Probate Wars of the Rich and Famous: An Insider's Guide to Estate Planning and Probate Litigation

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Probate Wars of the Rich and Famous

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Probate Wars of the Rich and Famous AN INS I D E R ’ S GU I DE T O E S TATE P L ANNI N G A N D P R O B ATE L I TI G AT I ON

Russell J. Fishkind

John Wiley & Sons, Inc.

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Copyright © 2011 by Russell J. Fishkind. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. ISBN 978-0-470-58593-1 (cloth); ISBN 978-1-118-15901-9 (ebk); ISBN 978-1-118-15902-6 (ebk); ISBN 978-1-118-15903-3 (ebk) Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

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To those I’ve loved and lost, here’s to your legacy. My father, Eugene L. Fishkind My grandmothers, Sara Fishkind and Dolly Gutterman My grandfather, Matthew Gutterman My father-in-law, Mel Zodkoy My aunt Anne Diamond and her son, David Diamond My “second father,” William L. Melillo Sr. My “little brother,” Patrick W. Melillo

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Contents

Acknowledgments

xi

About the Author

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Introduction Chapter 1

Chapter 2

Chapter 3

1 Legacy of a Lifetime Legacy Lesson #1: The Estate Planning Effect Legacy Lesson #2: Passing the Torch without Getting Burned Legacy Lesson #3: The Holistic Approach Legacy Lesson #4: Dropping the Gauntlet Stripping and Being Stripped Legacy Lesson #5: The Elective Share and Prenuptial Agreement Legacy Lesson #6: Providing Equitably Both for a Second Spouse and Children from a Prior Marriage Legacy Lesson #7: Disinheriting a Family Member The Astor Disaster: A Legacy of Influence and Undue Influence Legacy Lesson #8: Monitor the Health and the Wealth of a Loved One Who Is Ill and Vulnerable

5 9 10 11 12 13 27

28 30

33

79

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Contents

Legacy Lesson #9: Anatomy of a Contested Estate Legacy Lesson #10: Influence or Undue Influence? Legacy Lesson #11: By Gift or by Theft? Legacy Lesson #12: Time in a Bottle— Good Days and Bad Days Legacy Lesson #13: Protecting against Fraud

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88 91 94 97 99

Chapter 4

The Benevolent Queen of Mean 105 Legacy Lesson #14: Protect the Pooch 119 Legacy Lesson #15: The Grim Reaper’s Silver Lining 124 Legacy Lesson #16: A Generation Skipped 127 Legacy Lesson #17: Buried, But Not Resting Peacefully 129 Legacy Lesson #18: The Mission Statement: A Legacy Builder or Buster 134

Chapter 5

A Sweet and Sour Legacy 139 Legacy Lesson #19: A Stitch in Time Saves Nine 148 Legacy Lesson #20: Respecting the Formalities of a Will Signing 149 Legacy Lesson #21: Clarity versus Ambiguity 150 Legacy Lesson #22: Videotaping a Will Signing 151

Chapter 6

Is This It? Legacy Lesson #23: Raising Helen Legacy Lesson #24: If You Want Privacy, Use a Revocable Trust Legacy Lesson #25: The Business of the Business

153 168 170 171

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Contents

Chapter 7

Chapter 8

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Lessons from the Dead Legacy Lesson #26: A Legacy in the Hands of Fiduciaries Legacy Lesson #27: Heirlooms Can Define a Legacy

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At the End of the Day

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200 202

Appendix A Fact Sheet for Last Will and Testament

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Appendix B Probate Litigation Fact Sheet

221

Bibliography

229

Index

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Acknowledgments

This book could not have been completed without the contributions of so many who deserve honorable mention. First and foremost, my clients, who for the past 22 years have entrusted me to help protect their family and their legacy. To my students at New York University (NYU), who come into the class after a long day’s work, contribute their experiences and their insights, and help make each and every class interesting and fun. It has been an honor and a pleasure to have spent so much time with so many capable individuals. Nichole Alling, Megan Davies, Melissa Lowe, Stacey A. Digan, and Thomas Hearne for their research and creativity. Debra Englander, Susan Bliss, Emilie Herman, Melissa Lopez, and Tula Batanchiev of John Wiley & Sons, who have extended deadlines, commented on draft after draft, and worked with me to see this dream become a reality. My partners at Saul Ewing, LLP, who provided me with encouragement, a room in which to write, and staff to assist. To Cathy, formerly known as Kathy, who read the Introduction and politely suggested a complete rewrite. You were right. Leona, Bill, Frank, and Marion, I have learned more from you than you can ever learn from me. You have redefined the meaning of the word process. Nancy Slowe, Esq., and Ron Colicchio, Esq., who helped with the research and editing of each chapter and provided their frank and candid comments.

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Acknowledgments

Each of the following professionals provided valuable comments and suggestions from their vast experience: Greg Blank, Greg Butler, Bill Carrozza, Robert Chirumbolo, Stella Matteace-Esposito, David Friedman, Myron Gelman, Frank Granzio, Jeff Green, Thomas Henske, Christopher Hildebrandt, Michael Kay, Lawrence Keller, Jenny D. Krstinovski, Thomas Loester, Ken Mayer, William McDevitt, Philip Pahigian, J. George Reilly, Neil Rhein, Erik Rudolph, Ralph Saviano, Debra Franklin Schatzi, Manish Shah, David Stecker, Stuart Stern, Les Streitfeld, Andrew Sukhin, Kate Sweeney, Bruce Weinstein, Erik Wildstein, H. Edward Wilkin III, and Ralph Wright; and Wesley Bedrosian for his artistic contributions. Where would I be without Linda Hanley. For the past 15 years she has filed, organized and indexed every file. She has scheduled each and every matter, proofed all the documents and greets all my clients, colleagues, friends and family members warmly. Ms. Hanley, thank you and don’t retire. William L. Melillo Jr., who for the past 30 years has given me the support of a brother and the benefit of his creativity and entrepreneurial spirit. My Mother, Charlotte Leigh Fishkind, thank you for your undying love and support. Josh, Larry, and Shaina: What a pleasure to have my three children contribute to this effort. Josh provided me with current events and his comments to numerous chapters; Larry found song lyrics and movie quotes that fit perfectly into the book; and Shaina edited countless fragmented sentences, fixed misplaced commas, and taught me the proper use of semicolons. And then there’s my wife, Lori L. Fishkind—the glue, the stalwart, the engine that makes it all work. Our journey has been filled with challenges, never a dull day, more than a handful of trying days, but thank God, you are by my side day in and day out. I love you.

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About the Author

Russell J. Fishkind, Esq., is a partner in the Personal Wealth, Estates and Trusts Practice Group at the MidAtlantic law firm of Saul Ewing, LLP. His practice focuses on high-net-worth estate planning, business succession planning, estate administration, and probate litigation. He has been practicing law in New York and New Jersey for over 20 years. In addition to practicing law, Mr. Fishkind is an associate adjunct professor at New York University’s Department of Finance, Taxation and Law, where he has been teaching Estate and Business Succession Planning in the evenings for more than 15 years. His classes are interactive and chock full of celebrity probate litigation cases to help illustrate the need for effective estate and business succession planning, or strategies to implement when probate litigation is necessary. Mr. Fishkind authored Legacy of a Lifetime, a guide to planning your estate, and co-authored the first and second editions of J.K. Lasser’s Estate & Business Succession Planning—A Legal Guide to Wealth Transfer. He has appeared numerous times on television and radio and is a frequent lecturer. He addressed the Michigan State Bar Association, the Ohio State Bar Association, and New Jersey State Bar Association at their annual meeting in Atlantic City, New Jersey and the midyear meeting in Scottsdale, Arizona. He has written articles for newspapers and magazines and was a contributing author for the New Jersey Institute for Continuing Legal Education publication entitled Sophisticated xiii

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About the Author

Estate Planning. He has appeared on radio and television talk shows and in 2005, 2007, and 2009 Mr. Fishkind was named as a New Jersey Super Lawyer. Mr. Fishkind holds a J.D. from Hofstra University School of Law and a B.S. from Fairleigh Dickinson University. He is a member of the New York and New Jersey State Bar Associations, the American Bar Association, Middlesex County Bar Association, and the New York County Bar Association.

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Introduction

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’m lucky. I’ve dedicated my professional career to the practice of estate planning, business succession planning, and probate litigation. If the hands of time could be rolled back 20 years, and I had a chance to choose a career path all over again, I’d choose to be a trust and estate lawyer. I’ve represented clients from all walks of life, from all over the globe, and from all different backgrounds, both rich and poor. Regardless of race, color, creed, or social status, once the conference room door closes, the magic happens as I get to know my clients. They’ve shared their life story with me— they’ve confided in me and asked me for guidance. And having had the honor of being their counselor for the past 20 years, I’ve learned a bit about life, death, and the fragility of a legacy. I hope now to take the many lessons I’ve learned from my clients, students, friends, and family, and merge it with what I’ve read, watched, and heard, hoping to deliver a meaningful message. Why take your precious time to read my message? First, because I believe you’ll enjoy the experience. Second, and more important, because I think the message could be a game changer for you, your legacy, and those you love. And what qualifies me to deliver this message? I’ll bore you momentarily with a little background.

