II or any successor to him appointed as hereinafter provided shall fail to qualify or for arty reason shall cease to act as an Executor or a Trustee, I appoint as his substitute or successor such individual (who may be one of its own partners) as shall be designated by the firm of Sullivan & Cromwell, of New York, New York (or any -firm successor thereto), by written instrument, duly acknowledged. Any designation so made may be revoked by such firm at any time prior to the happening of the event upon which it is to become effective, by a written instrument, duly  acknowledged, and a new designation may be made as above provided.

TWENTIETH:

If any person or entity named as a beneficiary under this Will shall contest or rite objections to the admission to probate of this Will, or shall object to the exercise of the discretion granted my Executor other than my son, Anthony Marshall, pursuant to the provisions of Article NINTH hereof, all provisions herein made for any such person or entity shall lapse in the same manner as if such person or entity had not survived me or ceased to exist, and I devise and bequeath the property which would have passed to such person or entity had he, she or it not contested or filed objections to the admission to probate of this Will or not objected to the exercise of the discretion granted my said Executor to the person or entity which would have taken such property had such contesting or objecting person or entity not survived me or ceased to exist.

TWENTY-FIRST: Omitted

IN WITNESS WHEREOF, I have hereunto set my hand and seal this 30th day of January, two thousand two.

SIGNED, SEALED, PUBLISHED and DECLARED by the above-named Testatrix, BROOKE RUSSELL ASTOR, as and for  her Last Will and Testament, in the sight and presence of us, who, at her request and in her sight and presence

and in the sight and presence of each other, having hereunto signed our names as subscribing witnesses this 30th day of January, 2002.

Dated: January 30th, 2002

__________________________

BROOKE RUSSELL ASTOR

TESTATRIX

This detailed tax efficient Will was amended by a Codicil entitled “First and Final Codicil dated December 18, 2003”. This final Codicil, which turned out to be anything but final,  was the first of three Codicils hacking away at the charities interests and empowering one Anthony Marshall to govern over the Astor fortunes – almost half of which  according to this Codicil, were to be renamed “the Anthony Marshall Fund”.  To track the changes from Brooke Astor’s Will, excerpts of the first Codicil follow with comments highlighting the changes.

FIRST CODICIL OF BROOKE RUSSELL ASTOR

I, BROOKE RUSSELL ASTOR, a resident of Westchester   County, New York, do make, publish and declare this to be a First and Final Codicil to my Last Will and Testament dated January 30, 2002.

FIRST:

After much thought and discussion with my son, Anthony Marshall, I have decided to change the manner in which I appoint by my Last Will and Testament the assets of the trust which my late husband, Vincent Astor, established for my life benefit. I have always appointed the assets of that trust for the most part to charity, and I wish to continue to do so, but I have decided to do for my son, Anthony Marshall, what my late husband did for me in leaving me the control of the Vincent Astor Foundation, which is to allow my son the ability to devote himself to charitable activities for the balance of his life with assets I am setting aside for him. I have enjoyed greatly the ability to help New Yorkers through Vincent’s generosity throughout my long life, and I hope my son will obtain similar enjoyment and satisfaction, and find new ways to benefit the public, through his stewardship of the Fund I am going to establish for his use as Trustee.

SECOND:

In order to accomplish this end, I hereby amend my exercise of my general power of appointment under Article SIXTH of the last will and testament of my late husband, Vincent Astor, which was admitted to probate in the Surrogate’s Court of Dutchess County, New York. I hereby amend the provisions of Article ELEVENTH (G)of my said Will, by which I direct the Trustees under Article SIXTH of the last will and testament of my late husband to pay over and distribute the balance of the trust assets, as follows:

(A)I reduce the percentages disposed of under subparts (1) and (2) of Part (G) from twenty-five percent to eight percent in each case.

Authors Note:  Two more irons in the fire. First, The New York Public Library was historically a meaningful cause and recipient of Astor wealth. Buried in the legalese of this Codicil is a huge reduction of the New York Public Libraries  Astor, Lennox and Tilden Foundation from 25% to 8%.  Another cause, historically near and dear to the Astor’s was The Metropolitan Museum of Art. Their interest was also reduced from 25% to 8%.  Second, these percentages relate to powers that Brooke was granted by Vincent Astor’s Will which gave her the authority to appoint the fortunes that Vincent Astor had inherited,  as she deemed appropriate. One paragraph, and Astor wealth is transformed into Marshall power.

While I remain devoted to The New York Public Library and to The Metropolitan Museum of Art, I have dedicated a substantial part of my time, and of the assets of The Vincent Astor Foundation, to both organizations during my lifetime, and I therefore feel comfortable in reallocating these funds to establish the core of The Anthony Marshall Fund.  Similarly, but to lesser degree, I reduce the percentage disposed of under subpart (3) of Part (G) from eleven percent to five percent,

Authors Note: This reduction came at the expense of New York City school teachers. Brooke Astor intended to provide an endowment for outstanding teachers when she executed her Will, but if you believe this Codicil actually reflected her intentions, then you’d believe she intended to reduce a gift to outstanding New York City school teachers funds 11% to 5%, so that Astor wealth could be re-characterized as “The Anthony Marshall Fund”.

the percentage disposed of under subpart (4) from seven percent to four percent, the percentage disposed of under subpart (5) from six percent to four percent,

Authors Note:  This hit came at the expense of The Central Park Conservancy … … so that Astor wealth could be re-characterized as “The Anthony Marshall Fund.”.

and the percentage disposed of under subpart (6) from five percent to three percent.

Authors Note: Next, the axe fell on funds for the benefit of The New York Zoological Society which would have provided education to children, so that Astor wealth could be re-characterized as “The Anthony Marshall Fund.”.

Finally, I revoke entirely the provisions of subpart (12) of Part (G) as I am confident my son will provide generously for the Marine Corps University Foundation.

Authors Note: Funds intended to pass to the Marine Corps University Foundation to honor Brooke Astor’s father, were eliminated … so that, once again  Astor wealth could be re-characterized as “The Anthony Marshall Fund.”.

The aggregate of these reductions is forty-nine percent, so that fifty-one percent of the “balance” of my late husband’s trust will continue to be distributed to the charities I have named in my Will.

(B)I add the following as a new subpart (12), replacing that which I have revoked in the preceding clause:

(12) Forty-nine percent thereof to my son, Anthony Marshall, to be held upon the terms hereof, in a charitable trust to be known as THE ANTHONY MARSHALL FUND. This trust shall be a private foundation under the terms of the Internal Revenue Code, to be held, administered and disposed of solely for charitable  purposes, and all of the provisions of section 8-1.8 of the Estates, Powers and Trusts Law shall be incorporated by reference. My Trustee shall comply with all applicable provisions of the Internal Revenue Code in establishing and administering this trust.

Grants from The Anthony Marshall Fund shall be made to such charitable organizations as my Trustee may determine in his sole discretion, without regard to geographic restrictions, with emphasis in the fields of art, medicine, science, religion, education and the environment. I direct that my son, Anthony Marshall, shall be the sole Trustee of this trust, and that he shall have no successor as Trustee, but rather that The Anthony Marshall Fund shall terminate upon my sons death. If there shall be any principal assets remaining in this trust as of the date of its termination, or any income thereof then held or accrued, which my son shall not have disposed of or directed the disposition of to charity by instruments signed during his lifetime or by his last will and testament, I direct that the same be paid over and distributed in equal shares to The New York Public Library, Astor, Lenox and Tilden Foundations and to The Metropolitan Museum of Art, for their respective general purposes, as long as they shall still be charitable organizations at the date of termination of The Anthony Marshall Fund. My son shall not be entitled to compensation for his services as Trustee of this trust, which shall be governed by New York law.

THIRD:

I hereby ratify and confirm my said Will except insofar as my Will thereof is affected by this Codicil.

IN WITNESS WHEREOF, I have hereunto set my hand and seal this 18th day of December two thousand three.

SIGNED, SEALED, PUBLISHED and DECLARED by the above-named Testatrix, BROOKE RUSSELL ASTOR, as and for a First Codicil to her Last Will and Testament, in the sight and presence of us, who, at her request and in her sight and presence and in the sight and presence of each other, having hereunto signed our names as subscribing witnesses this 18th day of December, 2003.

__________________________

BROOKE RUSSELL ASTOR

TESTATRIX

Evidently someone failed to warn Marshall of the dangers of playing with fire. Why was the first Codicil called, a Final Codicil? Did the scrivener intend to imply that thereafter Brooke Astor would lack capacity? Or perhaps to throw cold water on any attempt to make further changes. As if the First and Final Codicil didn’t provide Anthony Marshall with enough money and power, the Second Codicil dated January 12, 2004 would surely finish the job. Less than a month after the First and Final Codicil was signed, the Second Codicil was signed which would later prove to be a ticking time bomb.

This alleged Second Codicil dated January 12, 2004  completely changed the how the balance of Brooke Astor’s estate was to be distributed. After the payment of taxes, expenses incurred in administering her estate and the payment of bequests, the balance of her estate, which was over $100,000,000, was supposed to fund a charitable remainder trust. This trust, called a charitable remainder trust, was to provide Anthony Marshall with 7% of the fair market value of the trust every year for the rest of his life. After his death, the balance in the trust would be distributed to charities. Anthony Marshall could have been a beneficiary of this charitable trust for the rest of his life.  No money worries – set for life.  After his death, the Astor wealth would pass to charities. But this Second Codicil cut out the charitable trust entirely and left Astor wealth, five generations in the making – to Anthony Marshall. If you were one of the charities who enjoyed a relationship with Brooke Astor, and was a donee of the Astor largess, you’d have a hard time believing  that this Second Codicil reflected Brooke Astor’s intentions.

But the Second Codicil also cut out Henry Christensen, III, Esq., who was Brooke Astor’s estate planning attorney and also removed Christensen as Co-Executor and Co-Trustee. This Second Codicil wasn’t authored by Henry Christensen III, Esq., but instead, a new attorney presumably hired on behalf of Brooke Astor by Anthony Marshall.  But Anthony Marshall couldn’t leave well enough alone. Another moth drawn to the fire. Two months later, when Brooke Astor was 102-years-old, the Third Codicil was signed and follows in it’s entirety, with Brooke Astor’s “signature”.

What’s the purpose of this Codicil? Some believe it was to burden the estate, rather than Anthony Marshall with the costs incurred in selling Astor properties. Perhaps this is so, but this sloppy, poorly drafted Codicil may have had a more manipulative purpose. By way of background, if a Will is ever contested, the contestant has the burden to prove that the document offered for probate was the product of undue influence, fraud or lack of capacity – at the time the document was signed. Since Brooke Astor’s health and the facts and circumstances around the signing of her Will and each of the three Codicils were different, a contesting party would be burdened first with challenging Codicil #3.  It may take years to overturn just the Third Codicil. But even if a moving party, in all likelihood a charity,  did win, only Codicil # 3  would be treated as a nullity, and the prior Will, Codicil #1 and Codicil #2 would still be in effect.  Accordingly, it may be that Anthony Marshall knew the Codicils #1 and #2 would be challenged once his mother died, and so as to protect the prospective inheritance of Astor riches, if another Codicil were to be signed, than any charity who contested the Will and Codicils, would have to first sue and set aside Codicil #3, in effect he would build a moat around the Will and Codicils #1 and #2.

But all the supposed gifts, and all the supposed Codicils, all the plotting were about to combust and one Anthony Marshall was about to feel the heat. On August 13, 2007 Brooke Astor died. But before the Westchester County Surrogates Office was able to adjudicate the authenticity of the Will, and Codicils #1, #2, and #3,  the sirens went off as it was announced that justice over Anthony Marshall’s actions, and his alleged pilfering of the Astor fortunes would start not in the Surrogate’s Court, but with the District Attorney’s Office.

Anthony Marshall, and the estate planning attorney he hired on his mother’s behalf, Francis X. Morrissey, Esq., were quickly named in a eighteen count criminal indictment. Collectively, they were charged with numerous counts of larceny, possession of stolen property, falsifying business records, forgery, conspiracy and a scheme to defraud Brooke Astor, and by extension, the Astor fortunes, all for his own benefit.  During a five month trial, in People of the State of New York v. Anthony D. Marshall and Francis X. Morrissey, Esq., the following testimony all but sealed the over-reaching duo’s fate:

  1. That Brooke Astor’s long time estate planning attorney, Henry Christensen, III, Esq., drafted and supervised the execution of a Last Will and Testament dated January 30, 2002, which provided amply for her son, Anthony Marshall, her friends, and her favorite charities. Under this Will, Marshall was to receive:
  2. a) Brooke’s real estate in Maine
  3. b) her real estate in Westchester,
  4. c) her Park Avenue co-op,
  5. d) the sum of $5,000,000,
  6. e) artwork and personnel effects, and
  7. f) he was to benefit from a Charitable Remainder Trust which provided Marshall with a guaranteed 7% payout for his lifetime, and the balance at his death to Brooke’s favorite charities.
  8. That Christensen then supervised the execution of the First and Final Codicil dated December 18, 2003, which provided that 49% of Vincent Astor’s wealth held for the benefit of charities, would be re-directed to seed the Anthony Marshall Fund, which provided him with sole power as to donate monies to charities of his choosing during his lifetime. Such a change would give the appearance that Anthony Marshall was a philanthropic donor.
  9. That Anthony Marshall, apparently displeased with even this outcome, fired Christensen, and hired a new attorney Francis X. Morrissey, Esq., to revise his mother’s estate plan  when she was apparently already suffering from dementia.
  10. That Morrissey caused a Second Codicil to be executed on January 12, 2004 which eliminated the Charitable Remainder Trust, thus terminating the charities remainder interest and leaving Astor fortunes outright to Anthony Marshall. The Codicil also appointed him as sole Executor and Trustee.
  11. As if that wasn’t enough, Morrissey prepared and allegedly caused the signing of yet another document, a Third Codicil on March 3, 2004, directing that properties be sold such that Anthony Marshall would get more cash as expenses of properties already “gifted” to Marshall would be borne by the Estate.
  12. That Brooke Astor was frail and confused when Marshall and Morrissey all but dragged into her library to execute the Second Codicil. That, after signing the documents, Brooke Astor asked Pearline Noble, her home healthcare provider, “What happened? Who are those men”?
  13. That in March of 2004, Noble further testified, the heiress “couldn’t recognize even her closet family and friends”.
  14. Dr. Norman Relkin, Brooke Astor’s neurologist, also testified that, during the time period the Codicils were signed, “I would be willing to state – she was suffering from dementia”.

After months and months of testimony from, friends, doctors, health care workers, and attorneys, the Court had heard from everyone … except Anthony Marshall, who refused to testify. The Court’s ruling was predictable; Marshall and his cohort, Morrissey, were convicted of numerous charges, summarized by the tabloids as follows:

SCHEME TO DEFRAUD —

Charged Anthony Marshall and cohort Francis Morrissey schemed together to cheat charities and Brooke Astor out of more than $60 million. Their schemes included strong-arming Astor into selling her favorite painting and twice changing her Will, even though her dementia rendered the 101-year-old philanthropist incompetent to do so.

Marshall: GUILTY

Morrissey: GUILTY

OFFERING A FALSE INSTRUMENT FOR FILING IN THE FIRST DEGREE –

Charged Marshall intentionally lied on a document in the Brooke Astor guardianship case by claiming he’d only pocketed $3.4 million out of a $5 million “gift” that supposedly Astor gave him at age 101.

Marshall: GUILTY

SECOND DEGREE GRAND LARCENY –

Charged Marshall continued using of his mother’s money, over $600,000 to pay expenses at her former summer home in Maine, even though Marshall had already talked his mother into giving him the property, and then had quietly transferred the Deed into his wife Charlene’s name.

Marshall: GUILTY

SECOND DEGREE GRAND LARCENY –

Charged Marshall stole a drawing, “Dancing Dogs with Musicians and Bystanders,” by Giovanni Domenico Tiepolo, worth more than a quarter-million dollars, from his mother’s Park Avenue apartment when she was 102, and no longer had capacity to consent to such a  gift. Marshall: GUILTY

CRIMINAL POSSESSION OF STOLEN PROPERTY –

Charged Marshall with possessing the Tiepolo.

Marshall: GUILTY

SECOND DEGREE GRAND LARCENY –

Charged Marshall stole $71,319.84 in payroll funds from his mother by using her social security funds to fund his theater production company.

Marshall: GUILTY

CONSPIRACY IN THE FOURTH DEGREE –

Charged Marshall and Morrissey conspired together to steal $60 million Astor had long promised to charity by strong-arming the 101-year-old woman into signing a codicil to her will when she was no longer competent to do so.

Marshall: GUILTY

Morrissey: GUILTY

CONSPIRACY IN THE FIFTH DEGREE –

Charged Marshall and Morrissey conspired together to offer into probate the $60 million will amendment.

Marshall: GUILTY

Morrissey: GUILTY

CONSPIRACY IN THE FOURTH DEGREE –

Charged Marshall and Morrissey conspired together to strong-arm an incompetent Astor into signing the third codicil to her will, this one directing that her properties be sold upon her death, resulting in millions in executor and legal fees for Morrissey and the Marshalls.

Marshall: GUILTY

Morrissey: GUILTY

SECOND DEGREE FORGERY –

Charged Morrissey forged Astor’s signature on the Third Codicil

Morrissey: GUILTY

FIRST DEGREE GRAND LARCENY –

Charges Marshall used his power of attorney to give himself a $1.4 million pay raise for managing Astor’s finances, at a time when the his 103-year-old mother lacked capacity.

Marshall: GUILTY

SECOND DEGREE GRAND LARCENY –

Charges Marshall used his mother’s funds to pay the $52,500 salary of his yacht captain — having bought the yacht by using the funds from the power of attorney.

Marshall: GUILTY

SECOND DEGREE GRAND LARCENY –

Charged Marshall stole a drawing, “Bedouin and Two Camels,” by John Frederick Lewis, worth more than a quarter-million dollars, from his mother’s Park Avenue apartment when she was 104, and had lost the ability to consent to his taking it.

Marshall: GUILTY”

On December 21, 2009, Judge Bartley, before sentencing 85-year-old Anthony Marshall to prison for a term of 1-3 years, said, “It is a paradox to me that such abundance has led to such incredible sadness”. Astor abundance, five generations in the making, was earned and preserved for generations of Astor descendents and charities. Anthony Marshall was not born into the bloodline, and, but for his mother’s marriage to her third husband,  would have never enjoyed being part of such aristocracy and influence.  While his mother was strong and of sound mind, he could never have orchestrated such a fraud, but her dementia and fragility, opened the door to his greed and a sense of entitlement that caused him to cast aside his mother’s last wishes –  for his own.

Anthony Marshall’s public humiliation is far from over. He has appealed his criminal conviction, and meanwhile the probate litigation in the Westchester County Surrogate’s Court is quickly heating up. The Court issued temporary letters of administration to  JP Morgan Chase Bank, N.A. and Howard A. Levine as Co-Temporary Administrators of Brooke Astor’s estate in November of 2007. They will jointly serve in such capacity until the Surrogate can decide which Will and Codicils are to govern.

Annette de la Renta, a legatee under the Will, filed the following  Affidavit on September 11, 2007 claiming the 2002 Last Will and Testament, together with Codicils, #1, #2, and #3 are all the product of fraud and or undue influence, and as such should be set aside and not admitted to probate. She takes the position that a 1997 Will and Codicil should govern the distribution of Brooke Astor’s estate instead.

For the Court to decide which Will, and which Codicils, are to be admitted to probate, the lawyers must complete discovery. On November 5, 2010 the Court signed the following Discovery Order:

Years of litigation will ensue. Charities and loved ones have to fight over the distribution of Astor wealth. And, worse yet, the proud and generous Astor legacy has been overshadowed and overwhelmed by headlines of misdeeds and greed. Instead of reading about the Astor legacy and attending to Brooke Astor for her legendary generosity, we instead were horrified to read of her sleeping in tattered nightgowns on a couch smelling of urine, and of pettiness and of pilfering.

In the end, Anthony Marshall got just what he was entitled to, but the Astor legacy didn’t.

Legacy Lesson #8: Monitor the Health and the Wealth of a Loved One Who Is Ill and Vulnerable

Brooke Astor’s good intentions we almost dashed by the Antagonist, sadly her son, who was willing to commit fraud, and take advantage of one so vulnerable. Fortunately her grandson and friends stepped in and brought their concerns to the Court’s attention. Don’t ignore your gut instincts. If you smell smoke, there’s probably a fire. Surrogate Courts will seek to protect one who can’t speak for themselves, or one who cannot adequately care for themselves by appointing a conservator or a guardian of the person and property. Sometimes family members battle over who should be appointed to best protect the interests of an ailing family member.  The Court, after hearing from all concerned will make that decision.  Such actions typically are intended to accomplish one thing – protect someone who needs protection. It’s far better to be proactive, and seek judicial intervention, than to ignore the warning signs and leave a loved one and their legacy at risk of going up in smoke.

Another way to create a check and balance system is to execute a Power of Attorney in which you appoint not one, but two co-agents. By so doing, in the event you’re mentally or physically incapacitated, and the agents need to act on your behalf, it takes two signatures for any action to be implemented.     

Legacy Lesson # 9: Anatomy of a Contested Estate

Whether a second spouse, child, friend, relative, neighbor or health care provider; the Antagonist typically has a false sense of entitlement, and a righteous justification for exerting his will over the Will of the weakened prey. Any of these actors may dutifully attend to the daily needs of one so ill or dependent, but alas, the doer of good deeds may be a wolf in sheep’s clothing. Perhaps the caregiver is thought to be so loving and thoughtful by one so dependent, that after traveling to the doctor, pharmacy, and post office, a stop at the bank or lawyers office seems in keeping with what priorities should be. It may just be a reasonable suggestion to visit a new, much better estate planning lawyer, or a timely reminder of children’s irresponsible tendencies, or perhaps changes are “required” to save estate taxes, or a host of other prompts, all at a time when one is fragile, dependent, or weak that fortunes are diverted.  Taken together, these prompts may cause a new Will to be executed, or a new beneficiary form filed just days, weeks or months before death and surprise surprise, the doer of good deeds has surfaced as a primary beneficiary and Executor.

In some cases, however, the decedent is the Antagonist, and the last minute change is the final dig, the last word and the intended consequence is anguish. Those bearing the brunt of the message typically claim that the decedent was not of sound mind, lacked the requisite mental capacity to execute the proffered Will or more likely, that a sister, brother or spouse influenced the Antagonist to act so irrationally. 

Probate litigation almost without fail is caused by the actions of an Antagonist or the inaction of a decedent who failed to implement an effective estate plan coupled with one or more of the following recurring fact patterns:  a dysfunctional family; a second spouse and children from prior marriages; significant wealth involving a family business; an elder infirmed widow who allegedly changed his or her intentions shortly before death; and either a tyrannical or dilatory fiduciary. Should these explosive conditions exist, after the funeral, unspoken words lead to heated words, followed by less than diplomatic late night emails. Thereafter lines are drawn, détentes formed and the best lawyer sought –   all the precursors that lead to battle. These ingredients when mixed, battered or boiled result in a contested estate in which aggrieved heirs seek to:

  1. set aside a Will as the product of undue influence, fraud or lack of capacity;
  2. set aside the titling of investment management accounts or deed;
  3. set aside beneficiary forms for life insurance policies and retirement accounts;
  4. enforce the rights of income beneficiaries or remainder persons of an estate or trust;
  5. set aside the acts of the agent while supposedly authorized by a power of attorney;
  6. demand an estate accounting and then object to the accounting when produced;
  7. remove an Executor or Trustee for malfeasance or breach of fiduciary duty;
  8. demand a sale or distribution of estate assets; and
  9. appraise and properly distribute jewelry, photographs and the contents of the home.

Threatening letters from lawyers may be exchanged, but rarely do such letters result in an amicable resolution. The next action may be the filing of a Caveat, a one paragraph warning to the Court, in the county where the decedent resided. If the Caveat is  properly filed, typically within ten days from date of death or before the Will is offered for probate, the Will is blocked from being admitted to probate. The filing of a Caveat requires the proponent of the Will to file an Order to Show Cause seeking to set aside the Caveat thus allowing the Will to be admitted to probate.  Generally, both sides prepare and sign Certifications telling their side of the story and then a Court issues a return date for preliminary oral argument. If the Court is swayed that something is amiss and that perhaps there was wrongdoing, before vacating the Caveat, the Court will set the matter down for discovery which includes interrogatories, depositions, exchange of paper discovery, expert reports, and briefs which typically are required to be completed within a six month time frame. Extensions are generally required and Court ordered mediation is not unusual before a Trial date is set. In the interim, the Court may appoint an Administrator of the estate who will be fair and impartial during the litigation.

The road to the estate’s conclusion will occur either in mediation, a settlement just before Trial or by a Court after a trial.    Some probate litigation cases are  promptly resolved, others, like Jarndyce v. Jarndyce as described in Charles Dickens, 9th novel, Bleak House,  rumble on for years, decades or generations and the estate assets wind up absorbed by costs – a legacy lost.

Legacy Lesson # 10: Influence or Undue Influence?

Claims seeking to set aside a Will based on undue influence have become more prevalent over the last few years as the economy weakens and as more baby boomers reach the fragility of old age.  Opportunities for children or others to take control of a senior’s finances often lead to temptations that are too often acted upon to the detriment of the intended heirs and beneficiaries.

Generally, Courts have found that undue influence exists when circumstances show a destruction of the free will and judgment of the person over whom influence is exerted and consequently, the weakened testator yields to the will of another merely for the sake of peace or is mentally or morally coerced into doing something contrary to his or her own wishes.  Undue influence can be established both by pressuring one who is in a weakened mental or physical state to yield to the influencer’s control, or sometimes in a much subtler behavior pattern, using acts of kindness to illicit guilt or dependence such that the weakened testator feels compelled to change his or her Will or the titling of his or her assets in favor of the influencer.

In order to establish undue influence, a contestant will typically need to establish:  1) that there were suspicious circumstances at the time the Will was executed; and 2) that a confidential relationship existed between the testator and the beneficiary.

You’ll know if suspicious circumstances exist. In an unreported case, a distant son flew into New York allegedly to visit his dying father in the hospital.  After an unsuccessful operation to remove cancer, the son requested time alone with his dad. The second spouse, tired and depressed welcomed the chance to go home, and perhaps shower, sleep and eat something. She returned the next day as the son was preparing to leave. Hugs exchanged, words of encouragement offered to dad, and off he went. Only days later, dad succumbed to illness and, though the grieving process should have followed, it was cut short. After the funeral, the distant son reappeared and handed his step-mother the new Will.  The son had requested some quality time with dad – some alone time and instead he seized the moment, and orchestrated the execution of a new Will.  The Will, prepared in advance of the son’s visit, was signed by witnesses he arranged, and kept a secret until dad died. The Will all but cut out the wife of 22 years, left the majority of the assets to the son, and named him as Executor – a very different disposition than her husband’s prior Will. This fact pattern is not offered as an academic explanation, but is instead, an example of a suspicious circumstance.

A confidential relationship may exist when circumstances make it clear that the parties do not deal on equal terms, that on one side there is an overpowering influence, and on the other, weakness, dependence or trust such that the parties don’t deal on terms of equality.  For instance, if a daughter controls her mother’s banking, pays her bills, manages her health care, cooks her meals, talks with the accountant or estate planning attorney all at a time when the mother is ill, and but for such help, Mom would be in a nursing home – a confidential relationship would likely be found to exist. Alternatively, if a child is agent under a Power of Attorney, or trustee of a Trust, then that alone may allow a Court to find that there exists a confidential relationship.

Though varying from state to state, and Court to Court, the following factors are generally considered in determining whether or not undue influence exists and who has the burden of proving it:

  1. whether the beneficiary was present at the execution of the Will;
  2. whether the beneficiary recommended and or arranged for the attorney to draft a Will for the testator;
  3. whether the beneficiary, to the exclusion of others, reviewed drafts or provided comments prior to the Will’s execution;
  4. whether the beneficiary was involved with the decedent’s bankers, money managers, accountants or lawyers shortly before the decedent’s demise;
  5. whether the beneficiary was in charge of safekeeping the Will subsequent to its execution;
  6. whether the beneficiary secreted the Will from others;
  7. whether the beneficiary isolated the testator from other family members;
  8. whether the beneficiary disparaged other family members from visiting the testator before his or her demise
  9. whether a beneficiary was the day to day care giver;

10.whether assets were gifted, re-titled or beneficiary forms changed shortly before one’s demise;

  1. whether a long term relationship with the family estate attorney was changed to a new attorney shortly before death;
  2. whether there was a history of a testator seeking to distribute assets equally, followed by actions which caused the estate to be distributed unequally;

13.whether the decedent’s health history indicates a mental or physical impairment;

  1. whether the decedent was taking medication, or required another to care for him;
  2. whether there were any acts that are suspicious or circumspect that resulted in inequity.