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Introduction

Fresh out of law school, I was hired by The United States Trust Company of New York. My job as a young trust officer was to administer trusts that were terminating as the result of a triggering event, such as a beneficiary attaining a certain age or the death of an income beneficiary. A typical day involved preparing or reviewing informal or judicial accountings that detailed the trust’s activity, then, after the accountings were approved by the beneficiaries, distributing the wealth as directed by the will or trust. Several years later, a childhood friend and I formed a small law firm. In an effort to build an estate planning practice, I spoke at hundreds of seminars for thousands of attendees. I wrote an estate planning primer and started teaching estate planning in the evenings at New York University. As the law practice grew, I joined a much larger regional law firm, co-authored another book entitled J.K. Lasser Pro: Estate & Business Succession Planning, and continued teaching estate planning at New York University. Appearing on Bloomberg and other television shows, and as a guest on countless radio programs, and contributing to dozens of articles, I’ve worked hard to educate professionals and prospective clients. A blink . . . and 20 years have passed. Though I’m now quite salt and peppery, as they say, I still teach estate planning at New York University. In fact, to date, I’ve taught over 45 semesters to over 600 students who collectively taught me more than I’ve taught them. But clearly, the bulk of my time is spent practicing law. I’m proud to be a partner in the Personal Wealth, Estates and Trusts Department at Saul Ewing, LLP—in my opinion, one of the oldest and finest law firms in the Mid-Atlantic region. Over the years, I’ve designed thousands of estate plans for clients who have come to my office, openly shared their personal concerns with me, and then made difficult decisions before executing estate planning documents tailored to their needs. In addition to estate planning, I’ve met with hundreds of families who had lost a loved one and explained

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Introduction

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why the surviving spouse or children were fighting over assets of the recently departed. Having drafted estate plans for a large cross section of families and having resolved contested estate disputes for decades, I couldn’t help but notice that there are recurring fact patterns that could ultimately, depending in part on the efficacy of the estate plan, be the difference between eternal peace or great divide. These recurring patterns are constants in 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 don’t clearly express their intentions to their trusted advisors, and don’t have estate plans tailored to the needs of their family, will likely have survivors who don’t grieve normally and can’t embrace the decedent’s legacy because they’re consumed by litigating over it. But likelihoods aside, the following six recurring fact patterns are the universal sparks to every probate litigation fire: 1. A second marriage with children from prior marriages. 2. An elder, infirm widow or widower who changed the disposition of his or her 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.

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Introduction

It’s 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, watch movies or sitcoms, listen to your favorite tunes, enjoy an opera, or surf the web; you’ll recognize that when it comes to inheriting the family wealth, brushfires spread like a wildfire, treasures are reduced to ash, and the legacy of a lifetime goes up in smoke. I hope once you’re sensitized to these recurring patterns, with a little insight, you’ll be better prepared to protect your legacy or fight the fight. Writing this book was quite a challenge. To begin with, while all the chapters have estate planning themes, it’s not a book about estate planning. Although the subject matter of every chapter is a dead celebrity, it’s not a book about dead celebrities. And although every chapter chronicles the probate litigation that befell a celebrity’s estate, this is not a book about probate litigation. Instead, it’s a book about observations and insights that could directly impact your heirs and how you’re remembered. The message is serious. It’s important; it can change lives and legacies. But instead of writing a textbook, which, based on experience, many view as nothing but a sleeping aid, I’ve tried to deliver this message informally, with a little lighthearted humor, lots of pop culture, a sprinkling of tabloid reports, and no legalese.

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1

C H A P T E R

Legacy of a Lifetime

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here are certain universal truths. Your life is unique. Yet at the same time, we all share many basic values: to love and be loved, to work hard, and give back, to be empathetic, and to be the best we can be. We’re only human and we all make mistakes. We all laugh, we all cry, and we all die. We hope that our lives mattered, that we’ll leave a mark and will be remembered for what 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. Each 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 mourning. Sometimes family members grieve together and tearfully share in the legacy of the deceased and by so doing, their mourning is eased. But too often, that’s not the case. Instead of pulling together, family members fractionalize, and the digs and darts begin. They become embroiled in bitterness, fingers are pointed, and blame is attributed. Lines are drawn and after heated exchanges, there’s silence as the embers smolder. The survivors, now divided, believe they are morally correct in 5

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interpreting the intentions of a loved one and are therefore posthumously charged to right the obvious wrong. The loved one’s legacy is 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, amid 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 latent family tensions or children embarrassed by their troubled youth. The source of such emotions may be a parent’s shortcomings, or a bitter divorce, or a stepparent asserting control. Some feel their childhood existence was overshadowed by their sibling’s golden status, or ignored because the difficult child demanded their parents’ attention. The resulting emotional wounds culminate in 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 with 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. Your parent suddenly passes, and your world stops. The golden child promptly assumes control, the difficult child objects, or the stepparent 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 retitled, and more questions go unanswered. Ultimately you reach a tipping point, the moment when you know you’ve had enough. Your

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patience has been exhausted and you’re ready to stand up for the last wishes of the decedent. The fuse is lit, lawyers are hired, and complaints are filed. The details of the family history are publicly 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 make no mistake about it, 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. You make one last call to the antagonist in hopes that reason will prevail, but instead your blood pressure boils as you listen to the same old irrational and tired diatribe. Baseless as it may be, it takes up part of your psyche and you really don’t want to talk about it, and so, you carry this weight on your shoulders. Conversely, the lives of those who have 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 fortunes. 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. Were the two icons so different? Jackie Onassis is remembered for who she was, and only a 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 overreaching 85-year-old son. 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 the exclusive property of those having achieved celebrity. 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

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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 the woes of celebrities, from the movies we watch, from the books we read, and the lyrics we sing, hoping that we can shape our destiny, and build and protect our legacy. 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 is not enough. One day, a loved one will deliver your eulogy. Perhaps it’ll be a tearful and at times funny description of your journey, your incredible work ethic, or good nature. In which pew sits the loved one who believes that the riches left behind are their birthright, and that those who weren’t there, those who caused the aggravation, haven’t such a right, or that a second spouse seeks only to legally establish such right. These perceptions, right or wrong, are the reality on which affidavits are filed and relationships extinguished. Those seeking eternal peace must clearly express and document their intentions to ensure that the fruits of their labor pass to those deserving, to those needing, to those respectful, and to those loving, at the correct time and in the manner that will best forward the lives of their loved ones and preserve their 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 responsibility, 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 a lifetime survive allegations of incompetence, favoritism, or neglect? Yes, 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.

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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 survivors’ peace of mind and your legacy. Whether you’re a soldier fighting for our great country, or spent a lifetime stressing in an office hoping to protect your employer and your job, or have perhaps endured the roller coaster ride of building a family business, or are immersed in the most difficult job of all, raising children and tending to a needy family, your legacy is a work in progress. You hope that your blood, sweat, and tears are 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. That same legacy, if neglected, if ambiguous, or if undermined can quickly vaporize amid pleadings and plottings.

Legacy Lesson #1: The Estate Planning Effect Your life story could be a book. Your estate plan can be effective only 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, to 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 progress. So, too, is creating a business succession plan that transfers the value of the business to the next generation in a tax efficient manner. But 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 you assemble, who embrace your priorities on an ongoing basis. Maintaining the plan’s integrity, keeping it current,

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and considering the good advice of your trusted advisors is the key often misplaced. 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 and for causes near and dear to you, and to be executed by those you deem most capable. The absence of a properly implemented estate plan is a prescription for chaos, bitterness, and dispute. Your wealth may fund a battle . . . or a grandchild’s education.

Legacy Lesson #2: Passing the Torch without Getting Burned A well-designed business succession plan will: appoint a successor leadership team, structure gifts or sales of business interests to the next generation, preserve your income stream, and establish the 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 a task that once completed 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 an understandable flowchart should be circulated to you and 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 a limited liability company 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

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Legacy of a Lifetime

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loved ones is one thing, passing control is quite another. To strike that delicate balance you must protect the golden goose first, 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 may be apportioned equitably. After a thorough analysis of all planning options, then a commitment to a detailed blueprint, followed by execution of documents edited for your needs, you can take comfort that you’ve 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 respect the responsibility of preserving the burning torch for the next generation. Such is the American dream. 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 journey, such themes cause agita and families to fall apart.

Legacy Lesson #3: The Holistic Approach Some buy life insurance from an insurance agent, then talk to their accountant about their tax returns or ask their lawyer to prepare wills, and periodically converse with their financial planner, while others simply address such needs on the Internet. The problem is that without communication among the professionals, there’s no integration of these disciplines, no master plan, and no melding of ideas and opinions. In order to best ensure that your estate and business succession plan are properly implemented, you should have all of your advisors working together, acknowledging and respecting each other’s roles, and assuming a certain degree of responsibility to assure the successful implementation of your plan. If there’s a weak link on

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the team, rearrange the players. Team meetings should be periodic, with an agenda circulated in advance and notes of the meeting subsequently forwarded to all involved with an action list. Coordination of experts on the team and periodic reviews go a long way to assuring that your intentions are followed. The absence of a functioning team is the allowance of a dysfunctional team and a predictable result.

Legacy Lesson #4: Dropping the Gauntlet Where there’s smoke there’s 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, open casket or closed, 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 isn’t the will at all, but rather a beneficiary designation form that was changed shortly before death, or odd financial transactions recharacterized as “gifts” by the recipient. 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, an order to show cause seeking to vacate the caveat then docketed. A life’s journey . . . subject to a discovery schedule, expert reports, motion practice, briefs, mediation, and a trial, all seeking to find the truth that now lies buried—a treasure never to be found but instead judicially constructed.