If a Court finds that a Last Will and Testament offered for probate was the product of undue influence, then it will be set aside, as if it never existed, and a prior Will may be admitted to probate.

Legacy Lesson #11: By Gift or by Theft?

There is clearly a variation of undue influence that is less frequently written about, but is occurring with increasing frequency.  When someone dies, many look to the decedent’s Will to determine how the estate is to be distributed.  However, the titling of the assets trumps the terms of the Will.  Generally, if an asset is titled jointly with a spouse, as an example, then upon one’s demise, that asset passes to the surviving spouse. Similarly, certain assets like life insurance, individual retirement accounts or annuities have named beneficiaries. The beneficiary designation governs the distribution of the asset – not the Will.  Undue influence may not be present in the drafting and execution of a Will, but may instead may occur in the re-titling of assets while one is ill and dependent on another.

Joint accounts are at first blush afforded certain statutory protections and the Courts generally will enforce the disposition of a joint account passing to the named surviving joint tenant. However, if someone challenges the titling of the account and alleges the beneficiary change form, or a deed conveyance was the product of undue influence,  then Courts may look to two factors. The first is a determination as to whether or not the account was titled jointly as a matter of convenience only,  or if there was really donative intent. By way of example, it’s not unusual for a checking account to be changed such that the daughter who lives nearby can pay bills for her aging mother.  If the account was changed from just the mother’s name, into an account titled in the mother’s name jointly with the daughter simply to enable the daughter to pay bills, then that’s a change for convenience only, not an intention to transfer wealth. Accordingly, the joint disposition would likely be set aside.  Alternatively, if that same mother called her attorney and advised, that in the event of her death she intends that a certain bank account or investment management account is to pass to her daughter, then,  donative intent can be easily established. But without a writing or witness, such intentions may be challenged and overturned by a Court which has no proofs before it to establish donative intent.

In some cases, the re-titling of assets simply reeks of undue influence. The most common example begins with an ill or mentally compromised parent who is dependent on one of his children for all   daily needs. Without such help from the child, the parent fears the only alternative is a nursing home. Fear and dependence changes the balance of power.  A parent may easily assent to a child’s request to change the  title of the investment account and the home from the parent’s name alone, into a joint account, or a deed with the parent and the child jointly … because it’s the right thing to do.  The child may explain that by so doing, the assets will be protected from a nursing home and therefore the change is prudent and really protects everyone. The deed is done.  Not until the parent dies will the other four children quickly learn – the titling of the account trumps the terms of the Will which provided for the children equally. So the other four protest in vain, and then hire an attorney to challenge the re-titling of assets. The pleadings filed with the Court claim that all such transactions should be set aside as a product of undue influence.  The siblings may easily prove that their brother was involved in the parents finances, was an agent under a power of attorney, or a trustee of a trust and that alone may be enough for a Court to find son had a confidential relationship with the parent. In some states, that’s enough to shift the burden of proof to the son to prove there was no undue influence. The son now has an uphill battle. If a Court finds the child was in a position of dominance and the weakened father  dependent, the son may be unable to prove to a Court, by clear and convincing evidence, that all was fair and that the playing field was equal.

Typically, the changing of account ownership forms or deeds doesn’t happen in one day, but occurs over time.  Accordingly, the aggrieved siblings may ask a Court for a reasonable amount of discovery to subpoena all banking records and medical records from the date of death back to the onset of the illness seeking to show a nexus between the two.  Then to prepare for a hearing, their lawyer will propound interrogatories on the alleged influencer, take his or her deposition, and serve anyone with knowledge of the facts with interrogatories, then take their depositions as well. Once all the  banking and medical records are received, experts are hired. Perhaps a forensic accountant will be engaged to quantify the re-titling of accounts and establish the amount of money in controversy and a geriatric medical professional may be hired to attest to the decedent’s weakened condition.

Prior to a trial, the Court may suggest, and the lawyers may agree to mediate their dispute. An experienced lawyer or retired judge may accept the role, review all the pleadings and discovery, then host an informal mediation. You could cut the tension with a knife when all the family members are in one room, each believing they’re right, and genuinely believe the heirs don’t understand and never understood their deceased parent.  The room may be filled with emotion, but a good mediator, reasonable lawyers, and family members looking to put an end to the divide may result in a settlement at, or shortly after mediation. If the case doesn’t settle, pre-trial briefs are filed and  a Trial date set such that a Judge will be destined to determine what the decedent intended. A Court may subsequently order that the re-titled assets which benefitted the influencer, be reversed and be distributed as provided in the decedent’s Last Will and Testament, and sometimes the Court is so enraged by the influencer’s actions that he is ordered to pay the legal fees incurred by the siblings.

Legacy Lesson # 12: Time in a Bottle: Good Days & Bad Days

Even if the Surrogate Court finds Anthony Marshall did not exert undue influence over his weakened mother, the charitable beneficiaries will likely argue that Brooke Astor did not have  the requisite mental capacity when she signed the Codicils. Most Will contests involve allegations that the testator lacked sufficient mental capacity to execute the Last Will and Testament. The standard for mental capacity is low and will be met if, at the time a Will was executed, the testator understood:  a) the extent of his assets; b) who his heirs are; c) that the Will is meant to dispose of his assets at death; and d) the terms of distribution under the Will.  At least initially, the witnesses and notary who watched the testator sign the documents also have attested that the testator – at that moment in time – had mental capacity. Are the witnesses psychologists? Probably not. Can a patient who suffers from early onset of Alzheimer’s have a moment of clarity sufficient to sign a Will? Probably. If heirs challenge not just the Will, but also the three subsequent Codicils and five gifts which took place over a two-year period, must mental capacity be established for each act? Yes.

Although there is a presumption that a testator is of sound mind and competent when he executes a Will, claims often may be filed seeking to set aside or invalidate a Will or gifts claiming the testator lacked testamentary capacity. To prosecute such a claim,  a psychologist will need to be retained to testify that the testator either had or lacked capacity at the time the Will or Codicil was executed. Witnesses to the execution of the Will and the attorney draftsperson also become key witnesses in the litigation.

Many times, the estate planning attorney will take adequate precautions and document evidence of capacity in the client’s file, or will video tape the Will signing if a Will contest is expected.  Some know their Will is going to be contested and actually hire a psychiatrist or psychologist to opine in writing that the testatrix  has capacity, and then, while cameras are rolling,  video tape the Will signing.  During the show, the testatrix  reads a prepared statement that might go something like this:

“My name is Contessa Capacita and I have two daughters, Maria and Tina. Yesterday,  I met with my accountants, reviewed my balance sheet and am aware that my assets total approximately $100,000,000. I am here today, in the presence of two witnesses and a notary to sign my Last Will and Testament. I have read it and it is consistent with my intentions. I have intentionally made no provisions for my daughter, Tina. It’s difficult for a mother to cut her own daughter out of her Will, but I am doing so knowingly and voluntarily. My reason for cutting Tina out of my estate is fairly simple. She has not acted like a daughter to me, she shows me no love or affection. She doesn’t call or write, and has,  for too many years only caused me pain. I’ve had enough. So as to protect my estate, my daughter Maria, and my legacy  I read this statement out loud, so there will no mistake or inquiry about my intentions”.

The lawyer then reviews the Will with her, and in the presence of the witnesses and notary, she signs the Will.  Tina has little to no chance of over-turning the Will … unless Maria was seen in the video,  hiding behind a plant and snickering.

In the Brooke Astor estate litigation, the Court may find she had capacity when she executed her Will on January 30, 2002 but lacked capacity when she signed the First Codicil dated December 18, 2003, the Second Codicil dated January 12, 2004 even more likely the Third Codicil dated March 3, 2004.

So what should you do if your aging parent is succumbing to old age, illness, and there is either no Power of Attorney in effect, or a Power of Attorney is in place, but you suspect foul play? Consider commencing a guardianship proceeding.  In such event, a family member with standing, such as a spouse, child or beneficiary, may file a complaint on behalf of an incapacitated person seeking to be appointed as guardian.  A Court may appoint a guardian over the person to make decisions on behalf of the incapacitated person including living arrangements and health care decisions.  The Court may also appoint a guardian over the property of an incapacitated person who will have the authority to make financial decisions subject later to an accounting. A determination of incapacity may be accomplished if there are two disinterested doctors willing to opine that an individual is mentally or physically incapacitated. To aid in the decision making, a Court may appoint an independent guardian ad litem, typically an attorney respected by the Court, to meet with the alleged incapacitated individual, talk with the doctors and family members, and then file a report with the Court. The report will include a summary and a recommendation as to whether a guardian of the person and or property should be appointed. If family members disagree with the report, a Court may hear from all parties and then issue an Order.  There are also degrees of incapacity, and a growing trend allowing courts to limit a guardian’s powers based on the level of incapacity, thereby allowing the incapacitated person to retain whatever rights are deemed appropriate.

Legacy Lesson #13: Protecting Against Fraud

 

If ever there was an “Antagonist” or an officious interloper, Commodus takes the lead role in Gladiator played by Joaquin Phoenix.

CAESAR: “There is one more duty that I ask of you before you go.

MAXIMUS: What will you have me do Caesar?

CAESAR: I want you to become the protector of Rome after I die. I will empower you, to one end alone; to give power back to the people of Rome and end the corruption that has crippled it.  Will you accept this great honor that I have offered?

MAXIMUS: With all my heart, no.

CAESAR: Maximus, that is why it must be you.

MAXIMUS: But surely a prefect, a senator, somebody who knows the city, who understands her politics….

CAESAR:  But you have not been corrupted by her politics.

MAXIMUS: And Commodus?

CAESAR: Commodus is not a moral man; you have known that since you were young. Commodus cannot rule. He must not rule. You are the son that I should have had. Commodus will accept my decision. He knows that you command the loyalty of the army.”

Caesar had good intentions, but his intentions were not in writing, were not witnessed by others, and were ultimately usurped by the acts of the Antagonist. Moments later Caesar explained his business succession plan to his twisted son Commodus.

CAESAR:  Are you ready to do your duty for Rome?

COMMODUS: Yes, father.

CAESAR: You will not be Emperor.

COMMODUS:  Which wiser, older man is to take my place?

CAESAR: My powers will pass to Maximus to hold in trust until the Senate is ready to rule once more. Rome is to be a Republic again.

COMMODUS: Maximus?

CAESAR: My decision disappoints you?

Apparently his decision did disappoint Commodus, because moments later,  asphyxiated his Father and undermined his intentions.

 

 

Commodus was not the only one who undermined his parent’s decision.  Anthony Marshall was found guilty of fraud, conspiracy, and larceny in a criminal court as he too, undermined the intentions of his mother.  In the Civil Court,  the Westchester County Surrogate must decide which Will or Codicil to admit to probate; and which Will and/or Codicil should be set aside as a product of fraud or undue influence.  A Will can also be set aside as the product of fraud where the testator was misled by another’s misrepresentation or action, thereby, frustrating the testator’s intentions.  Where fraud is found, the Court may set aside a Will which resulted from such fraud.  Sanctions may also be imposed against the bad actor, and in some extreme cases referred to a prosecutor.  Examples of fraud might include, a forged Will, Deed, Trust or Beneficiary form, physical control and exertion over one lacking capacity causing a new document to be executed in favor of the influencer, or an altering of documents.

The reclusive billionaire Howard Hughes invited fraud when he died in 1976 apparently without a valid Last Will and Testament. Several of the recurring fact patterns that are universal to all probate litigations cases were present when the eccentric recluse died; a vast fortune, a family owned business, two marriages, two divorces, no children, no operative estate plan and scores of antagonists. The Hughes Estate was a spectacle, and over thirty purported Wills were offered for probate and all were determined fugazzi’s. But what were the true intentions of then, one of the richest men in America? We’ll never know, but if you want insight into the chaos, consider the Wills offered for probate below.

The Court did not accept this Will so Richard Robard Hughes, aka, Joseph Michael Brown did not inherit the Hughes fortunes. Then there’s the famous Mormon Will proffered by Melvin Dummar.   Dummar who claimed that he picked up a disheveled Howard Hughes as he was stranded roadside from an apparent motorcycle accident. According to Dummar, Hughes was so indebted for his good deed, that allegedly, Hughes executed the following Will:

 

Another fortune, tossed to the wind, to be a spectacle, a mockery and a movie.  By not seeking the counsel of his trusted advisors, Howard Hughes invited fraud.  Ironic, that a man so obsessed with germs would allow every germ, and every Antagonist into his empire to infect and forever taint his legacy.

 

Probate Wars – the Anna Nicole Smith Probate Saga

Stripping and Being Stripped

Vickie Lynn Marshall stunned everyone when she died unexpectedly in February 2007 at the age of 39. Her death, like her life, ignited a firestorm of media coverage.

Having a hard time remembering just who Vickie Lynn Marshall was?  That’s probably because you know her better for her colorful professional career…as an iconic sex symbol.  In the 1990’s she epitomized the definition of a blonde bombshell.  Her curves seared the pages of Playboy Magazine leaving little to the imagination, and in 1993 she captured the Playmate of the Year title, solidifying her as an American sex icon.  Hers was the face of Guess Jeans and her image appeared in magazines, on television, and in numerous modeling ads.  If you are still struggling to figure out who she was, perhaps you knew her by her professional name: Anna Nicole Smith.

Vickie Lynn Marshall – widely (and hereinafter) known as Anna Nicole Smith – may have grabbed national attention as a model, but she stole the media spotlight in 1994 when, at the age of 26, she married elderly 89-year-old self made billionaire, J. Howard Marshall, II.

Marshall, a Yale law school graduate earned his money the old fashioned way;   academic excellence, hard work and an entrepreneurial spirit. Though he served on the Yale Faculty, and later became assistant Dean of Yale Law School, it was oil that ran through his veins.  He co-wrote two articles about oil industry regulations that in 1933 led to his employment in our Nation’s capital to work for the Secretary of the Interior, Harold Ickes.  Thereafter he served as special counsel to the President of Standard Oil (now Chevron), then became a partner in a major law firm.  Some earn their wealth the old fashioned way; others marry into it, while some simply stumble upon it – like Jed. Oh you must remember The Beverly Hillbillies? If not, then listen to a story about a man named Jed. He was a poor mountaineer, and barely kept his family fed. But then, one day he was shootin’ at some food, and up through the ground came some bubblin’ crude. Oil that is, black gold, Texas tea.

Marshall didn’t stumble upon his fortunes, but sure enough, his well was filled by the same Texas Tea.  With his impressive academic background, experience in our Nation’s capital as well as the boardroom, his pump was primed and he was well positioned to co-found The Great Northern Oil Company with Fred C. Koch. Under the stewardship of these two titans, the company grew, into what is now one of the largest privately owned family businesses in the United States – Koch Industries.

At the time of his demise, J. Howard Marshall, II owned 16% of Koch Industries and that asset alone earned him his spot on the elite list of U.S. Billionaires. But we know that all work and no play makes Jack a dull boy, and though  Marshall could travel in the circles of high society and join any club he so desired, it was a gentlemen’s club that bubbled his crude. And so it was, the 87-year-old Ivy League oil tycoon was taking in the sights at Gigi’s, a Texas go-go bar, and like a moth drawn to the fire,  he cast his eyes on one hot number – Anna Nicole Smith.

In the words of Jackson Brown, both of them were “running on empty”.  In the love and longevity column, his tank was running on fumes. He was divorced, his second wife died, one of his two sons had apparently crossed him in a palace coup at Koch Industries and consequently earned the proverbial – “you’re out Tom” and the other son, E. Pierce Marshall simply couldn’t provide the lift that Anna could. Maybe the lonely octogenarian needed companionship or maybe he simply wanted to go out with a bang. Her tank seemed starved for fame, fortune and attention and maybe, just maybe, a marriage to an 89-year-old elderly billionaire could fill her void.  Maybe they both got what they wanted – as only 13 months after they exchanged vows, J. Howard Marshall, II died.  But there were too many maybes and not enough certainties.

Anna Nicole, not quite 28, was a widow. After reading the Will, or having it read to her, she must have been shocked to find out her well would soon run dry.  She was omitted – no bequest, no trust fund, no trinkets. Though her hubby had gifted assets to her worth approximately $6,000,000 during her lifetime, she wasn’t the object of his affection in his Revocable Trust.  Odd that J. Howard Marshall, II, a Yale lawyer and astute businessman allegedly signed a new Will and amended his Revocable Trust just days after his marriage to 26-year-old bombshell, and left her nothing. In fact the Will didn’t even recognize her as his spouse.  That same Will and Revocable Trust also cut out one son, and then there was one, just one beneficiary – E. Pierce Marshall, who by the way, was involved in his father’s estate planning and who stood to inherit the billion dollar fortune.  Was J. Howard Marshall, II’s estate plan the product of undue influence or worse yet, fraud?

Though there was plenty of money to amicably resolve any probate dispute, such was not the path chosen by the parties, or their counsel. It did not take long before the fate of the $1.6 billion estate was in litigation. According to Anna Nicole,  J. Howard Marshall, II orally promised her half of his estate.  But a jury of her Texas-peers rejected her claims, and in 1996 they decided Anna had no claim to the estate.  The battle, however, was far from over.

That same year, 1996, Anna Nicole Smith filed for bankruptcy protection in California, and E. Pierce Marshall filed a claim as one of her creditors. In a story full of the unexpected, the bankruptcy judge didn’t disappoint. Though estate litigation is typically filed and decided in state court – not federal court, the federal bankruptcy judge awarded her $447,000,000 of J. Howard Marshall, II’s estate.  What’s interesting about that number is that it’s close to one-third of the estate, the amount that had the Court tied the award to Anna Nicole’s elective share claim,  would have made sense. But the Bankruptcy Court didn’t tie the number into the elective share claim and therefore it was unclear what the award represented. The ruling did however help land Anna Nicole on the cover of Playboy, again, but this time as the “$450,000,000 Playmate.”

  1. Pierce Marshall must have been blown away, and appealed the Bankruptcy Courts decision. In 2002 U.S. District Court Judge David Carter reduced the award to just $88,500,000. Another appeal, and this time, the 9th Circuit Court of Appeals threw out Judge Carter’s award and ruled that the Federal Court did not have jurisdiction over the case. Anna Nicole contested this ruling, taking her argument to the highest authority in the land: The United States Supreme Court.  The Justices of the Supreme Court, in a unanimous decision issued in May 2006, ruled that Anna Nicole did have legal grounds to challenge J. Howard Marshall, II’s Will in Federal Court.  The Court, however, did not decide the issue of whether she was entitled to the $447,000,000 or $88,500,000 or some other amount, or nothing – that would be left to yet another Court.
  2. Pierce Marshal had fought for years trying to extinguish any rights that Anna Nicole Smith might have in and to his father’s estate. But he would not see victory during his lifetime. He died in June of 2006, and therefore his heirs are burdened with continuing legal drama.

Unfortunately, in September of 2006, before any Court resolved the disposition of J. Howard Marshall, II’s estate, Anna Nicole’s life took a bittersweet turn. Just three days after being blessed with a beautiful daughter, Dannielynn, her joy was overshadowed by her son’s death. Just 20-years-old, and the joy of Anna’s life, Daniel Smith, born from her first marriage to Billy Smith, died while visiting his Mom and step-sister in the hospital. How traumatic for anyone – the birth of a daughter and the death of a son within a three day period.  Despite Daniel’s death, and the birth of Dannielynn, Anna Nicole did not alter her own Will. Only six months later,  her own life was unexpectedly cut short on February 8, 2007 from what Dr. Sanjay Gupta deemed a toxic concoction of prescription drugs. Whether she suffered from post mortem depression and depression from the loss of her son – we’ll never know. Anna’s death however, created a veritable legal hurricane that placed her infant daughter, Dannielynn in the eye of the storm. Anna’s Will may as well have been printed on flash paper as it burned up the tabloids because it expressly cut out her newborn as a beneficiary of her estate, and provided only for her son Daniel who had predeceased her.  Excerpts of Anna’s Last Will & Testament follow:

LAST WILL AND TESTAMENT of VICKIE LYNN MARSHALL

I, VICKIE LYNN MARSHALL, also known as Vickie Lynn Smith, and Vickie Lynn Hogan, and Anna Nicole Smith, a resident of Los Angeles County, California, declare that this is my Will. I revoke all prior Wills and Codicils. I hereby dispose of all property that I am entitled to dispose of by Will and exercise all general powers of appointment that I am entitled to exercise. I have not entered into a contract to make or not revoke a Will.

ARTICLE I: FAMILY DECLARATIONS AND STATUTORY DISINHERITANCES

I am unmarried. I have one child DANIEL WAYNE SMITH. I have no predeceased children nor predeceased children leaving issue. Except as otherwise provided in this Will, I have intentionally omitted to provide for my spouse and other heirs, including future spouses and children and other descendants now living and those hereafter born or adopted, as well as existing and future stepchildren and foster children.

ARTICLE II: DISPOSITION OF ESTATE

All of the property of my estate (the “residue”), after payment of any taxes or other expenses of my estate as provided below, including property subject to a power of appointment exercised hereby, shall be distributed to HOWARD STERN, ESQ., to hold in trust for my child under such terms as he and a court of competent jurisdiction may declare, such that my children are distributed sufficient sums for the health, education, and support according to their accustomed manner of living from either the income or principal of the trust until age twenty-five; and are at that time given one-third of all of the income of the trust and one-third of the principal of the trust as then constituted; and at thirty are given one-half of the income from the trust and one-half of the principal of the trust as then constituted; and at thirty-five are given all of the principal of the trust. If, in the discretion of the Trustee, the amount remaining in the Trust is too small to efficiently administer, he may give all of the corpus of the Trust to my child at once.

ARTICLE III: PROVISIONS REGARDING EXECUTORS

3.1       Nomination of Executor.

I nominate as Executor and as successor Executors of this Will those named below. Each successor Executor shall serve in the order and priority designated if the prior designated Executor fails to qualify or ceases to act.

First:    HOWARD STERN, Esq.

Second:           RON RALE, Esq.

Third:  ERIC JAMES LUND, Esq.

Fourth:            Wells Fargo Bank (Sandra K. Von Paul) or its successors by merger, consolidation, or otherwise.

3.2       Power to Nominate Executor.

If all of the foregoing Executors are unable or unwilling to act, the majority of the adult beneficiaries under this Will shall have the power to designate as successor Executor any corporate fiduciary having assets under management of at least Two Hundred Fifty Million Dollars ($250,000,000). Such designation shall be filed with the court in which this Will is probated.

3.3.      Waiver of Bond.

I request that no bond be required of any Executor nominated above, including nonresidents, whether such Executor is acting alone or together with another.

3.4.      Powers of Executor.

My Executor shall have the following powers in addition to all powers now or hereafter conferred by law, and except as otherwise expressly provided, shall have the broadest and most absolute permissible discretion in exercising all powers. I intend and direct that the probate court uphold any action taken by my Executor, absent clear and convincing evidence of bad faith or gross negligence.

3.4.1.   Independent Administration.

My Executor may administer my estate with full authority under the California Independent Administration of Estates Act.

3.4.2.   Tax Elections and Decisions.

My Executor may value my gross estate for federal estate tax purposes as of the date of my death or any permissible alternate valuation date, my claim any items of expense as income or estate

3.4.3.   Disclaimers.

My Executor may disclaim all or any portion of any bequest, devise or trust interest provided for me under any Will or Trust. In particular, I authorize and encourage my Executor to try to obtain overall tax savings, even though this may change the ultimate recipients of the property that is disclaimed.

3.4.4.   Limitations on Tax Elections and Decisions. Omitted.

3.4.5.   Management and Administrative Powers of Executor. Omitted

3.5.      Resignation of Executor.

My Executor may resign at any time (a) by filing a written instrument with the court having jurisdiction over my estate, or (b) by giving written notice to all successor Executors.

3.6.      Successor Executors.

All authority, titles and powers of the original Executor shall automatically pass to a successor Executor. A successor Executor may accept as correct or contest any accounting made by any predecessor Executor; provided that a successor Executor shall be obligated to inquire into the propriety of any act or omission of a predecessor if so requested in writing by a Trustee of the Trust, any Protector of the Trust, or any adult beneficiary or the guardian of a minor beneficiary of the Trust within ninety (90) days of the date that the successor is appointed.

3.7.      Liability of Executor. Omitted.

3.8.      Executor’s Authority to Transfer to Trust.

I hereby authorize my Executor (or the person nominated to serve as Executor even if no Letters Testamentary are issued) to transfer to the Trustee of the Trust any asset and to execute any document in connection with any such transfer to the extent necessary or appropriate to carry out any assignment of assets to the Trust.

3.9.      Co-Executors.

If more than one person is serving as Executor, one Executor acting alone may transfer securities and execute all documents in connection therewith; open accounts with one or more bank and savings and loan associations; authorize deposit or withdrawal of funds to or from accounts; and sign checks. Transfer agents, corporations and financial institutions dealing with a single Executor as provided in the preceding sentence shall have no liability as a consequence of dealing with only one Executor. My Executor may delegate any ministerial duties to any Co-Executor.

ARTICLE IV: GENERAL PROVISIONS

4.1       No Interest.

No interest shall be paid on any gift hereunder, except to the extent necessary to qualify for the marital deduction.

4.2.      Life Insurance Policies. Omitted.

4.3.      Construction.

4.3.1.   Number and Gender.

In all matters of interpretation, the masculine, feminine and neuter shall each include the other, as the context indicates, and the singular shall include the plural and vice versa.

4.3.2.   Headings.

The headings in this Will are inserted for convenient reference and shall be ignored in interpreting this Will.

4.3.3.   Severability of Provisions.

If any provision hereof is unenforceable, the remaining provisions shall remain in full effect.

4.4.      Governing Law.

The validity, interpretation, and administration of this Will shall be governed by the laws of the State of California in force from time to time.

ARTICLE V: TAXES AND OTHER EXPENSES OF MY ESTATE

Omitted.

ARTICLE VI: NO CONTEST; DISINHERITANCE

6.1.      Contestants Disinherited.

If any legal heir of mine, any person claiming under any such heir, or any other person, in any manner, directly or indirectly, contests or attacks this Will or the Trust or any of the provisions of said instruments, or conspires with or assists anyone in any such contest, or pursues any creditor’s claim that my Executor reasonably deems to constitute a contest, any share or interest in my estate or the Trust is revoked and shall be disposed of as if the contesting beneficiary had predeceased me without descendants, and shall augment proportionately the shares of my estate passing to or in trust for my beneficiaries who have not participated in such acts. This Article shall not apply to a disclaimer. Expenses to resist a contest or other attack of any nature shall be paid from my estate as expenses of administration.

6.2.      General Disinheritance.

Except as otherwise provided herein and in the Trust, I have intentionally omitted to provide for any of my heirs, or persons claiming to be my heirs, whether or not known to me.

ARTICLE VII: OFFICE OF GUARDIAN

7.1.      Nomination of Guardian of the Person.

I nominate HOWARD STERN as guardian and successor guardian of the person of my minor child DANIEL WAYNE SMITH:

Any such nominee who is a resident of a state other than California may, at the nominee’s election, file a petition for appointment in such other state and/or in California. I request that any court having jurisdiction permit the guardian to change the residence and domicile of my minor children to the jurisdiction where the guardian resides.

I give the guardian of the person of my minor children the same authority as a parent having legal custody and authorize the guardian to exercise such authority without need for notice, hearing, court authorization, instructions, approval or confirmation in the same manner as a parent having legal custody. I request that no bond be required because of the grant of these independent powers.

7.2.      Waiver of Bond.

I request that no bond be required of any guardian nominated above.

Signature Clause.

I subscribe my name to this Will at Los Angeles, California, on this 30th day of July, 2001.