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C H A P T E R

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ickie 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 1990s 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 89-year-old self-made billionaire J. Howard Marshall II. Marshall, a Yale law school graduate, earned his money the old-fashioned way with academic excellence, hard work, and an entrepreneurial spirit. Although he served on the Yale faculty, and later became assistant dean of Yale Law 13

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School, it was oil that ran through his veins. He co-authored 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, then became a partner in a major law firm. Some earn their wealth the old fashion way; some marry into it, while some simply stumble on it, like Jed. Oh you remember The Beverly Hillbillies, and the story of a man named Jed, the poor mountaineer who could barely keep his family fed, until one sunny day while shooting out some food, up through the ground came some bubblin’ crude. Oil that is, black gold, Texas tea. Marshall didn’t stumble on his fortune, but sure enough, his well was filled by the same Texas tea. With his impressive academic background and 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 approximately 16 percent 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 desired, it was a gentlemen’s club that bubbled his crude. And so it was that 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 Browne, 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 had died, one of his two sons had apparently crossed him in a palace coup at Koch Industries (consequently earning the proverbial “you’re out, Tom”), and the other

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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 billionaire could fill her void. Maybe they both got what they wanted. A mere 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, and no trinkets. Although her hubby had gifted assets to her worth approximately $6 million during his 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 the 26-year-old knock-out, 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? Although 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 steeped 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, 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,

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the bankruptcy judge didn’t disappoint. Although estate litigation is typically filed and decided in state court, not federal court, the federal bankruptcy judge awarded her $447 million 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.” E. Pierce Marshall must have been blown away, and appealed the bankruptcy court’s decision. In 2002, U.S. District Court Judge David Carter reduced the award to just $88.5 million. 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 $447 million or $88.5 million or some other amount, or nothing—that would be left to yet another court. E. Pierce Marshall 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 were 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 she was 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, who was born

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from her first marriage to Billy Smith, died while visiting his mom and stepsister 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 life was snuffed out on February 8, 2007 from what Dr. Sanjay Gupta deemed a toxic concoction of prescription drugs. Whether she suffered from postmortem depression and depression stemming from the loss of her son, we’ll never know. Anna’s death however, created a veritable legal hurricane that placed her infant daughter in the eye of the storm. Anna’s will may as well have been printed on flash paper—it burned up the tabloids because it expressly cut out her newborn as a beneficiary of her estate, and provided only for the son who had predeceased her. Excerpts of Anna’s last will and 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

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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: Second: Third: Fourth:

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HOWARD STERN, Esq. RON RALE, Esq. ERIC JAMES LUND, Esq. Wells Fargo Bank (Sandra K. Von Paul) or its successors by merger, consolidation, or otherwise.

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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, may 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

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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

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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.

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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

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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

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of Roxie Hart’s baby, or if Fred Casley, the bugler . . . or furniture salesman who gave her 10 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 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. Despite both Anna Nicole’s death and E. Pierce Marshall’s death, 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 was invalid given the 9th Circuit Court of Appeal’s reversal of the 2002

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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 agreed to hear this case . . . again. In June of 2011, the United States Supreme Court effectively ruled that it is unconstitutional for a Bankruptcy Court to hear a probate litigation matter. Chief Justice Roberts delivered the opinion of the Court, and wrote in part: “This suit has, in course of time, become so complicated, that . . . no two . . . lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;” and, sadly, the original parties “have died out of it.” A “long procession of [judges] has come in and gone out” during that time, and still the suit “drags its weary length before the Court.” “Those words were not written about this case, see C. Dickens, Bleak House, in 1 Works of Charles Dickens 4 –5 (1891), but they could have been. This is the second time we have had occasion to weigh in on this long-running dispute between Vickie Lynn Marshall and E. Pierce Marshall over the fortune of J. Howard Marshall II, a man believed to have been one of the richest people in Texas. The Marshalls’ litigation has worked its way through state and federal courts in Louisiana, Texas, and California, and

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two of those courts—a Texas state probate court and the Bankruptcy Court for the Central District of California— have reached contrary decisions on its merits. Article III of the Constitution provides that the judicial power of the United States may be vested only in courts whose judges enjoy the protections set forth in that Article. We conclude today that Congress, in one isolated respect, exceeded that limitation in the Bankruptcy Act of 1984. The Bankruptcy Court below lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim. Accordingly, the judgment of the Court of Appeals is affirmed.” The perverse battle over J. Howard Marshall II’s fortunes has lasted over 16 years, and continued even after the deaths of the primary potential beneficiaries, Anna Nicole or E. Pierce Marshall. 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 in a drug-induced death. 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 rides of judicial findings. Perhaps 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.

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Legacy Lesson #5: The Elective Share and 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 other’s 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 spouse’s 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 percent, 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 that 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

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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 coexist peacefully with the children from prior marriages.

Legacy Lesson #6: Providing Equitably Both for a Second Spouse and Children from a Prior Marriage There’s this story, of a lovely lady, who 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 Bradys’ 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 stepfather? Well, maybe just Jan. But put the Bradys aside, because they’d resolve everything amicably anyway. Think of your family, your friend’s family, or for that matter any blended family that make up such a 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

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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: • The financial needs of the children and the second spouse. • The ages of the children and the age of the spouse. • The estate tax implications of leaving money to a spouse or children. • The terms of a prenuptial agreement. • The length of the marriage and whether children were born to the marriage. • The relationship between the parent and the children from a prior marriage. • 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. • The titling of assets to make sure they are consistent with the terms of the will. • The health of spouse and children. • Their respective abilities to manage money. If an estate plan is created by a team of advisors who collectively balance the needs of the survivors 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.

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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 a classic estate planning 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 letter that was attached to the will: 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: I 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?” The lawyer responds: “It means that the estate, in excess of $3 million . . . after expenses and taxes, will go

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into a trust fund . . . for a beneficiary to be named in this document.” “Who is that?” “I’m afraid I can’t tell you that.” “Who controls the money? You?” “No. He’s called a trustee.” “What is that? How does that work?” “Forgive me, but there’s nothing more I can say. I’m sorry, son. I can see that you’re disappointed.” Charlie Babbitt responds: “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.” “Charles, I mean, those are rose bushes. There’s no need . . .” “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? “Were you listening to that letter?” the lawyer asks. “Yes, sir, I was.” “Were you?” “No. Could you repeat it? ’Cause I can’t believe my fuckin’ ears.” Charlie then leaves the room stunned and sees his beautiful girlfriend, who asks: “How did it go?” Charlie Babbitt replies, “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, or is otherwise 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

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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 an 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 videotaped will signing, all but disarm the antagonist from contesting a will. Just ask Charlie Babbitt.

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C H A P T E R

The Astor Disaster: A Legacy of Influence and Undue Influence

J

ust how unentitled to the Astor fortune was Anthony Marshall? Consider that John Jacob Astor, the nation’s first multimillionaire, had earned his fortune 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 million— 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 million. By the time his sons, John Jacob Astor III and William Backhouse Astor Jr., assumed the helm of the Astor empire, the family aristocracy, now in its third generation, was firmly entrenched in the world of arts, philanthropy, and social circles befitting royalty. Most notable in the fourth generation of the Astor influence was John Jacob Astor IV, who during his first 33

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marriage fathered Vincent Astor and Ava Astor. He later divorced, and, in an apparent midlife 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 million and was soon dubbed “the richest boy in America.” The fifth generation of Astor wealth had arrived. It’s been said that money doesn’t buy happiness, and Vincent Astor’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. As a condition of the divorce, Minnie agreed to find Vincent Astor a new spouse—one who was charming, energetic, and happy, everything that Vincent Astor was not. Far from the Astor circles, Roberta Brooke Russell had, at the tender age of 17, 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 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

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less than 6 years later, in 1959, Vincent Astor suffered a fatal heart attack, leaving Brooke as the last Mrs. Astor and the beneficiary of the Astor fortune. Brooke Astor came into riches that she had probably never dreamt of. The transference of wealth from Vincent Astor’s estate to Brooke Astor wasn’t without notable controversy. In fact, Vincent Astor’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 (Jack for short). But Jack Astor was never recognized as a real Astor; he never inherited the Astor fortune, and seemed a red-headed stepchild to the true Astor Aristocracy. However, when Vincent Astor 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 can be seen in Figure 3.1. The claim was odd in that, if a will is set aside for any reason, the prior valid will governs and is admitted to probate. Vincent Astor’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 probate litigation matter was shaping up to be a real dis-Astor. So, before Brooke Astor was to inherit much of the vast Astor fortune 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 Jack Astor was paid the sum of $250,000 in exchange for agreeing to the dismissal of his claim. The Petition for Approval of Compromise Agreement can be read in Figure 3.2. 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.

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L AST W ILL AND T ESTAMENT OF VINCENT ASTOR, AS A

W ILL OF R EAL AND P ERSONAL P ROPERTY.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................