Anna Nicole Smith

 

Anna Nicole Smith’s Last Will and Testament is a classic example of an outdated, ineffective Will. Though the Will indicated she had no predeceased children, she sadly did have a predeceased child, Daniel. Then, mistake #2, the Will precluded a future child from being a beneficiary, but at the time of her death, she had a child born after the Will was executed. Mistake number #3, she named as Executor and Trustee a person who as it would turn out, had an issue with the beneficiary. Anna named Howard Stern as Executor and Trustee of her estate. After Anna died, Howard Stern  unsuccessfully tried to establish himself as the father – but DNA testing confirmed he wasn’t Dannielynn’s dad and DNA testing confirmed Larry Birkhead was Dannielynn’s dad.

How did we ever resolve such claims before DNA testing? If we had DNA testing centuries ago, how many servants would be kings, and how many kings would be servants? And Amos, or was it Andy, would know if he was the father of Roxie Hart’s baby, or if Fred Casley,  the bugler … or furniture salesman who gave her ten percent off,  was really the father. Oh wait, if Roxie got a real pregnancy test, then we wouldn’t need a DNA test.  All these tests can really take the fun out of conception – but they do add clarity to the estate planning process. Anyway … an odd position for Howard Stern who as executor of Anna Nicole’s Estate now had to fight for assets for a beneficiary whom he thought was his daughter, but isn’t.

The legal battle over J. Howard Marshall II’s estate that had plagued Anna Nicole for most of her adult life, rumbled on after she died.  Almost a year after Anna Nicole died, in 2008 a Los Angeles judge ruled that  Dannielyn, was the only  the beneficiary of Anna Nicole’s estate. Accordingly, Howard Stern, as executor of Anna Nicole Smith’s estate had to prosecute the claim on behalf of Anna Nicole’s estate that it should be a beneficiary of J. Howard Marshall’s billion dollar estate. How strange would that be, J. Howard Marshall II’s fortunes passing to Anna Nicole Smith’s daughter who was born 11 years after Marshall II’s death.

While the 2008 decision marked the end of Dannielynn’s fight for her mother’s estate, the fight for her mother’s share of the J. Howard Marshall II fortune had only just begun.  Dannielynn could  inherit the millions of dollars her mother so vigorously sought,  but not without a fight. Accordingly, her counsel filed a Writ on March 9, 2009 with the United States Supreme Court asking for authority to start collecting at least the $88,500,000 awarded to Anna Nicole in 2002.  Meanwhile, Anna Nicole’s adversary, E. Pierce Marshall, also died, yet the litigation raged on. The new contestants were: the Estate of E. Pierce Marshall v. the Estate of Anna Nicole Smith, both  seeking to establish their rights in and to the Estate of J. Howard Marshall, II.  E. Pierce Marshall’s estate litigation lawyers fought back, claiming the 2002 award is invalid given the 9th Circuit Court of Appeal’s reversal of the 2002 decision.  They maintained that although the Supreme Court disagreed with the 9th Circuit on the issue of Federal jurisdiction, the Court did not uphold the $88,500,000 judgment.  On March 13, 2009 the United States Supreme Court rejected the attempt to accelerate collection and denied the Writ, and on March 19, 2010, the 9th Circuit, on remand from the U.S. Supreme Court, issued their own embargo.  According to the Court, Anna Nicole Smith and her estate are entitled to nothing, as the finding of the Texas probate court was a final judgment and precludes Federal Court jurisdiction on the issue of undue influence and tortuous interference.  At least it’s over – right?  Nope, the executor of Anna Nicole Smith’s estate appealed and the United States Supreme Court granted certiorari, meaning the highest Court will hear this…again.

The perverse battle over J. Howard Marshall II’s fortunes has lasted over 15 years, and  continues even after the deaths of the primary potential beneficiaries, Anna Nicole or E. Pierce Marshall, and it’s not over yet.  Google the name and image of J. Howard Marshall, II and you find much more about the bizarre marriage and ensuing probate litigation than his awesome professional accomplishments. Anna Nicole’s quest for fame and fortune ended sadly, and Dannielynn, who never met J. Howard Marshall, II, and is not in his gene pool, but could be the heir to the fortune.  And sadly, neither of Marshall’s sons will enjoy their father’s Texas Tea.  Given all the resources that J. Howard Marshall, II had at his fingertips, combined with Anna Nicole’s likely motivation for marriage, it’s simply astounding that his legacy was so exposed and so compromised by both an ill conceived or manipulated estate plan and the lack of a prenuptial agreement.  And while few may be sympathetic to the motivations of Anna Nicole Smith, in fairness to her, her life was left in limbo, turned upside down by uncertainty, bankruptcy, legal bills, and the roller coaster of judicial findings.

In the end, they both sold out.  She sold out love for money, and he sold out the institution of marriage for sexual gratification.  In the end, they really screwed themselves…a crude reality.

Legacy Lesson # 5: The Elective Share & Prenuptial Agreement

How could a brilliant billionaire like J. Howard Marshall, II get married without a prenuptial agreement? Many think of negotiating a prenuptial agreement as a distasteful process but recognize it’s a necessary evil. Once the agreement is completed,  the newlyweds’ rights and responsibilities in the event of a divorce are spelled out.  For the agreement to have any teeth, both parties must have their own counsel and there must be full disclosure of their income and assets.  All true, but most people don’t recognize the importance of, what seems like a boilerplate clause in the agreement, in which both parties waive their right of election and waive their rights in and to each others estate. Because many legislators didn’t like the idea of spouses disinheriting each other, the right of election protects a disinherited spouse so that he or she has the right to opt against their deceased spouse’s estate and claim an entitlement to approximately one-third of that estate. Generally, assets gifted or transferred to each other during their lifetimes would count as a credit toward the one-third elective share claim. Alternatively, spouses negotiating a prenuptial agreement may agree to waive the elective share claim, and then agree upon the distribution of assets in the event of one spouses demise. For example, if J. Howard Marshall, II and Anna Nicole Smith entered into a prenuptial agreement, and she waived her right of election, but agreed instead to a fixed bequest of $20,000,000 or a fixed percentage of the gross estate, say 5%, then little would be left to chance or interpretation. Note however, when using a percentage of the gross estate, sometimes beneficiaries battle over the valuation of an asset which is part of the estate, by way of example, a business interest, intellectual property rights, or royalties. Accordingly, a fixed bequest may be the preferable route.

There’s no right or wrong amount that a surviving spouse should inherit, but from a practical point of view, if the prenuptial agreement provides the safety net of a home and a reasonable sum of money, both being either outright or in trust, it goes a long way toward keeping the peace and marital bliss. If such planning considerations were a universal predicate to a second marriage, much of the probate litigation currently docketed, wouldn’t have been filed, and more importantly, the widow or widower could afford to grieve and co-exist peacefully with the children from prior marriages.

Legacy Lesson #6: Providing Equitably for a Second Spouse and Children From a Prior Marriage

There’s this story, of a lovely lady, who, as the story was told, was bringing up three very lovely girls. All the girls had golden hair, like their mother, and the youngest one had golden curls. There’s a similar story, of a man named Brady, who was raising three boys of his own. They were four men, living all together, but clearly, they were all alone. Well, one day the lady met this fellow on match.com. And they knew it was much more than a hunch. They felt that this group, after exchanging prenuptials, must somehow form a family and that’s how they all became the Brady Bunch.

Did you see the episode when Carol was busy packing for the Brady’s trip to Hawaii, had a heart attack and died? Me neither. But, if it were an episode, and Carol’s Will left everything to Mike,  would Marsha, Jan and Cindy sue their beloved step father? Well, maybe just Jan. But put the Brady’s aside, because they’d resolve everything amicably anyway. Think of your family, your friends family or for that matter any blended family that makes up a such big part of America’s fabric and ask yourself,  what would happen if one spouse died?  Who are the heirs … the second spouse, the children from the first marriage, a combination of both of them? How much to each and when?  What’s fair?

Too often the Will is vague, the decedent’s intentions are unclear, and the survivors all have expectations. It should come as no surprise that estate litigation cases are on the rise, and once filed, the gloves come off. Though a prenuptial agreement would have been helpful, even without such an agreement, a well designed estate plan could provide equitably for children from a prior marriage and a subsequent spouse. The amount left to each, the timing of the distributions, and the estate tax implications require thoughtful consideration of the following factors:

  1. The financial needs of the children and the second spouse;
  2. The ages of the children and the age of the spouse;
  3. The estate tax implications of leaving money to a spouse or children;
  4. The terms of a prenuptial agreement;
  5. The length of the marriage and whether children were born to the marriage;
  6. The relationship between the parent and the children from a prior marriage;
  7. The need to hold the assets in a spousal trust or distribute outright to spouse and the need to hold assets in a discretionary trust or age terminating trust for children or distribute outright;
  8. The titling of assets to make sure they are consistent with the terms of the Will;
  9. The health of spouse and children; and
  10. Their respective abilities to manage money

If an estate plan is created by an attorney who balances these needs such that the plan provides reasonably for each beneficiary class, then the likelihood of adequately protecting both your loved ones and your legacy goes up. But if the Will is silent as to any class, as it was with Anna Nicole Smith, or harsh as to any one beneficiary, then the likelihood of probate litigation goes up – dramatically.

Legacy Lesson # 7: Disinheriting a Family Member

If J. Howard Marshall II truly intended on cutting his young bride out of his estate, he should have taken a page from Sanford Babbitt’s playbook. In the movie Rain Man, Tom Cruise plays a fast and loose son who at age 16, fell out of favor with his father. After his father’s demise, the family lawyer read aloud the following terms of a letter which was attached to the Will:

AU: Per Legal’s instructions, movie quotes don’t require permission up to about 300 words – this needs to be trimmed a bit. I’d summarize some of the dialogue at the end… – Emilie

‘And I remember, too, the day you left home…

so full of bitterness and grandiose ideas.

So full of yourself.

And being raised without a mother, the hardness of your heart…

is understandable as well.

Your refusal to even pretend that you loved or respected me…

all these I forgive.

But your failure to write, to telephone, to reenter my Life in any way…

has left me without a son.

I wish you all I ever wanted for you. I wish you the best.’

Then turning to the Will, the Lawyer continued reading:

‘l hereby bequeath to my son, Charles Sanford Babbitt…

that certain Buick convertible…

the very car that, unfortunately, brought our relationship to an end.

Also, outright title to my prizewinning hybrid rose bushes.

May they remind him of the value of excellence…

and the possibility of perfection.

As for my home and all other property, real and personal…

these shall be placed in trust in accordance with the terms of…

that certain instrument executed concurrently herewith.’

Charlie Babbitt then asks: “What does that mean?”

Family Lawyer responds: “It means that the estate, in excess $3 million… after expenses and taxes, will go into a trust fund… for a beneficiary to be named in this document.”

Charlie Babbitt: “Who is that?”

Family Lawyer: “I’m afraid I can’t tell you that.”

Charlie Babbitt: “Who controls the money? You?”

Family Lawyer: “No. He’s called a trustee.”

Charlie Babbitt: “What is that? How does that work?”

Family Lawyer: “Forgive me, but there’s nothing more I can say. I’m sorry, son. I can see that you’re disappointed.”

Charlie Babbitt: “Why should I be disappointed? I got rose bushes, didn’t I? What’s his name got–What’d you call him? The– – Beneficiary?  He got $3 million, but he didn’t get the rose bushes.  I definitely got the rose bushes.”

Family Lawyer: “Charles, I mean, those are rose bushesThere’s no need —”

Charlie Babbitt: “To what? To be upset? To be upset?  If there is a hell, sir, my father’s in it…and he is looking up right now and he is laughing his ass off.  Sanford Babbitt. You wanna be that guy’s son for five minutes?

Family Lawyer: “Were you Listening to that letter?”

Charlie Babbitt: “Yes, sir, I was.”

Family Lawyer: “Were you?”

Charlie Babbitt: “No. Could you repeat it? ‘Cause I can’t believe my fuckin’ ears.

(Charlie then leaves the room stunned and sees his beautiful girlfriend.)

Girlfriend: “I was looking for you.  How did it go?”

Charlie Babbitt: “I got what I expected.”

Sometimes a child has chosen not to be part of their family, or has been a thorn in the side of his or her parents for too long, has shown no love or respect, is simply out of favor.  Or as is often the case, a child has married a spouse who is not up to snuff or appears to be the cause of divide.  Though a child does not by law have rights to inherit the riches of their parents, simply omitting the child from a Will is a mistake. Such an omission may leave the omitted child nothing to lose and all to gain by contesting the Will. Why? Because a Will contest burdens the other surviving beneficiaries and the Estate with the costs associated with litigation, will cause the Executor or Administrator to delay distributions to the heirs until the litigation is concluded and will increase the tensions and anxieties for those who now need to fight the omitted child. Even if the omitted child has weak case, the prospect of a long and costly litigation could force a settlement, particularly if the other heirs have no stomach to battle or resources to fund the war.

Simply omitting a child from your Will, or providing the sum of $1 is not prudent planning. The better course of action is to name the child in the Will and specifically address why the child is not to be included as a beneficiary. The goal is to let all who read the Will, including potentially a Judge, know that your decision was deliberate and intentional. Sometimes, in addition to the language in the Will, a handwritten letter is helpful if it details your reasoning as it could be introduced into evidence and quickly quash the Antagonists’ ill conceived efforts.

For those who have meaningful assets, it may be prudent to include a modest bequest for the child, but not include him or her in the residuary or balance or the estate.  In addition to the bequest, the inclusion of a no contest clause, or in terrorum clause, adds teeth and gives the Antagonist cause for concern. This clause provides that in the event any beneficiary contests the Will, their interest lapses and is distributable to the residuary beneficiaries. Even the most adversarial beneficiary would think twice before contesting the Will, for to do so would put their bequest at risk. The combination of language specifically omitting the beneficiary from the residuary, providing a small but not inconsequential fixed bequest, an in terrorum clause, and possibly a handwritten letter of explanation and a video taped Will signing, all but disarm the Antagonist from contesting a Will.

Just ask Charlie Babbitt.

 

Russell J. Fishkind, Esq. and Ronald P. Colicchio, Esq. at Saul Ewing, LLP rfishkind@saul.com (609)452-5043                                                    rcolicchio@saul.com (609)452-3133

A Legacy at Risk: Estate Planning versus Estate Litigation

A Legacy At Risk: Estate Planning Versus Estate Litigation

Introduction

Having drafted estate plans for a large cross-section of families and having resolved contested estate disputes for decades, I could not help but notice that there are themes and recurring fact patterns that could ultimately, depending in part upon the efficacy of the estate plan, mean the difference between eternal peace and a great divide. These recurring patterns are constants in virtually every estate battle.