TO THE SURROGATE’S COURT OF THE COUNTY OF DUTCHESS:

JOHN ASTOR, CITED HEREIN AS JOHN JACOB ASTOR, V INCENT A STOR, DECEASED, ANSWERING THE PETITION OF L UKE B. L OCKWOOD AND A LLAN W. B ETTS FILED HEREIN, BY HARRY H. LIPSIG, HIS ATTORNEY, AND CONTESTING THE PAPER WRITING PROPOUNDED AS THE L AST W ILL AND T ESTAMENT OF V INCENT A STOR D ECEASED, DATED J UNE 26, 1958, AND RELATING TO REAL AND PERSONAL PROPERTY, BEING A HALF-BROTHER OF

ALLEGES, ON INFORMATION AND BELIEF:

1- T HE SAID INSTRUMENT SO PROPOUNDED IS NOT THE LAST WILL AND TESTAMENT OF THE SAID DECEDENT;

2- A T THE TIME SAID PAPER OFFERED FOR PROBATE IS PURPORTED TO HAVE BEEN EXECUTED, THE SAID DECEDENT DID NOT HAVE TESTAMENTARY CAPACITY;

3- A T THE TIME SAID PAPER OFFERED FOR PROBATE IS PURPORTED TO HAVE BEEN EXECUTED, THE SAID DECEDENT WAS MENTALLY DEFICIENT;

4- A T THE TIME SAID PAPER OF FERED FOR PROBATE IS PURPORTED TO HAVE BEEN EXECUTED, THE SAID DECEDENT WAS SUFFERING FROM SENILITY AND WAS LACKING IN TESTAMENTARY CAPACITY;

5- A T THE TIME OF THE ALLEGED EXECUTION OF THE Figure 3.1: Vincent Astor’s Last Will and Testament

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PAPER OFFERED FOR PROBATE AND FOR SOME TIME PRIOR THERETO, THE SAID DECEDENT WAS SUFFERING FROM ADVANCED ARTERIO-SCL EROSIS AND WAS THEREBY RENDERED MENTALLY DEFICIENT AND TOTALLY LACKING IN TESTAMENTARY CAPACITY;

6- A T THE TIME THE ALLEGED WILL IS CLAIMED TO HAVE BEEN EXECUTED, THE DECEDENT WAS INCOMPETENT TO MAKE A WILL, WHICH INCOMPETENCY

WAS THE RESULT OF

PHYSICAL DISABILITY INCURRED BY HIM MORE THAN FORTYEIGHT (48) YEARS PRIOR THERETO;

7- T HAT SAID INSTRUMENT SO PROPOUNDED WAS NOT DULY EXECUTED AS REQUIRED BY LAW;

8- T HE SAID PAPER OFFERED FOR PROBATE WAS NOT FREELY OR VOLUNTARILY EXECUTED BY THE SAID V INCENT A STOR AS HIS LAST WILL AND TESTAMENT; THE EXECUTION BY V INCENT A STOR OF SAID PAPER OFFERED FOR PROBATE WAS CAUSED OR PROCURED BY THE IMPROPER CONDUCT AND UNDUE

B ROOKE R USSELL A STOR, DECEDENT’S WIDOW, L UKE B. L OCKWOOD, A LLAN W. B ETTS AND OTHERS. WHEREFORE, THIS CONTESTANT PRAYS THAT THIS PRO-

INFLUENCE OF

CEEDING BE DISMISSED WITH COSTS AND THAT THE PROBATE OF THE PAPER HEREIN OFFEREED FOR PROBATE BE REFUSED. THIS CONTESTANT DOES HEREBY DEMAND A TRIAL BE REFUSED. THIS CONTESTANT DOES HEREBY DEMAND A TRIAL BY JURY OF ALL THE ISSUES RAISED BY THESE OBJECTIONS.

D ATED: M IAMI, F LORIDA J ULY 14, 1959.

Y OURS, ETC. HARRY H. LIPSIG A TTORNEY FOR C ONTESTANT O FFICE & P O A DDRESS 100 C HURCH S TREET B OROUGH OF M ANHATTAN C ITTY OF N EW Y ORK.

Figure 3.1 Vincent Astor’s Last Will and Testament (Continued)

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Figure 3.2 Vincent Astor Petition for Approval of Compromise Agreement

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Figure 3.2 Vincent Astor Petition for Approval of Compromise Agreement (Continued )

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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 not an Astor, not an employee of an Astor enterprise, and not an intended beneficiary of his second stepfather. In the years from 1959 until 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 she donated over $200 million 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 and 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

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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. Was it possible that Anthony Marshall would be deemed a villlain? Yes! Apparently, 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 million—even after giving away over $200 million of Astor wealth to various charities. One would 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 royal, 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 Astor as they were angered by the unnecessary belt-tightening restrictions imposed by Anthony Marshall. 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 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: • 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.”

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• That Anthony Marshall “cut back on everything from Brooke’s doctor visits to the brand of make-up she uses.” • That he “wouldn’t give his mother a hospital bed fitted with rails, even though she had fallen from her bed.” • That, on her 104th birthday, he “wouldn’t allow the nurses to buy his mother a new outfit.” • Although Brooke 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.” • 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.” • That Anthony Marshall denied a request for hair bonnets and nonskid socks so “the nurses bought them themselves.” • 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 aides 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 Marshall 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 indeed looked like villains, or at the very least, neglectful caretakers. However, their worst days were yet to come. With little likelihood of success and potential exposure of financial transgressions, Anthony Marshall, with wife Charlene in tow, consented to the requested relief, and the Court acted accordingly. The powers granted to Anthony

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Marshall by his mother’s power of attorney were effectively terminated; Annette de la Renta was appointed in his stead as guardian of Brooke Astor’s person and JP Morgan Chase was appointed as guardian of her property. Subsequently, JP Morgan Chase sought to have its 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 had been 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 that conferred riches from Brooke Astor to Anthony Marshall both during her lifetime and through a new set of codicils to her will—all drawn up during a period of time when her capacity was diminished. Chief among the alleged pilfering allegations were: • Anthony Marshall’s sale of Brooke Astor’s prized Childe Hassam painting for $10 million and pocketing a $2 million brokerage commission. • A $5 million gift from Brooke Astor to Anthony Marshall. • A self-adjusted pay raise to $2.38 million for managing Brooke Astor’s affairs—an amount five times his annual salary of $450,000. • Two checks, each in the amount of $250,000 payable to Anthony Marshall’s theater production company. • Additional gifts of jewels, artwork, and cash. • A deed transfer from Brooke Astor to Anthony Marshall of the coveted Coves End property as well as monies to maintain the property. But for the alleged gifts, these same assets might otherwise have been bequeathed to charities under Brooke Astor’s will. Although alarming and totaling as much as $18 million, the Court denied JP Morgan’s request for expanded powers, finding instead that the powers granted

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to the bank were temporary in nature and that the executors of Brooke’s estate could sort out these claims. By so ruling, the Court set the stage 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 aggrieved party 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 or may not 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 RUSSELL ASTOR

TESTAMENT

OF

BROOKE

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.

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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.

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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 greatgrandchildren, 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;

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(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;

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(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 me for the pleasure they have brought to me; and (K) I have discussed with my son, Anthony Marshall, gifts of 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

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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

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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).

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(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 jewelr y, clothing and furs not other wise 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 personality under any of the foregoing provisions of this Will, I direct

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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 of 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

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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

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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

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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;

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(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 longterm 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

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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

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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 and 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),

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or to the extent my son shall 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.

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In the event that Henry Christensen II or any successor to him appointed as hereinafter provided shall fail to qualify or for any 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 by 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

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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 preside over the Astor fortune—almost half of which, according to this codicil, was to be renamed “the Anthony Marshall Fund.” According to this First and Final Codicil, Astor wealth created over centuries should be re-titled and re-named so future donations would appear to be the generosity of Anthony Marshall. 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

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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.

Author’s Note: More irons in the fire. 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 bequest to the New York Public Library’s Astor, Lennox, and Tilden Foundation from 25 percent to 8 percent. Another cause historically near and dear to the Astors was The Metropolitan Museum of Art. The Museum’s interest was also reduced from 25 percent to 8 percent. These cuts were designed presumably, to move wealth out of the Vincent Astor Foundation and into a new

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fund—a fund that didn’t bear the Astor name. One paragraph . . . and the Astor wealth was transformed and repackaged into a new fund—The Anthony Marshall Fund. 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,

Author’s Note: This reduction came at the expense of New York City schoolteachers. 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 schoolteachers’ funds from 11 percent to 5 percent so that Astor wealth could be recharacterized 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,

Author’s Note: This hit came at the expense of The Central Park Conservancy so that Astor wealth could be recharacterized as “The Anthony Marshall Fund.” and the percentage disposed of under subpart (6) from five percent to three percent.

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

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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.

Author’s 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 recharacterized 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 son’s death. If there shall be any principal assets remaining in this trust as of the date of its termination, or any income

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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

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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 (see Figure 3.3). Less than a month after the First and Final Codicil was signed, the Second Codicil was signed. This would later prove to be a ticking time bomb. This alleged second codicil completely changed 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 million, was supposed to fund a charitable remainder trust. The charitable remainder unitrust was to provide Anthony Marshall with 7 percent 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. Not a bad deal . . . $700,000 a year for life. After his death, the Astor wealth would pass to charities. This second codicil cut out the charitable trust entirely and left Astor wealth, five generations in the making, to Anthony Marshall. Call it chutzpah, call it unmitigated gall, but don’t call it Brooke Astor’s intentions. If you were a principal in one of the charities that enjoyed a relationship with Brooke Astor, and that charity had been a recipient of the Astor largess, you’d have a hard time believing that either of these codicils reflected Brooke Astor’s intentions. The second codicil also cut out Henry Christensen III, Esq., who was Brooke Astor’s estate planning attorney, for many, many years, and removed him as co-executor and cotrustee. In fact, the second codicil wasn’t authored by Henry Christensen III, Esq., but instead, by a new attorney presumably hired on behalf of Brooke Astor by Anthony Marshall. Anthony Marshall couldn’t leave well enough alone. Another moth drawn to the fire. Two months later, when Brooke Astor was 102 years old, yet another codicil was signed. The Third Codicil To Will of Brooke Russell Astor follows in its entirety, with Brooke Astor’s “signature” (see Figure 3.4).

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Figure 3.3 Second Codicil of Brooke Russell Astor

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Figure 3.3 Second Codicil of Brooke Russell Astor (Continued )

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Figure 3.3 Second Codicil of Brooke Russell Astor (Continued )

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Figure 3.3 Second Codicil of Brooke Russell Astor (Continued )

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Figure 3.4 Third Codicil to Will of Brooke Russell Astor

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Figure 3.4 Third Codicil to Will of Brooke Russell Astor (Continued )

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What was the purpose of the third 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 of proving 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 each time, a contesting party would be burdened first with challenging codicil #3. It could 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, along with the first two codicils, would still be in effect. Accordingly, it may be that Anthony Marshall knew that codicils #1 and #2 would be challenged once his mother died, so to protect the prospective inheritance of Astor riches, if another codicil were to be signed, any charity that 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 the first two codicils. All the supposed gifts, all the supposed codicils, and all the plotting were about to combust, and one Anthony Marshall was about to feel the heat right after Brooke Astor died. Before the Westchester County Surrogate’s office was able to adjudicate the authenticity of the will and the codicils, 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 an 18 count criminal indictment. Collectively, they were charged with numerous counts of larceny, possession of stolen property, falsifying business

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records, forgery, conspiracy, and a scheme to defraud Brooke Astor, and by extension, the Astor fortune, all for Anthony Marshall’s personal 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 overreaching duo’s fate: • 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, her son, Anthony Marshall was to receive: • Brooke’s real estate in Maine • her real estate in Westchester • her Park Avenue co-op • the sum of $5 million • artwork and personnel effects • the benefit from a Charitable Remainder Trust that provided Marshall with a guaranteed 7 percent payout for his lifetime, and the balance at his death to Brooke’s favorite charities. • That Christensen then supervised the execution of the First and Final Codicil dated December 18, 2003, which provided that 49 percent of Vincent Astor’s wealth held for the benefit of charities, would be redirected to seed the Anthony Marshall Fund, which provided him with sole power to donate monies to charities of his choosing during his lifetime. Such a change would give the appearance that Anthony Marshall was the philanthropic donor. • 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 at a time when Brooke Astor was apparently suffering from dementia.

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• 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 Anthony Marshall as sole executor and trustee. • 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. • That Brooke Astor was frail and confused when Marshall and Morrissey all but dragged her into her library to execute the Second codicil. That, after signing the documents, Brooke Astor asked Pearline Noble, her home health-care provider, “What happened? Who are those men?” • That in March of 2004, Noble further testified, the heiress “couldn’t recognize even her closet family and friends.” • Dr. Norman Relkin, Brooke Astor’s neurologist, also testified that, during the time period the codicils were signed, Brooke Astor 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 X. Morrissey schemed together to cheat charities and Brooke Astor out of more than $60 million. Their

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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 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

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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

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FIRST DEGREE GRAND LARCENY Charged Marshall used his power of attorney to give himself a $1.4 million pay raise for managing Astor’s finances, at a time when his 102-year-old mother lacked capacity. Marshall: GUILTY SECOND DEGREE GRAND LARCENY Charged 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 the then 85-year-old Anthony Marshall to prison for a term of 1 to 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, earned and preserved for generations of Astor descendants and charities was instead hijacked. 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

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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 whether one of Brooke Astor’s wills and/or one or both codicils are to govern. Annette de la Renta, a legatee under the will, filed an affidavit on September 11, 2007, claiming that the 2002 last will and testament as well as 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 (see Figure 3.5). For the court to decide which will, and which codicil(s), are to be admitted to probate, the lawyers must complete discovery. On November 5, 2010, the court signed the Discovery Order (see Figure 3.6). 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 were almost dashed by the antagonist, sadly her son, who was willing to commit fraud,

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Figure 3.5 The Affidavit of Annette de la Renta

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Figure 3.5 The Affidavit of Annette de la Renta (Continued )

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Figure 3.6 November 5, 2010 Discover Order

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Figure 3.6 November 5, 2010 Discover Order (Continued )

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Figure 3.6 November 5, 2010 Discover Order (Continued )

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Figure 3.6 November 5, 2010 Discover Order (Continued )

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Figure 3.6 November 5, 2010 Discover Order (Continued )

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Figure 3.6 November 5, 2010 Discover Order (Continued )

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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 those who can’t speak for themselves, or 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 his or her 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, or a conspiracy to perpetrate a fraud.

Legacy Lesson #9: Anatomy of a Contested Estate A second spouse, child, friend, relative, neighbor, or healthcare provider could be the antagonist who typically has a false sense of entitlement, and a righteous justification for exerting his or her 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 priorities should be. It may just be a reasonable suggestion to

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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. Such suggestion may appear reasonable and could 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 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 expect the blaze to follow. After the funeral unspoken words lead to heated words, followed by less than diplomatic late-night e-mails. 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: • Set aside a will as the product of undue influence, fraud, or lack of capacity. • Set aside the titling of investment management accounts or deed.

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• Set aside beneficiary forms for life insurance policies and retirement accounts. • Enforce the rights of income beneficiaries or remainder persons of a trust. • Set aside the acts of the agent while supposedly authorized by a power of attorney. • Demand an estate accounting and then object to the accounting when produced. • Remove an executor or trustee for malfeasance or breach of fiduciary duty. • Demand a sale or distribution of estate assets. • 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 timely filed, 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 request that the Court admit the will 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 believes 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, typically 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 end either in mediation, a settlement just before trial, or by a court

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after a trial. Some probate litigation cases are promptly resolved. Others, like 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.

Legacy Lesson #10: Influence or Undue Influence? Claims seeking to set aside a will based on undue influence have become more prevalent over the past few years as baby boomers mature, or die, and the family structure is blended, and beneficiaries quickly seek the advise of counsel. Opportunities for children or second spouses to take control of an ailing parent’s or spouse’s finances often lead to temptations that are too often acted on to the detriment of other intended heirs and beneficiaries. The question is often: did such acts cross the line, and rise to the level of undue influence. Generally, courts have found that undue influence exists when a mentally or physically ill individual loses the ability to exercise their free will and judgment. 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.

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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 the distant son returned to a destination unknown. 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 stepmother the new will. The son had requested some quality time with dad—some alone time—and during such time, 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 the dying father and witnesses arranged by the son, 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 suspicious circumstances. 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.

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Although varying from state to state, and court to court, the following factors are generally considered in determining whether undue influence exists and who has the burden of proving it. • Whether the beneficiary was present at the execution of the will. • Whether the beneficiary recommended and/or arranged for the attorney to draft a will for the testator. • Whether the beneficiary, to the exclusion of others, reviewed drafts or provided comments prior to the will’s execution. • Whether the beneficiary was involved with the decedent’s bankers, money managers, accountants, or lawyers shortly before the decedent’s demise. • Whether the beneficiary was in charge of safekeeping the will subsequent to its execution. • Whether the beneficiary secreted the will from others. • Whether the beneficiary isolated the testator from other family members. • Whether the beneficiary discouraged other family members from visiting the testator before his or her demise. • Whether a beneficiary was the day-to-day caregiver. • Whether assets were gifted or retitled, or beneficiary forms changed shortly before the testator’s demise. • Whether a long-term relationship with the family estate attorney was changed to a new attorney shortly before death. • Whether there was a history of a testator seeking to distribute assets equally, followed by actions that caused the estate to be distributed unequally. • Whether the decedent’s health history indicates a mental or physical impairment. • Whether the decedent was taking medication, or required another to care for him or her.

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• 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, 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, not the will, governs the distribution of the asset. Undue influence may not be present in the drafting and execution of a will, but instead may occur in the retitling of assets. 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 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 the authorized signatory’s 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

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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 may 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, donative intent can be easily established. Without a writing or an independent witness, a Court may have no proofs or evidence before it to establish donative intent. In some cases, the retitling 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 change the balance of power. A parent may assent to a child’s request to change the title of the investment account or transfer the deed to the home from the parent’s name alone, to a new 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 ultimately hire an attorney to challenge the retitling of assets. The pleadings filed with the court claim that all such financial transactions should be set aside as a product of undue influence. The siblings may 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, met the lawyers to transfer the deed, and changed titling of investment accounts on-line by simply typing in a user name and password. That alone may be enough for a court to

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find that the son had a confidential relationship with the parent. In some states, that’s also enough to shift the burden of proof to the son to prove there was no undue influence. The meddling son now has an uphill battle. If a court finds the child was in a position of dominance and the weakened parent was dependent, the son may be unable to prove to a court, by clear and convincing evidence, that all was fair and above board, and that the playing field was level, and that the weakened parent had ample opportunity to get independent advise. 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 retitling 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. 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, pretrial 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

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the retitled assets that benefited the influencer be reversed and distributed as provided in the decedent’s last will and testament; sometimes, the court is so enraged by the influencer’s actions that he or she is ordered to pay the legal fees incurred by the siblings.

Legacy Lesson #12: Time in a Bottle—Good Days and 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 or her heirs are; (c) that the will is meant to dispose of his or her 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? Maybe. If Brooke Astor’s heirs challenge not just the will, but also the three subsequent codicils and five gifts that were given 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 may be filed seeking to set aside or invalidate a will claiming that the testator lacked mental 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.