Those who spend time clearly expressing their intentions to their trusted advisors, and then execute the appropriate estate planning documents, are more likely to have survivors who will peacefully mourn the death of a loved one and amicably share in the decedent’s legacy.  Conversely, those who do not clearly express their intentions to their trusted advisors, and do not have estate plans tailored to the needs of their family, will likely have survivors who do not grieve normally and cannot embrace the decedent’s legacy because they are consumed with litigating over it.

But likelihoods aside, it is the following six recurring fact patterns that are the universal sparks to almost every probate litigation fire:

  1. A second marriage with children from prior marriages;
  2. An elderly, infirm widow or widower who changed the disposition of their wealth shortly before death;
  3. Significant wealth, a family business, and a struggle for control;
  4. A dysfunctional family;
  5. A dilatory, tyrannical, or conflicted fiduciary;
  6. An antagonist who is more concerned with his motives than the decedent’s intentions. Aptly dubbed “the officious interloper” by one judge who has seen it all, this actor can clog any courtroom calendar … and divide any family.

If any of these six recurring fact patterns exist and the estate plan was ineffective, the estate will be contested. It is a given—a universal truth; and this universal truth transcends time, knows no geographic border, and does not distinguish between rich or poor. You can read Bible stories or classic literature, you can watch movies or sitcoms, listen to your favorite tunes, enjoy an opera, or surf the web, and you will recognize that when it comes to inheriting the family wealth, brush fires spread like a wildfire, treasures are reduced to ash, and the legacy of a lifetime can go up in smoke

Family Member Considerations in the Estate Planning Process

Your life story could be a book. Therefore, your estate plan can only be effective if the planner understands and appreciates what keeps you up at night, what makes you tick, the nuances of your family structure, the needs of your heirs, and your goals. To that end, you must be able to develop a rapport with your planner, and talk frankly about family conflicts, struggles, jealousies, special needs, or special situations as a condition precedent to effective estate planning. Understanding the family dynamic, your goals, asset base, and titling of assets is a terrific start.

Documenting your wishes in a will, health care proxy, power of attorney, and if appropriate, trusts, is surely important. When it comes to drafting your will, you should take a step back and think about how your fiduciary would interact with the beneficiaries of the estate. Would they work well together? Do they get along, or is there a history of animosity? Are there family issues that have been suppressed by your presence that might bubble over after you are gone? Next, think about the skill set that that an executor or trustee should have, such as diplomacy, fairness, reasonableness, and a comfort level working with attorneys, accountants, financial planners, and bankers. If you are going to name co-executors or co-trustees, will the decision making be shared equally, or would one executor or trustee antagonize the other, or be domineering?

By way of background, executors are individuals or institutions nominated in a will and appointed by a court to settle the estate of the testator: i.e., to execute the provisions of the will. Once appointed by a court, the executor has the responsibility of collecting the estate assets, paying its debts and taxes, maintaining accurate books and records, and ultimately distributing the estate’s assets as provided in the will. Being an executor is a thankless job, and can entail a lot of work. You may choose as your executor a spouse, child or children, an accountant, lawyer, trust company, trusted family member, advisor, or any combination of them.

Every family has different needs. If you have been married a long time to your first and only spouse, and you trust each other, each spouse may appropriately be named as each other’s executor. If it is a second or third marriage, and there are children from prior marriages, or prior relationships, choosing a spouse as executor or in many cases, co-executor, is not a good idea. Once you introduce that spouse as a fiduciary who is supposed to work for the benefit of others, children from prior marriages tend to resent the situation and react to it with skepticism.

If you think your estate may be complicated or involves a business, or if you own assets that are difficult to value, wish to leave assets to heirs unequally, or involve a second spouse and children from prior marriages in your estate plan, think about hiring an independent individual executor or corporate executor. Appointing a corporate executor with an independent neutral third party co-executor who understands the family dynamic typically prevents your heirs from fighting amongst themselves, or second guessing the actions of their step-parent. Some are reluctant to appoint a bank as a corporate executor or trustee and cite as their reasoning the fees involved or the institutional feel of such an appointment. The reality is corporate executor fees could, in the long run, save the estate money, because a smoother estate administration is much more cost-effective than the costs of an estate in litigation.

Trinkets, bric-a-brac, and heirlooms provide yet more fertile ground for family disputes. Upon hearing that her mother passed, one daughter dropped everything, boarded a plane, and hours later, entered Mom’s home to discuss arrangements with her sister, who was already in the home … “organizing things.” After a quick look around the home, and a peek inside the mother’s china closet and jewelry box, the questions started: “Where’s the candelabra, and grandma’s china, and mom’s engagement ring?” “What do you mean?” responded the organizing daughter, who by the way, provided her mom’s care for the past two years. “Mom gave me that stuff years ago, she said she wanted me to have it.” Another fuse lit.

Inheriting money is one thing, and it is important. But heirlooms can define a legacy. And when an engagement ring, china, or photo albums are missing in action, emotions heat up quickly. The will has not even seen the light of day, at least for the daughter who just arrived, but you can see the steam coming out the ears of the surprised daughter. The visit may be brief, but the emails will be long and emotionally charged. So whether the heirlooms are jewelry, candelabras, china, photo albums, or an invitation to the White House signed by a President, do not leave the disposition of prized possessions to chance. Most wills have a clause which governs the distribution of tangible personal property, and it is up to the executor to divide that property amongst the beneficiaries as equally as is practicable. When families are tight and get along well, this is usually not a problem. But when there is friction and all the heirs are not on the same page, this standard clause is an invitation for litigation. When it comes to drafting a will, you should spend time on the distribution of personalities—a stitch in time saves nine.

You spend a lifetime building your reputation, your asset base, and your legacy. Your estate plan should be a natural extension of your life by providing appropriately for those you love, for causes near and dear to you, and it should be executed by those you deem most capable. The absence of a properly implemented estate plan is a prescription for chaos, bitterness, and dispute. Life is not stagnant. Changes in the law, your wealth, your health, your intentions, or your family structure will require your plan to be periodically reviewed by a team of advisors who embrace your priorities on an ongoing basis. Maintaining the plan’s integrity, keeping it current, and considering the good advice of your trusted advisors is the key often misplaced.

Business Succession Planning

A well-designed business succession plan that transfers the value of the business to the next generation in a tax-efficient manner will appoint a successor leadership team, structure gifts or sales of business interests to the next generation, preserve your income stream, establish your children’s post-transfer income stream to meet their needs and obligations, all while maximizing income, estate, and gift tax efficiencies and promoting family harmony. A tall order indeed, but once completed, such a plan protects and preserves your life’s work.

Once the need for a business succession plan has been established and your needs assessed, a detailed proposal letter with a understandable flowchart should be circulated to you, your accountant, life insurance professional, financial planner, attorney, banker, and other trusted advisors, and, if appropriate, shared with your heirs. A vetting of the plan can be an enlightening experience, one that sometimes reopens wounds and sometimes heals wounds.

Typically, business succession planning requires a valuation of an existing entity and the execution of a buy-sell agreement that will govern that entity. Sometimes the legal structure of the business merits the creation of new entities such as limited liability companies (LLCs) or a family limited partnership that may serve as the springboard for planned sales or gifts of all, or a portion, of the underlying business interest. Passing value to loved ones is one thing, passing control is quite another. To strike that delicate balance you must protect the golden goose first, and then divide the eggs equally. Nominating the successor manager should be a decision based on what is in the best interests of the business, and thereafter, the benefits of ownership should be apportioned equitably.

After a thorough analysis of all business succession planning options, making a commitment to a detailed blueprint, followed by execution of documents edited for your needs,  you can take comfort that you have done your level best. Selling or gifting your prized possession is an emotional act, and hopefully, your children will appreciate the significance of the moment, embrace the process, and thereafter preserve the burning torch for the next generation. Such is the “American Dream.”

The Value of Careful Decision Making in the Estate Planning Process

Not until it was too late did King Lear realize his plan for bequeathing England’s riches to only two of his three daughters was ill-conceived. Not until it was too late did Esau regret selling his birthright to his brother Jacob for a cup of hot soup. Themes of hasty decisions and ill-conceived gifts make for a fascinating read, but in our profession, we find that such themes cause agita and families to fall apart.

Where there is smoke there is fire, and it generally does not take long after one’s demise for the smolder to burst into flames. It may start with a disagreement over the planning of the funeral service, the location of the burial, whether to have an open or closed casket, the wording of the obituary, or a missing goblet, but make no mistake, such disagreements stand as a beacon of things to come. Expect thereafter, a newly inked will, a surprise codicil, or an outdated will being offered for probate. Sometimes the issue is not the will at all, but rather a beneficiary designation form that was changed shortly before death, or odd financial transactions re-characterized as “gifts” by the donee. Allegations of promises made and promises broken are often lodged as a new lawyer enters the scene, and family members scramble to fight fire with fire. A caveat blocking the will from being admitted into probate may be filed, and the appropriate response may be an order to show cause seeking to vacate the caveat then docketed. Ultimately, a life’s journey ends up on trial, subject to a discovery schedule, expert reports, motion practice, briefs, mediation and a trial, all seeking to find the truth which now lies buried—a treasure never to be found but instead judicially constructed.

Too often the will is vague, the decedent’s intentions are unclear, and the survivors all have expectations. Multiple marriages often involve children from both prior and current marriages. Once one parent dies and the surviving spouse and children find themselves on different pages, the fuse is lit. It should come as no surprise that estate litigation cases are on the rise, and once filed, the gloves come off. Though a prenuptial agreement would have been helpful, even without such an agreement, a well-designed estate plan could provide equitably for children from a prior marriage and a subsequent spouse. The amount left to each, the timing of the distributions, and the estate tax implications require thoughtful consideration of the following factors:

  1. The financial needs of the children and the second spouse;
  2. The ages of the children and the age of the spouse;
  3. The estate tax implications of leaving money to a spouse or children;
  4. The terms of a prenuptial agreement;
  5. The length of the marriage and whether children were born to the marriage;
  6. The relationship between the parent and the children from a prior marriage;
  7. The need to hold the assets in a spousal trust or distribute outright to spouse and the need to hold assets in a discretionary trust or age terminating trust for children or distribute outright;
  8. The titling of assets to make sure they are consistent with the terms of the will;
  9. The health of the spouse and children; and
  10. Their respective abilities to manage money.

If an estate plan is created by an attorney who balances these needs such that the plan provides reasonably for each beneficiary class, then the likelihood of adequately protecting both your loved ones and your legacy goes up. But if the will is silent as to any class, perceived as overly generous to any one class, or harsh as to any one beneficiary, then the likelihood of probate litigation goes up dramatically.

Omitting a Child from a Will

Sometimes a child has chosen not to be part of their family, or has been a thorn in the side of his or her parents for too long, has shown no love or respect, or is simply out of favor.  Alternatively, as is often the case, a child has married a spouse who is not up to snuff or appears to be the cause of a divide.  Though a child does not by law have rights to inherit the riches of their parents, simply omitting the child from a will is a mistake. Such an omission may leave the omitted child with nothing to lose and all to gain by contesting the will. Why? Because a will contest burdens the other surviving beneficiaries and the estate with the costs associated with litigation, will cause the executor or administrator to delay distributions to the heirs until the litigation is concluded, and will increase the tensions and anxieties for those who now need to fight the omitted child. Even if the omitted child has a weak case, the prospect of a long and costly litigation could force a settlement, particularly if the other heirs have no stomach to battle or resources to fund the war.

Simply omitting a child from your will, or providing the sum of $1 is not prudent planning. The better course of action is to name the child in the will and specifically address why the child is not to be included as a beneficiary. The goal is to let all who read the will, including potentially a judge, know that your decision was deliberate and intentional. Sometimes, in addition to the language in the will, a handwritten letter is helpful if it details your reasoning, as it could be introduced into evidence and quickly quash the antagonist’s ill-conceived efforts.

For those who have meaningful assets, it may be prudent to include a modest bequest for the child, but not include him or her in the residuary or balance of the estate. In addition to the bequest, the inclusion of a no-contest clause, or in terrorem clause, adds teeth and gives the antagonist cause for concern. This clause provides that in the event any beneficiary contests the will, their interest lapses and is distributable to the residuary beneficiaries. Even the most adversarial beneficiary would think twice before contesting the will, for to do so would put their bequest at risk. The combination of language specifically omitting the beneficiary from the residuary, providing a small but not inconsequential fixed bequest, an in terrorem clause, and possibly a handwritten letter of explanation and a videotaped will signing, all but disarm the antagonist from contesting a will.

Antagonist Caregivers

Whether a second spouse, child, friend, relative, neighbor, or health care provider, an antagonist caregiver typically has a false sense of entitlement, and a righteous justification for exerting his will over the will of the weakened prey. Any of these actors may dutifully attend to the daily needs of one so ill or dependent, but alas, the doer of good deeds may be a wolf in sheep’s clothing. Perhaps the caregiver is thought to be so loving and thoughtful by one so dependent, that after traveling to the doctor, pharmacy, and post office, a stop at the bank or lawyer’s office seems in keeping with what their priorities should be. The antagonist may make a reasonable suggestion to visit a new, much better estate planning lawyer, offer a timely reminder of the estate owner’s children’s irresponsible tendencies, suggest that changes to a will are “required” to save estate taxes, or they may make a host of other prompts, all at a time when one is fragile, dependent, or weak—and as a result, fortunes are diverted. Taken together, these prompts may cause a new will to be executed, or a new beneficiary form filed just days, weeks, or months before the estate owner’s death, and surprise: the “doer of good deeds” has surfaced as a primary beneficiary and executor.

In some cases, however, the decedent is the antagonist, the last minute change is their final dig/last word; and the intended consequence is anguish. Those bearing the brunt of the message typically claim that the decedent was not of sound mind, lacked the requisite mental capacity to execute the proffered will or more likely, that a sister, brother, or spouse influenced the antagonist to act so irrationally.

Probate Litigation and Pattern Recognition

Probate litigation almost without fail is caused by the actions of an antagonist or the inaction of a decedent who failed to implement an effective estate plan coupled with one or more of the following recurring fact patterns: a dysfunctional family; a second spouse and children from prior marriages; significant wealth involving a family business; an elderly infirm widow or widower who allegedly changed his or her intentions shortly before death; and either a tyrannical or dilatory fiduciary. Should these explosive conditions exist, after the funeral unspoken words often lead to heated words, followed by less than diplomatic late night emails. Thereafter lines are drawn, détentes formed and the best lawyer sought—all the precursors that lead to battle. These ingredients when mixed, battered, or boiled result in a contested estate in which aggrieved heirs seek to:

  1. Set aside a will as the product of undue influence, fraud, or lack of capacity;
  2. Set aside the titling of investment management accounts or deed;
  3. Set aside beneficiary forms for life insurance policies and retirement accounts;
  4. Enforce the rights of income beneficiaries or remainder persons of an estate or trust;
  5. Set aside the acts of the agent while supposedly authorized by a power of attorney;
  6. Demand an estate accounting and then object to the accounting when produced;
  7. Remove an executor or trustee for malfeasance or breach of fiduciary duty;
  8. Demand a sale or distribution of estate assets; and
  9. Appraise and properly distribute jewelry, photographs, and the contents of the home.

Threatening letters from lawyers may be exchanged, but rarely do such letters result in an amicable resolution. The next action may be the filing of a caveat, a one-paragraph warning to the court, in the county where the decedent resided. If the caveat is properly filed, typically within ten days from date of death or before the will is offered for probate, the will is blocked from being admitted to probate. The filing of a caveat requires the proponent of the will to file an order to show cause seeking to set aside the caveat and thus allowing the will to be admitted to probate. Generally, both sides prepare and sign certifications telling their side of the story, and then a court issues a return date for preliminary oral argument. If the court is persuaded that something is amiss and that perhaps there was wrongdoing, before vacating the caveat, the court will set the matter down for discovery, which includes interrogatories, depositions, exchange of paper discovery, expert reports, motion practice, and briefs, which typically are required to be completed within a six-month timeframe. Extensions are generally required, and court-ordered mediation is not unusual before a trial date is set. In the interim, the court may appoint an administrator of the estate who will be fair and impartial during the litigation.

The road to the estate’s conclusion will occur either in mediation, a settlement just before trial or by Order of the Court.  Some probate litigation cases are  promptly resolved, while others, such as Jarndyce v. Jarndyce as described in Charles Dickens’ ninth novel, Bleak House, rumble on for years, decades, or generations, and the estate assets wind up absorbed by costs—a legacy lost.

Influence or Undue Influence

Claims seeking to set aside a will based on undue influence have become more prevalent over the last few years as the economy weakens and as more baby boomers reach the fragility of old age. Opportunities for children or others to take control of a senior’s finances often lead to temptations that are too often acted upon to the detriment of the intended heirs and beneficiaries.

Generally, courts have found that undue influence exists when circumstances show a destruction of the free will and judgment of the person over whom influence is exerted and consequently, the weakened testator yields to the will of another merely for the sake of peace or is mentally or morally coerced into doing something contrary to his or her own wishes. Undue influence can be established both by pressuring one who is in a weakened mental or physical state to yield to the influencer’s control, or sometimes in a much subtler behavior pattern, using acts of kindness to illicit guilt or dependence such that the weakened testator feels compelled to change his or her will or the titling of his or her assets in favor of the influencer.

In order to establish undue influence, a contestant will typically need to establish: 1) that there were suspicious circumstances at the time the will was executed; and 2) that a confidential relationship existed between the testator and the beneficiary. Some states require the objecting party to also show that the influencer had both the opportunity and motive to influence the testator.

You will know if suspicious circumstances exist. In an unreported case, a distant son flew into New York allegedly to visit his dying father in the hospital.  After an unsuccessful operation to remove cancer, the son requested time alone with his dad. The second spouse, tired and depressed, welcomed the chance to go home, and perhaps shower, sleep, and eat something. She returned the next day as the son was preparing to leave. Hugs were exchanged, words of encouragement offered to dad, and off the son went. Only days later, dad succumbed to illness and, though the grieving process should have followed, it was cut short. After the funeral, the distant son reappeared and handed his step-mother a new will.  The son had requested some quality time with dad—i.e., some alone time—and instead, he seized the moment, and orchestrated the execution of a new will. The will, prepared in advance of the son’s visit, was signed by witnesses he arranged, and kept a secret until dad died. The will all but cut out the wife of twenty-two years, left the majority of the assets to the son, and named him as executor—a very different disposition than the husband’s prior will. This fact pattern is not offered as an academic explanation, but is instead, an example of a suspicious circumstance.

A confidential relationship may exist when circumstances make it clear that the parties do not deal on equal terms, that on one side there is an overpowering influence, and on the other, weakness, dependence, or trust such that the parties do not deal on terms of equality. For instance, if a daughter controls her mother’s banking, pays her bills, manages her health care, cooks her meals, and talks with the accountant or estate planning attorney at a time when the mother is ill—and but for such help, Mom would be in a nursing home—a confidential relationship would likely be found to exist. Alternatively, if a child is an agent under a power of attorney, or a trustee of a trust, then that alone may allow a court to find that there exists a confidential relationship.

Though varying from state to state, and court to court, the following factors are generally considered in determining whether or not undue influence exists and who has the burden of proving it:

  1. Whether the beneficiary was present at the execution of the will;
  2. Whether the beneficiary recommended and or arranged for the attorney to draft a will for the testator;
  3. Whether the beneficiary, to the exclusion of others, reviewed drafts or provided comments prior to the will’s execution;
  4. Whether the beneficiary was involved with the decedent’s bankers, money managers, accountants, or lawyers shortly before the decedent’s demise;
  5. Whether the beneficiary was in charge of safekeeping the will subsequent to its execution;
  6. Whether the beneficiary secreted the will from others;
  7. Whether the beneficiary isolated the testator from other family members;
  8. Whether the beneficiary discouraged other family members from visiting the testator before his or her demise;
  9. Whether a beneficiary was the day-to-day caregiver;
  10. Whether assets were gifted, re-titled, or beneficiary forms changed shortly before the testator’s demise;
  11. Whether a long-term relationship with the family estate attorney was ended, and a new attorney hired shortly before testator’s death;
  12. Whether there was a history of a testator seeking to distribute assets equally, followed by actions which caused the estate to be distributed unequally;
  13. Whether the decedent’s health history indicates a mental or physical impairment;
  14. Whether the decedent was taking medication, or required another to care for him;
  15. Whether there were any acts that are suspicious or circumspect that resulted in inequity.

If a court finds that a Last Will and Testament offered for probate was the product of undue influence, then it will be set aside, as if it never existed, and a prior will may be admitted to probate.

There is clearly a variation of undue influence that is less frequently written about, but is occurring with increasing frequency. When someone dies, many look to the decedent’s will to determine how the estate is to be distributed.  However, the titling of the assets trumps the terms of the will.  Generally, if an asset is titled jointly with a spouse, as an example, then upon one’s demise, that asset passes to the surviving spouse. Similarly, certain assets such a life insurance, individual retirement accounts, or annuities have named beneficiaries. The beneficiary designation governs the distribution of the asset—not the will. Undue influence may not be present in the drafting and execution of a will, but may instead occur in the re-titling of assets while one is ill and dependent on another.

Joint accounts are at first blush afforded certain statutory protections, and the courts will generally enforce the disposition of a joint account passing to the named surviving joint tenant. However, if someone challenges the titling of the account and alleges the beneficiary change form or a deed conveyance was the product of undue influence, then courts may look to two factors. The first is a determination as to whether or not the account was titled jointly as a matter of convenience only, or if there was really donative intent. By way of example, it is not unusual for a checking account to be changed such that a daughter who lives nearby can pay bills for her aging mother. If the account was changed from just the mother’s name into an account titled in the mother’s name jointly with the daughter simply to enable the daughter to pay bills, then that is a change for convenience only, not an intention to transfer wealth. Accordingly, the joint disposition would likely be set aside. Alternatively, if that same mother called her attorney and advised that in the event of her death she intends that a certain bank account or investment management account is to pass to her daughter, then donative intent can be easily established. But without a statement in writing or witness, such intentions may be challenged and overturned by a court which has no proofs before it to establish donative intent.

In some cases, the re-titling of assets simply reeks of undue influence. The most common example begins with an ill or mentally compromised parent who is dependent on one of his children for all daily needs. Without such help from the child, the parent fears the only alternative is a nursing home. Fear and dependence changes the balance of power. A parent may easily assent to a child’s request to change the title of the investment account and the home from the parent’s name alone, into a joint account, or a deed with the parent and the child jointly named on the title—simply because it is the right thing to do. The child may explain that by so doing, the assets will be protected from a nursing home and therefore the change is prudent and really protects everyone. The deed is done. Not until the parent dies will the other four children quickly learn that the titling of the account trumps the terms of the will which provided for the children equally. Therefore, the other four children protest in vain, and then hire an attorney to challenge the re-titling of assets. The pleadings filed with the court claim that all such transactions should be set aside as a product of undue influence.  The siblings may easily prove that their brother was involved in the parent’s finances, was an agent under a power of attorney, or a trustee of a trust, and that alone may be enough for a court to find the son had a confidential relationship with the parent. In some states, that is enough to shift the burden of proof to the son to prove there was no undue influence. The son now has an uphill battle. If a court finds the child was in a position of dominance and the weakened father was dependent, the son may be unable to prove to a court, by clear and convincing evidence, that all was fair and that the playing field was equal.

Preparing for and Participating in a Will Contest Hearing

Typically, the changing of account ownership forms or deeds does not happen in one day, but occurs over time. Accordingly, the aggrieved siblings may ask a court for a reasonable amount of discovery to subpoena all banking records and medical records from the date of death back to the onset of the illness, seeking to show a nexus between the two. Then to prepare for a hearing, their lawyer will propound interrogatories on the alleged influencer, take his or her deposition, serve anyone with knowledge of the facts with interrogatories, and then take their depositions as well. Once all the banking and medical records are received, experts are hired. Perhaps a forensic accountant will be engaged to quantify the re-titling of accounts and establish the amount of money in controversy, and a geriatric medical professional may be hired to attest to the decedent’s weakened condition.

Prior to a trial, the court may suggest, and the lawyers may agree, to mediate their dispute. An experienced lawyer or retired judge may accept the role, review all the pleadings and discovery, then host an informal mediation. You could cut the tension with a knife when all the family members are in one room, each believing they are right, and genuinely believing that the other heirs do not understand and never understood their deceased parent. The room may be filled with emotion, but a good mediator, reasonable lawyers, and family members looking to put an end to the divide may be able to reach a settlement at, or shortly after mediation. If the case does not settle, pre-trial briefs are filed and a trial date set such that a judge will be destined to determine what the decedent intended. A court may subsequently order that the re-titled assets which benefitted the influencer be reversed and be distributed as provided in the decedent’s Last Will and Testament, and sometimes the court is so enraged by the influencer’s actions that he is ordered to pay the legal fees incurred by the siblings.

Most will contests involve allegations that the testator lacked sufficient mental capacity to execute the Last Will and Testament. The standard for mental capacity is low and will be met if, at the time a will was executed, the testator understood: a) the extent of his assets; b) who his heirs are; c) that the will is meant to dispose of his assets at death; and d) the terms of distribution under the will. At least initially, the witnesses and notary who watched the testator sign the documents typically have also attested that the testator, at that moment in time, had mental capacity. Are the witnesses psychologists? Probably not. Can a patient who suffers from early onset of Alzheimer’s have a moment of clarity sufficient to sign a will? Probably. If heirs challenge not just the will, but also the three subsequent codicils and five gifts which took place over a two-year period, must mental capacity be established for each act? Although there is a presumption that a testator is of sound mind and competent when he executes a will, claims may often be filed seeking to set aside or invalidate a will or gifts claiming the testator lacked testamentary capacity. To prosecute such a claim, a psychologist will need to be retained to testify that the testator either had or lacked capacity at the time the will or codicil was executed. Witnesses to the execution of the will and the attorney draftsperson also become key witnesses in the litigation.

Many times, the estate planning attorney will take adequate precautions and document evidence of capacity in the client’s file, or will videotape the will signing if a will contest is expected. Some people know their will is going to be contested and will actually hire a psychiatrist or psychologist to opine in writing that the testatrix has capacity. Then someone will videotape the will signing. During the taping, the testatrix reads a prepared statement that might go something like this:

“My name is Contessa Capacita and I have two daughters, Maria and Tina. Yesterday, I met with my accountants, reviewed my balance sheet, and am aware that my assets total approximately $100 million. I am here today, in the presence of two witnesses and a notary, to sign my Last Will and Testament. I have read it and it is consistent with my intentions. I have intentionally made no provisions for my daughter, Tina. It is difficult for a mother to cut her own daughter out of her will, but I am doing so knowingly and voluntarily. My reason for cutting Tina out of my estate is fairly simple. She has not acted like a daughter to me, she shows me no love or affection. She does not call or write, and has, for too many years, only caused me pain. I have had enough. So as to protect my estate, my daughter Maria, and my legacy I read this statement out loud, so there will no mistake or inquiry about my intentions.”

The lawyer then reviews the will with the Contessa, and in the presence of the witnesses and notary, she signs the will.  Tina has little to no chance of over-turning the will…unless Maria was seen in the video, hiding behind a plant and snickering.

Guardianship Proceedings and Incapacity Issues

What should you do if your aging parent is succumbing to old age, illness, and there is either no power of attorney in effect, or a power of attorney is in place, but you suspect foul play? Consider commencing a guardianship proceeding.  In such event, a family member with standing, such as a spouse, child, or beneficiary, may file a complaint on behalf of an incapacitated person seeking to be appointed as guardian. A court may appoint a guardian to make decisions on behalf of the incapacitated person, including living arrangements and health care decisions. The court may also appoint a guardian over the property of an incapacitated person who will have the authority to make financial decisions subject to a later accounting. A determination of incapacity may be accomplished if there are two disinterested doctors willing to opine that an individual is mentally or physically incapacitated. To aid in the decision making, a court may appoint an independent guardian ad litem, typically an attorney respected by the court, to meet with the alleged incapacitated individual, talk with the doctors and family members, and then file a report with the court. The report will include a summary and a recommendation as to whether a guardian of the person and or property should be appointed. If family members disagree with the report, a court may hear from all parties and then issue an order. There are also degrees of incapacity, and a growing trend allowing courts to limit a guardian’s powers based on the level of incapacity, thereby allowing the incapacitated person to retain whatever rights are deemed appropriate.