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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 testators 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, videotape the will signing. During the show, the testatrix may read a prepared statement that goes 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’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 aloud, so there will be 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 it. Tina has little to no chance of overturning 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 and Final codicil dated December 18, 2003, the second codicil dated January 12, 2004, and even more likely, the third codicil dated March 3, 2004. So what should you do if your parent is succumbing to old age and illness, and there is either no power of attorney in effect, or a power of attorney is in place, but you suspect

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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 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 by 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, played by Joaqin Phoenix, took the lead role in Gladiator. Caesar: Maximus: Caesar:

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There is one more duty that I ask of you before you go. What will you have me do, Caesar? I want you to become the protector of Rome after I die. I will empower you, to one end

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Maximus: Caesar: Maximus:

Caesar: Maximus: Caesar:

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? With all my heart, no. Maximus, that is why it must be you. But surely a prefect, a senator, somebody who knows the city, who understands her politics. . . . But you have not been corrupted by her politics. And Commodus? 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: Commodus: Caesar: Commodus: Caesar:

Commodus: Caesar:

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Are you ready to do your duty for Rome? Yes, father. You will not be Emperor. Which wiser, older man is to take my place? 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. Maximus? My decision disappoints you?

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Apparently his decision did disappoint Commodus, because moments later he asphyxiated his father, undermined his intentions and deemed himself the Emperor of Rome. 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, likely 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 that 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 litigation 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 30 purported wills were offered for probate and all deemed fugazzis. But what were the true intentions of one of the richest men in America at the time? We’ll never know, but if you want insight into the chaos, consider the wills offered for probate shown in Figure 3.7. The Court did not accept the 1975 will, so Richard Robard Hughes, aka Joseph Michael Brown, did not inherit the Hughes fortune. Then there’s the famous Mormon will

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Figure 3.7 Howard Hughes’ Last Will and Testament

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Figure 3.7 Howard Hughes’ Last Will and Testament (Continued )

proffered by Melvin Dummar. Dummar 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 into 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 into his empire to infect and forever taint his legacy.

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4

C H A P T E R

The Benevolent Queen of Mean

W

hen 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 sendoff. Instead, both big people and little people alike read the headlines trumpeting the death of the Wicked Witch. 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 that will likely fund hospitals, health-care providers, museums, schools, medical research, and yes, provide for the care of 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 mother lode? Did she only seek to reduce her estate tax liability or was she truly philanthropic? Only Leona knew. But if homeless families have shelter, cures for diseases are discovered, lands are preserved, animals cared for, and the hungry fed-in part from the Leona M. and

105

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Harry B. Helmsley Foundation, then we must give the devil her due. Daughter of a hat maker and high school dropout, 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 most successful real estate brokers. That drive, that moxie, that “something 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 with Leona, and left his wife of 33 years, Eve, to marry this up-andcomer. Once on top of, and seemingly in control of, Helmsley Enterprises as chairwoman 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, and the Helmsley Middletowne, as well as various Florida resorts, to name only a few of the properties that collectively were valued at approximately $5 billion, give or take. Although prior to their marriage Harry maintained a quiet, humble lifestyle, after the marriage he and Leona enjoyed a lifestyle worthy of royalty. Their residences 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, a chauffeur-driven limosines, 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 publicly 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.

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A reporter, Ransdell Pierson, published a book entitled The Queen of Mean and in it he quoted Hizzoner, Mayor Ed Koch, who called Leona the “Wicked Witch of the West,” and added, for “a billionairess 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 woman and added, “I can feel sorry for my worst enemy, but I cannot feel sorry for Leona Helmsley.” Mayor Koch and Donald Trump actually echoed the sentiments of the masses. What comes around goes around. It was Leona’s 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 spent $40,000 on jewelry at Van Cleef and Arpels, and was unwilling to pay the 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 that oversaw the $8 million renovation of Dunnellen Hall had to sue to get paid. During the litigation it was alleged that, though the construction company billed the renovation costs to the Helmsleys 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 New York Post reporter, who inked two articles about the way the Helmsleys did business. It wasn’t long after these articles landed on a prosecutor’s desk that an investigation started and eventually led 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 facing jail time if convicted, and their reputations were about to be irreparably tarnished.

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Although it took three years, eventually the Helmsleys 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 United States of America v. Harry B. Helmsley, Leona M. Helmsley and others, Circuit Court Judge Cardamone, 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 the 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 helped to 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 18

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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 6 (A) of his will, he left his residuary estate to Leona. Now a widow, Leona 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, with almost every New York 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 modestly for two of her four grandchildren and her brother, threw her chauffeur a trinket and Trouble a king size bone. It was clearly the Leona M. and Harry B. Helmsley Charitable Trust that was to benefit from roughly 99 percent of the multibillion-dollar 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. Although her estate was worth conservatively $5 billion, 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 million outright, as well as $5 million each in a charitable remainder unitrust specified to pay out 5 percent 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 million outright and $10 million in a charitable remainder trust paying Alvin 5 percent of the trust’s fair market value every year until his

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death, after which the trust’s remainder will be added to the Leona M. and Harry B. Helmsley Charitable Trust. But even these modest provisions for her two grandchildren came with strings attached. Leona required that her grandchildren, David and Walter, 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 million in a perpetual trust to maintain the Helmsley mausoleum. The trustees were required to maintain, clean, and preserve the Helmsleys’ 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 there except her brother and his wife, and of course, that diamond studded, nippy little fluff ball—Trouble. But it wasn’t the creation of charitable remainder trusts for the benefit of only two of her four grandchildren, 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 million bequest 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 to 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

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ready, Sfara was made to get down on her knees and feed the dog with two fingers. Between cutting out two grandchildren, leaving $12 million 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 royal—a real dogfight. Fortunately, reason prevailed. The two disinherited grandchildren and the executors of Leona Helmsley’s estate agreed to a settlement that Surrogate Court Judge Renee Roth approved on April 20, 2008. Under the terms of the agreement, reportedly, the two disinherited grandchildren divided $6 million 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 million haircut to Trouble’s trust, leaving the snappy little pooch a paltry $2 million. Poor Trouble . . . lost her best friend and then lost 88 percent of the trust fund. Sadly . . . Trouble’s trouble may have caused the misunderstood canine to go legs up. 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 dog’s 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 dog’s 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 dog’s annual expenses came to $190,000—the

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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 five-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 hotel’s incinerator late last night.

It is funny, 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 it turns out that New York law doesn’t allow animals to be buried with humans (Leona, that is) and she wanted $12 million held in trust for the pooch, but Trouble was thrown only a $2 million bone. With all her resources, her intentions were not honored.

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Even the residuary beneficiary of her will the Leona M. and Harry B. Helmsley Charitable Trust, which was funded with billions of dollars, caused litigation. Again the question was, what did she intend? Seems Leona signed two mission statements in addition to the Helmsley Charitable Trust Agreement, which were intended to govern the distribution of billions to charities. However, little care or thought went into the drafting of either of these mission statements. The first mission statement is shown in Figure 4.1.

THE LEONA M. AND HARRY B. HELMSLEY CHARITABLE TRUST AGREEMENT Leona M. Helmsley, Trustee I, the undersigned, Leona M. Helmsley, as Settlor of The Leona M. and Harry B. Helmsley Charitable Trust, hereby state my intentions as to the purposes of such trust, as provided in Paragraph (A) of Article FOURTH of the trust agreement. I hereby revoke all prior Mission Statements. Mission Statement It shall be the mission of The Leona M. and Harry B. Helmsley Charitable Trust to make such grants in such amounts and proportions and to or for the benefit of the following specific purposes as the Trustee shall determine: (1)

purposes related to the provision of care for dogs;

(2)

purposes related to the provision of medical and health care services for indigent people, with emphasis on providing care to children, including, but not limited to, building a new hospital or contributing to an existing hospital for the creation of a new annex to carry out such purposes; or

(3)

such other charitable activities as the Trustees shall determine.

I reserve the right to alter, amend or replace this Mission Statement as such time or times as I shall determine.

Figure 4.1

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Leona M. Helmsley’s First Mission Statement

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Leona amended the first mission statement on March 1, 2004, with the second mission statement which is shown in Figure 4.2. 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 angry with 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.

THE LEONA M. AND HARRY B. HELMSLEY CHARITABLE TRUST AGREEMENT Leona M. Helmsley, Trustee I, the undersigned, Leona M. Helmsley, as Settlor of The Leona M. and Harry B. Helmsley Charitable Trust, hereby state my intentions as to the purposes of such trust, as provided in Paragraph (A) of Article FOURTH of the trust agreement. I hereby revoke all prior Mission Statements. Mission Statement It shall be the mission of The Leona M. and Harry B. Helmsley Charitable Trust to make such grants in such amounts and proportions and to or for the benefit of the following specific purposes as the Trustee shall determine: (1)

purposes related to the provision of care for dogs; and

(2)

such other charitable activities as the Trustees shall determine.

I reserve the right to alter, amend or replace this Mission Statement as such time or times as I shall determine.

Figure 4.2

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Leona M. Helmsley’s Second Mission Statement

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That’s the language that governs the distribution of what will likely be over $25 million a year—forever. Certainly the Humane Society of the United States, The American Society for the Prevention of Cruelty to Animals, and Maddie’s Fund had high expectations. They had reasonable grounds to believe that they, and like causes, would be the primary beneficiaries. The trustees of the Helmsley Charitable Trust, not wanting to be caught in the crosshairs of this dogfight, 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 $136 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 of and help for dogs, rather than people? Absolutely not. Have the trustees of this vast fortune acted improperly and ignored Mrs. Helmsley’s instructions? Again, absolutely not.