If one does have capacity, but other heirs may question capacity, post-mortem, you need to plan accordingly. Why pay experts, take up the court’s time, and leave a legacy up to the discretion of the court? If you have meaningful assets, and you are concerned about an antagonist challenging your will, there are several precautionary measures to consider, but certainly an option often dismissed as being expensive or not necessary, is in fact, not expensive and is necessary—videotape the signing of your will. Since the signing ceremony will be on tape, you should not take an extra Xanax, or otherwise slur your words, as the videotape could then be used as evidence that you are incapacitated or under the influence of medication, and provide just the crack in the door that the antagonist is looking for.

Conclusion

There are several constants in the American family quilt. First, an inheritance can provide great warmth or leave some feeling out in the cold. Second, ambiguity with respect to an estate plan opens the door to differing interpretations. Third, differing interpretations combined with a possible inheritance or heirlooms too often lead to litigation. Fourth, last minute changes to a will may lead to a dispute. Fifth, there is a casual relationship between effective estate planning and protecting one’s legacy.

Estate planning is about you, your life, and your legacy. Be aware of the universal sparks to probate litigation, and plan your estate to adequately and clearly represent your intentions. Should you smell smoke, react, be proactive, and stand up for what you believe to be true.

Key Takeaways

  • Develop a rapport with your estate planning client, and talk frankly about family conflicts, special needs, or special situations as a condition precedent to effective estate planning. Understand your client’s family dynamics, goals, asset base, and titling of assets.
  • Document your client’s wishes in a will, health care proxy, power of attorney, and if appropriate, trusts. When drafting a will, think about how the chosen fiduciary would interact with the beneficiaries of the estate. Specifically address why a certain child is not to be included as a beneficiary in the client’s will.
  • Hire an independent individual executor or corporate executor if you think your client’s estate may be complicated or involves a business, if they own assets that are difficult to value, if they wish to leave assets to heirs unequally, or if their estate involves a second spouse and children from prior marriages.
  • Determine if the client needs a business succession plan. If so, a detailed proposal letter with a understandable flowchart should be circulated to the client’s accountant, life insurance professional, financial planner, other attorneys, banker, and, if appropriate, their heirs. Obtain a valuation of an existing entity and the execution of a buy-sell agreement that will govern that entity.
  • Prepare for an undue influence hearing by propounding interrogatories on the alleged influencer, taking his or her deposition, serving anyone with knowledge of the facts with interrogatories, and taking their depositions. Obtain all banking and medical records, and hire a forensic accountant to quantify the re-titling of accounts and establish the amount of money in controversy. Hire a geriatric medical professional to attest to the decedent’s weakened condition.   

 

 

A Partner in Saul Ewing LLP’s Personal Wealth, Estates and Trusts practice, Russell Fishkind focuses his practice on high net worth estate planning, business succession planning, family office consulting, estate administration and probate litigation. Prior to joining the firm, Mr. Fishkind served as chair of the Trusts & Estates Team at Wilentz, Goldman & Spitzer P.A. in Woodbridge, New Jersey. Following law school, he was a trust and estate administrator and financial officer for the United States Trust Company of New York. He was also the founding partner of Rudolph & Fishkind in New York City and East Brunswick, New Jersey.

 

Mr. Fishkind is an Assistant Adjunct Professor in New York University’s Department of Finance, Taxation and Law where he teaches estate and business succession planning. He frequently writes and lectures about trusts and estates related issues. Mr. Fishkind is the author of Legacy of a Lifetime, a layman’s guide to understanding estate matters; a co-author of J.K. Lasser Pro’s™ Estate Business Succession Planning—A Legal Guide to Wealth Transfer, and the author of Probate Wars of the Rich & Famous: An Insider’s Guide to Estate Planning and Probate Litigation.

 

Legacy of a Lifetime

Legacy of a Lifetime

There are certain universal truths. Your life is unique. Yet at the same time, we all share so many basic values: to love and be loved; to work hard, to give back, to be empathetic and to be the best we can be. But we’re only human and we all make mistakes. We all laugh, we all cry, and we all die. But when our time’s up, we hope that we’ll be more than just dust in the wind; that our lives matter, that we left a mark and we’ll be remembered for that which made us special. How will you be remembered? As a kind soul, a dedicated parent and a loving spouse? Perhaps your legacy will be defined by a lifetime of achievements, or maybe your loved ones will reminisce about your infectious laugh or loyal demeanor.  Your journey is unique, but at the end of the day, we all hope to leave a meaningful legacy.

But there are certain universal truths. The loss of a loved one typically leaves the survivors in tears.  Sometimes family members grieve together and by tearfully sharing in the legacy of the deceased; their mourning is eased. But too often, that’s not the case. Instead, of pulling together, family members scatter like cats on a hot tin roof. They become embroiled in bitterness, fingers are pointed and blame attributed.  Lines are drawn and after heated exchanges, there’s silence as the tinder smolders. The survivors now divided, believe they are morally correct in interpreting the intentions of a loved one and they are therefore, posthumously charged to right the obvious wrong. The legacy you hoped to pass on, that which you hoped would be etched in the minds and memories of generations to come, is instead marred by dispute and bitterness, and ultimately decided by a Court of competent jurisdiction with a perceived winner and a perceived loser. But somewhere in the taking of the windmill, amidst the salacious charges and endless delays, has slipped the aura of the body at rest.

Family disputes and contested estates are not unique to your family. Behind every front door are children embarrassed by their troubled youth. The source of such emotions may be a parent’s shortcomings, or their bitter divorce, or a new step-parent who has been thrust upon them. Some feel their childhood existence was overshadowed by their siblings golden status, or ignored as the difficult child demanded their parents’ attention. The resulting effect; emotional wounds and a note to self – “I’ll do better as a parent”.

Thereafter, you start your own family and commit to doing just that. The effort may start by listening to Mozart while the fetus is in utero, and reading each and every Baby Einstein book to your exceptional toddler. It continues by attending every soccer game or back to school night, opening your doors to the neighborhood, and making over the top Bar Mitzvahs, or packing every conceivable item for summer camps. Before you know it, you’re purchasing the safest new vehicle for your teen, and then searching for the perfect university for your young adult child.  You wouldn’t be criticized for not trying hard enough, but you may be criticized for trying too hard. But, no amount of effort can change that which was.

A call that your parent suddenly passed – and your world stops. The golden child promptly assumes control, the difficult child objects or the step parent explains what your parent allegedly intended. The raw nerve is exposed and you’re steaming mad.  Frustrations rise as questions go unanswered. Old Wills, unsigned Wills, and unclear Wills surface. Assets are missing, assets were gifted, assets were re-titled and questions go unanswered.  Ultimately you reach a tipping point, the moment when you know you’ve had enough, your patience  has been exhausted and you’re ready to stand up for the last wishes of a decedent.  The fuse is lit, lawyers are hired and Complaints are filed.

The details of the family history are publically docketed, yet the wounds are internalized.  It’s hard to talk about. The paparazzi may not be at your doorstep and the terms of the disputed Will may not be chronicled in the tabloids or laughed about on TMZ. But the stress and the anxiety of a contested estate will keep you up at night as the acid indigestion burns like a five alarm fire.  One last call to the Antagonist in hopes that reason will prevail, but instead your blood pressure boils as you listen to the baseless accusations.

Conversely, the lives of those who’ve attained stardom are exposed for all to see, for all to envy or for all to condemn. Ask about the legacy of Brooke Astor, and you may hear of a 105-year-old beloved philanthropist left to sit in soiled clothes while her son, once respected, planned and plotted his way into her Will. The world would watch as he fell on his own sword while comforted in the arms of his Lady Macbeth. Or ask of the spirit of Jackie Onassis, and you will hear the story of grace, dignity and style. Are the two icons so different? Though unique in their own way, Jackie O. is remembered by who she was, and only few know the details of her estate plan – an aura preserved.  In stark contrast, Brooke Astor’s legacy will be overshadowed by her final failing years and the conviction of her over reaching 85-year-old son, Anthony Marshall.

Whether it’s Brooke Astor, Michael Jackson, Jerry Garcia, Leona Helmsley or Anna Nicole Smith, celebrity probate disputes fill both tabloids and court dockets. However such dubious distinctions are not exclusive property of those having achieved stardom. Be assured that back on Oak Street, the future of the family business, the distribution of the family’s wealth and the snuffing out of family relations are the sources of emotionally charged arguments staged at your neighbor’s kitchen table, exaggerated by rumors and innuendo at a wedding reception or exchanged in a long string of harsh and accusatory e-mails, just waiting to be introduced into evidence.  We must learn from our own experiences, from with the woes of celebrities, from the movies we watch, from the literature we read and from the lyrics we sing,  hoping,  that taken together, we can shape our destiny, build our legacy and protect our spirit.

Here’s hoping that yours isn’t debated in a Court of Law, but will be etched in the hearts and minds of those you love. But hoping may not be enough. One day, a loved one will deliver your eulogy. Perhaps it’ll be a tearful and at times funny description of your journey, of your work ethic and your good nature. But those same loved ones, may also believe that the riches left behind are their  birthright, and that those who weren’t there, those who caused  aggravation, haven’t such a right, or that a spouse seeks only to legally establish such right. These perceptions, right or wrong, are the reality upon which Affidavits are filed and relationships extinguished.

But for those seeking eternal peace, take notice that you must clearly express and document your intentions to ensure that the fruits of your labor, pass to those deserving, to those needing, to those respectful and to those loving, at the correct time and in the correct manner that you believe best forwards the lives of those you love and preserves your legacy. If however you become subject to the acts of the Antagonist and the matchstick has struck the flint, then understanding the nuances of undue influence, fraud, breach of fiduciary and lack of capacity may become the requisite tools for this firefight.

Is the pen mightier than the sword?  Can estate litigation be avoided, even in the most dysfunctional of families? Can the legacy of your lifetime survive allegations of incompetence, favoritism or neglect? Yes indeed, but with a caveat. Not every Antagonist can be reasoned with, not every lemon turned into lemonade. Anticipating such a reality allows you to plan accordingly, to plan with specificity and to plan holistically. But know that estate and business succession planning requires effort, resources and persistence. Is such an undertaking worthy of your time and attention?  Resting in the balance is your survivor’s peace of mind and your legacy.

Whether you’re a soldier fighting for our great country, or you’ve spent a lifetime stressing in an office hoping to protect your employer and your job, or perhaps you’ve endured the rollercoaster  ride of building a family business, or you’re immersed in the most difficult job of all, raising children and tending to a needy family – your legacy is work in progress. You hope that your blood, sweat and tears were not for naught, but served a greater purpose, that your legacy will live on and in some small way, help guide and provide for those you love. But that same legacy if neglected, if ambiguous, or if undermined can quickly vaporize amidst pleadings and plottings.

Russell J. Fishkind, Esq. and Ronald P. Colicchio, Esq. at Saul Ewing, LLP rfishkind@saul.com (609)452-5043                                                    rcolicchio@saul.com (609)452-3133

The New Jersey Appellate Division refuses to impose damages on influencer despite clear finding of undue influence

In a decision of the New Jersey Appellate Division in the seminal Stockdale Will Contest case (196 N.J. 275 (2008)), the Court refused to impose compensatory or punitive damages against the influencer, Ronald Sollitto, or his attorney, Anthony Casale, despite the finding of undue influence surrounding Stockdale’s Will and the transfer of her home to Sollitto.

In the underlying Will contest, the Spring Lake First Aid Squad, a beneficiary under Stockdale’s prior Will, successfully challenged as a product of undue influence Decedent’s 2000 Will and the inter vivos sale/transfer of her house to Sollitto.  The trial Court admitted a prior Will to probate, rescinded the sale of the house to Sollitto, and awarded punitive damages of $1.174 million in legal fees incurred by the Squad against Sollitto and Casale.  On appeal, the Appellate Division reversed the award of punitive damages and instead ordered the Squad’s fees paid from the Estate.

The Supreme Court granted certification and ultimately agreed that the counsel fees were not recoverable as a form of punitive damages, distinguishing the case from In re Niles.  The Supreme Court also held that punitive damages could not be awarded absent an award of compensatory damages.  With that said, the Supreme Court decided to remand the matter back to the trial Court on the punitive damages claim noting that the following facts support a basis for the award of punitive damages, Sollitto and Casale were strangers to Decedent, they engaged in undue influence, a tort-based remedy was sought in the underlying Complaint, and the loss of the Squad could not be addressed through the ordinary probate process.

On remand, the trial Court decided that there was no basis for an award of compensatory damages and therefore no basis for punitive damages.  The Court ordered the fees paid from the Estate.  The Court denied the Squad’s claim that it had lost money in the delayed transfer of Decedent’s home result of the litigation, as the Squad in fact received an amount equal to their claimed loss when they subsequently sold the property.

In this context, an experienced Will Contest Attorney in New Jersey can make all the difference.  Counsel must navigate through the initial filing of the pleadings, the all important discovery and depositions, and then be prepared to bring the matter to trial.  While cases often settle before trial, the actual costs to prepare for trial often compels an early settlement, and the proper choice of counsel is imperative to achieving a quick resolution.

Russell J. Fishkind, Esq. and Ronald P. Colicchio, Esq. at Saul Ewing, LLP rfishkind@saul.com (609)452-5043                                                    rcolicchio@saul.com (609)452-3133

Frivolous Sanctions are Rarely Awarded in the Estate Litigation Context

In a recent unpublished opinion (Cole v. Winnicki, Docket No. L-1449-11(App. Div. 2014), the New Jersey Appellate Division declined to sanction a Plaintiff who filed an action against her former firm, finding lack of evidentiary support for the claim.  A claim is deemed frivolous in this context if there is no rational argument which can be advanced in support of the claim, or it is not supported by any credible evidence, or is completely untenable.  If a claimant can justify a claim with any rational basis, frivolous sanctions will be denied.  An analysis of the applicable law to the alleged facts is certainly before any motion for frivolous sanctions is filed.

Russell J. Fishkind, Esq. and Ronald P. Colicchio, Esq. at Saul Ewing, LLP rfishkind@saul.com (609)452-5043                                                    rcolicchio@saul.com (609)452-3133