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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

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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 health-care 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

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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.”*

Wayne Pacelle, chief executive of the Humane 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 Helmsley’s expressed intention,” Pacelle said afterward. Regardless of which charities benefited, the Helmsley wealth is in fact benefiting good causes. The question is, what did Leona intend? Were her intentions clearly expressed? You decide. Detailed in Table 4.1 is a summary of distributions to various charities made by the Leona M. and Harry B. Helmsley Charitable Foundation for the first few months of 2011. 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

*Source: Helmsleytrust.org.

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Table 4.1 2011 Charitable Donations Made by the Helmsley Trust Type of Charity Health Services and Health Care Education Social and Human Services Conservation Cultural Access Care of Dogs

Amount Donated $6,060,807 $5,279,000 $2,100,000 $2,054,524 $1,750,000 $ 0

Source: HelmsleyTrust.org.

carried out to a T?” the answer is categorically no. So be forewarned, if Leona should cross over into the mind of psychic John Edwards, or should she appear in a dream like FrumaSarah, someone’s getting fired . . . but the good news is that 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 he or she is 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 million 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 50 dogs and, though his intentions were good,

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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 create either 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 and/or 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 next 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 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:

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• 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 two 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 of Ten Thousand ($10,000) Dollars 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).

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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 Buffett 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 remainder persons 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 remainder persons. 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

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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

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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 percent on assets over $2 million. If her estate was valued, after administration costs, at $5 billion less the $2 million federal estate exemption amount, her estate tax liability could have exceeded $2.2 billion. Instead of incurring such an enormous liability, Leona Helmsley chose to provide her brother, Alvin, with an outright bequest of $10 million and two of her grandchildren, David and Walter, with outright bequests of $5 million each. In addition to the outright bequests, her will created three separate charitable remainder unitrusts: one funded with $10 million for Alvin for his lifetime, one for her grandson David funded with $5 million, and another for her grandson Walter, also funded with $5 million. 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 percent 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: 1. 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. 2. Second, her estate would be entitled to an estate tax deduction equal to the value of the remainder

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interest going to the Leona M. & Harry B. Helmsley Charitable Trust. 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 percent of the $5 million contributed into the trust, or $1 million. 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 current interest rate, her estate would be entitled to an estate tax charitable deduction of approximately 67 percent of the $10 million contributed into his trust, or $6.7 million. 3. 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 percent of her total estate value for family members and the remaining 99 percent 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 (see Table 4.2) exposes the roller coaster ride that we the little people have been forced to endure. 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

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Probate Wars of the Rich and Famous Table 4.2 Historical and Future Federal Estate Tax Exemptions and Rates Year

Estate Tax Exemption

Top Estate Tax Rate

1997 1998

$ 600,000 $ 625,000

55% 55%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ 650,000 $ 675,000 $ 675,000 $1,000,000 $1,000,000 $1,500,000 $1,500,000 $2,000,000 $2,000,000 $2,000,000 $3,500,000 $ 0 $5,000,000 $5,000,000 $1,000,000

55% 55% 55% 50% 49% 48% 47% 46% 45% 45% 45% 0% 35% 35% 55%

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 million as a constant, from 1997 through 2013, then your federal estate tax liability could be estimated as shown in Table 4.3. Families who have accumulated modest wealth don’t know whether they should anticipate being subjected to the estate tax and plan 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 from Trusts & Estates

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Table 4.3 The Estate Tax Rollercoaster—$3M estate Year

Estate Tax Exemption

Estimated Estate Tax Liability

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ 600,000 $ 625,000 $ 650,000 $ 675,000 $ 675,000 $1,000,000 $1,000,000 $1,500,000 $1,500,000 $2,000,000 $2,000,000 $2,000,000 $3,500,000 $ 0 $5,000,000 $5,000,000 $1,000,000

$1,320,000 $1,306,250 $1,292,500 $1,278,750 $1,278,750 $1,000,000 $1,000,000 $ 720,000 $ 720,000 $ 460,000 $ 450,000 $ 450,000 $ 0 $ 0 $ 0 $ 0 $1,100,000

entitled “The Disappering Billions” by Ivan Taback and Yvonne M. Perez-Zarraga, it was estimated that our federal government lost $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? Taxation drives behavior. Wealthy individual becomes philanthropic after realizing the true benefits of benevolence. Without tax incentives, what percentage of donors would stop feeling philanthropic? 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,

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she did not provide her reasoning, which would 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-inlaw, and perhaps by so doing, put the relationship with her grandchildren at risk. Given the fact that she was a multibillionaire, 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 million to a grandchild, and it 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 million 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 changed seven times. In addition, there is also a predeceased ancestor exemption such that if a child predeceased a parent, the parent may leave the

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bequest to the grandchild without incurring the generationskipping 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 their spouses; or (c) if such wealth would take the incentive out of working hard and climbing the proverbial ladder? Creating a generationskipping transfer trust of $5 million is a great thought, but drill down. Would you be upset if rather than inheriting $5 million, you instead receive only the income of the trust for life, and after you die it passes to your children? Generation skipping tax planning has its place in the planning process, but must be fully vetted before being implemented.

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 aren’t so easy.

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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 $1.4 million mausoleum at Sleepy Hollow Cemetery in Westchester County, New York. The new location, where Harry and Leona Helmsley are interred, sits imposingly on the crest of a hill with the Helmsley name displayed. Two real estate tycoons resting comfortably. Leona Helmsley is not the only one who has had to sue to attempt to move the deceased from one gravesite to another. And, it’s certainly not the kind of issue unique to celebrities. In fact, in an 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 he was still married to his wife of more than 40 years, it had been a lifetime of bickering. Not believing in divorce, both he and his wife had 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 above 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 his dying father, complied. Hours later, he returned to the basement, plot deed in hand, and assured his father he could and would 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 whether 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

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reflected his intentions and would be sufficient. Relieved, the dying man closed his eyes for the last time. Although some describe this family as dysfunctional, the morning of the funeral, like every other family in mourning, they dressed in dark clothes, attended mass, and rode in black limousines that followed the hearse. 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 of him. The son, enraged, didn’t attend his father’s burial; instead, hoping to stop the burial, he called a lawyer. 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 days 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 family lawyer testified that the decedent had called and asked whether 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 handed her a Kleenex and a cup of water. A long pause, and then the capable counsel offered into evidence the 10-year-old last will and testament of her now deceased husband. He asked her to read aloud from Article 2 of that last will and testament. Slowly she read the words directing

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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 dearly departed 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, not oral discussions with a son. So then, it’s clear—to assure your intentions are honored, you must document your burial intentions in your will. 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 have 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. A copy of the first page is seen in Figure 4.3. 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 Williams, John Henry, and his sister Claudia claims that they all agreed to be put into a state of biostasis after death so they could be together for the future, even if there is only a chance. A reproduction of the note, shown in Figure 4.4, has eternally changed the legacy of an American hero. Almost immediately after his death, Ted Williams’ body was flown to an Arizona lab to be cryonically suspended. His head was removed in neuro-separation surgery, a procedure for which John Henry was billed $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

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Figure 4.3 Ted Williams’ Last Will and Testament

containers. His head, which has been cracked as many as 10 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 among the siblings, but the damage was already

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Figure 4.4 Note from Ted Williams

done, he was already in pieces, and now the siblings’ relationship is 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 mantel over the fireplace like Jack Burns’s father in Meet the Parents, you must clearly express these intentions in your will. The same applies to the purchasing of any plot deeds or written funeral plans. Give thought to whom you choose as your executor, because ultimately, it’s the executor who will 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 and their lawyers, accountants, and employees dedicate to ironing out the details of complex commercial real estate transactions? It took decades to

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build the Helmsley empire. Yet, how much thought went into defining the purpose of the Leona B. and Harry M. Helmsley 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: • purposes related to the provision of care for dogs; and • 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 of view, it looks like the trustees are doing an outstanding job-no issue there. The web site 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, and other such Helmsley imprimaturs. Instead, the first and second amended mission statements lacked any such forethought. The Helmsley mission statements didn’t get the attention or thoughtfulness that you’d think worthy of a multibillion-dollar fortune. What did the donor intend? Although the court determined that the Leona B. and Harry M. Helmsley Charitable Trust had absolute discretion, and the issue was resolved fairly quickly, that’s atypical. Usually, the words “quick and efficient” are not associated with litigation. Giving money to

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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 question the utilization of the gifted dough. Just ask the Robertsons. 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 Robertsons 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 Robertsons wanted their gift to be used for graduate training in international affairs, with the hope that most of the students who benefited 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. He served dutifully in this role until his death in 1981. The trouble is that Princeton University trustees sought to expand the meaning of the mission and control the management of the

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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 million appreciated over the years to over $900 million 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 Robertsons as plaintiffs sought to sever the foundation’s 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 40 years of peacefully fulfilling the donor’s intention, the hinges had come off, and the next six and a half years was nothing short of a four alarm fire. Over 80 individuals were deposed, 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 was right, only to be refuted by experts hired by the adversary opining what was wrong. Although 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 their price tag for this dispute was over $20 million. Perhaps well over $20 million when in December of 2008, the litigation between the Robertsons and Princeton University was finally settled, and the claims extinguished by a settlement agreement that provided: • That Robertson Foundation funds would be used to reimburse the plaintiffs’ Banbury Fund $40 million payable over three years.

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• That the Robertson Foundation would fund a new foundation funded with $50 million over 10 years and the funds would be used strictly to prepare students for careers in government service. • 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 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 could name numerous charitable causes or types of causes and allow the trustees the right to allocate among 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 for seeing 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; some charitable foundations or trusts operate in perpetuity, others operate 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. Had Leona Helmsley taken time to write a mission statement that was clear, thoughtful, kind and also provided the Trustees explicit directions as to how to administer future gifts, her legacy as the Queen of Mean would not be forgotten, nor would her benevolence.

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5

C H A P T E R

A Sweet and Sour Legacy

I

f you were talking about kidnapping, ransom, murder, forged wills, and the richest woman in Hong Kong, you would 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 McDonald’s. 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. Although Teddy Wang’s family never liked Nina, 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 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 139

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deemed worthless, held them for many years 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 about how 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 million 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 that 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 they 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, empowered as the agent on the power of attorney that Teddy had executed before his disappearance, assumed the helm at Chinachem. In 1999, when Teddy was legally declared dead, Nina became chairwoman of Chinachem and, seemingly, heir to the Chinachem empire. But, you’ll recall that Teddy’s parents were not fond of Nina becaused she was stubborn and didn’t cook and, almost 50 years after their marriage, Teddy’s father filed

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a lawsuit seeking to set aside the will that named Nina as Teddy’s beneficiary. Instead of mourning in peace, instead of having peace, the rest of her life was to be consumed in probate litigation, fighting with her father-in-law, Wang Din-Shin. The issue: which of Teddy’s wills would 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 and testament 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 the 1968 will governed. To add insult to injury, Nina Wang was then charged with forgery and attempting to pervert the course of justice and had to post bail of $7 million. A disheartened Nina Wang appealed the court’s 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 Nina Wang 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. Although she was loved by the Hong Kong masses, their time to mourn was interrupted by sensationalism. Only

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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 and 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 and $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 to which she had been so committed during her lifetime. A tale of two wills would ensue; the 2002 will favored the Chinachem Charitable Foundation, whereas the 2006 will favored Tony Chan. Both were offered for probate, and this time, Nina’s intent had to be judicially determined. To the victor go the spoils. The war was on; and allegations of fraud, undue influence, and lack of capacity were aired publicly. 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 outsider’s 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 he met her. He resided in a $30 million 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

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a time when he himself was a newlywed, but denies any other wrongdoing. He claimed that the riches bestowed on him by Nina were just payments for feng shui massages and other such services, and 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 Specific Bequest Will, or Feng Shui Will, left the Wang fortunes to this fortuneteller. Gag me with a chopstick. 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 claimed that neither Nina’s siblings or Chinachem executives knew of any spiritual or romantic relationship between her and Tony Chan, and that Nina Wang was busy giving millions to the foundation, appointing its 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 when Nina was ill, lacked capacity, and was unduly influenced by Chan. The Chinachem Team surmised 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 and 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 40 days of trial, wrote a detailed 260 page decision covering 935 points. Summarized here are some of the issues the court would decide:

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• Whether the 2006 will was executed by Nina. • Whether the 2006 will was the same document the witnesses saw her sign on October 16, 2006. • Whether Nina had the requisite capacity to execute the 2006 will. • Whether Nina knew and approved of the contents of the 2006 will. • Whether Nina had testamentary intention in relation to the 2006 will. • Whether the execution of the 2006 will was obtained by undue influence of the 1st Defendant. • Whether the 2006 will was only a partial will. On February 2, 2010 the court issued a final 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 (sic) 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, and 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 Chan had a relationship.

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The Court took great care in hearing from handwriting experts to determine whether the 2006 will was a forgery and whether another document intended as a codicil to Nina’s 2002 will that 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. To appreciate the painstaking detail of how a forgery case is introduced, the signature and analysis is in Figure 5.1. The judge considered both handwriting expert reports and dedicated approximately 30 pages of his written decision to these expert opinions and concluded that the Nina Wang signature was a highly skilled simulation (see Table 5.1). 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 that 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. The court ultimately did not find Tony Chan to be a credible witness and concluded that he was prepared to say

Figure 5.1 Nina Wang Signature Analysis

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Table 5.1 Feature Numbers

Description of Feature

Judge’s Findings

(i) & (ii)

The left-hand downward stroke of the “N” and its slightly angular turn to traverse horizontal.

(iii)

(vi)

The rounded pen movement before the right-hand upward stroke of the “N.” The relative proportion of the “i” in “Nina” and the subsequent looping up/ down pen movements forming “na.” The “i” dot in “Nina.”

The 2 features are dependent and should be treated as one. 3 matches found out of 81 specimens. This is a “more significant” feature. 3 matches found out of 81 specimens. This is a “more significant” feature. 5 matches found out of 81 specimens. This is a “more significant” feature.

(vii) & (viii)

The “T”-bar in “T.H.”

(ix)

The downstroke of the “T” and the mimicking full stop next to it.

(v)

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Signature Analysis

2 matches found out of 81 specimens. This is a “more significant” feature. 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. This feature is relatively prone to variations, not helpful for the purpose of identification or nonidentification.

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Description of Feature

(x)

The “H” in “T.H.”

(xiv)

(xv)

(xvii)

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Signature Analysis (Continued )

Feature Numbers

(xi)

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Judge’s Findings

Not appropriate to split this into 3 subfeatures, 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. The slope of the initial 5 matches found out of downstroke of the “W.” 82 specimens. The rhythm of “an” in No match found. This “Wang”; instead of the feature is out of mimicking pen strokes in “an” range. This is a “more and the stroke significant” feature. leading to the top loop of “g” of “Wang,” the “an” was written in a significantly different manner with a diversity of slopes. The top loop, or eyelet, of The top loop of the “g” the “g” in “Wang.” 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. The stepped alignments of The specimen signatures the four components of show a great variety in the signature. pattern for this feature, not a distinctive feature for the purpose of identification or nonidentification.

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anything to advance his claim, and 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. Accordingly, the 2002 will that 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’s decision, 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 having to post bail, and it seemed clear that Chan’s good fortunes were over. Once again, it’s the tax collectors who delivered 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 originals in your own fireproof safe and keep a set of copies in a separate location. Destroy prior wills that have been superceded. Let your trusted executors know how to get access to the safe in the event of your death or dis-

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ability. 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 buysell agreements, business valuations, life insurance policies, deeds, titles, and all current account statements. If these documents are then summarized in a 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 10 years of Nina Wang’s life were consumed by in 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 finally 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 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

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is being cut out. Why a billionaire would sign a will without taking any such precautions is simply mind boggling.

Legacy Lesson #21: Clarity versus Ambiguity What Nina Wang went through trying to settle her husband’s estate was completely avoidable. The precautions are basic, but too many individuals overlook the basics. The irony is that after all Nina Wang went through litigating with her father-in-law, you’d think she would have taken extra precautions with her own estate plan. Instead, she also exposed her own 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. 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, her lawyers should have updated her will just to ensure it was in fact her last will. Is Nina’s story so different from your neighbor’s? After the loss of a loved one, the survivors are 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, go back to basics and use your team of advisors prudently. Talk to them, e-mail them, write to 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

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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 pockets.

Legacy Lesson #22: Videotaping a Will Signing Why wonder if it’s Nina’s signature? Why pay handwriting 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 too expensive or not necessary is video-taping the signing of your will. Since the signing ceremony will be on tape, better not to take an extra Xanax, or otherwise slur your words, as then the videotape could be evidence that your are incapacitated or under the influence of medication, or may provide just the crack in the door that the antagonist looks for.

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6

C H A P T E R

Is This It?

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very generation has its icons. Some are worshipped like deities; their every move is 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 that Michael Jackson was a star. Sitting on beanbag chairs, 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. We’d watch the Jackson Five perform on Soul Train, and looked for good dancers. But Michael 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.” As parents, our technosavvy children—over our objections— used Napster to fill our iPods with HIStory. Those who loved Michael knew weirdness was just part of Michael. Neverland was perhaps a product of Michael’s attempt to relive his childhood—a little strange. A marriage to Lisa Marie Presley, and one very awkward kiss—getting 153

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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 a 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. Through his lyrics, Michael made a pact with us—he’d bring salvation, he promised joy and laughter, he reached his hand out to us, and crooned he’d be there to protect us. He reminded husbands: 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

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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 you tube, and we know that his loss is our loss. Though some never can say goodbye, others joined en masse to say goodbye. The world mourned his loss and the media debated his checkered life. Although 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.” After the Mass and after the funeral it was time to administer Michael’s estate. 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 (see Figure 6.1).

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Figure 6.1 Michael Jackson’s Last Will and Testament

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Figure 6.1 Michael Jackson’s Last Will and Testament (Continued )

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Figure 6.1 Michael Jackson’s Last Will and Testament (Continued )

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Figure 6.1 Michael Jackson’s Last Will and Testament (Continued )

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Figure 6.1 Michael Jackson’s Last Will and Testament (Continued )

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Figure 6.1 Michael Jackson’s Last Will and Testament (Continued )

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Figure 6.1 Michael Jackson’s Last Will and Testament (Continued )

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Michael was well advised to appoint his trusted advisors as executors. His longtime attorney John Branca, music executive John McClain, and accountant Barry Siegel were named in the will to so serve. But the costs of administering his estate, defending the lawsuits, all while preserving wealth for the beneficiaries—is a dangerous undertaking, one that longtime 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, but 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. Administering an estate is a process. Once someone dies, their last will is offered for probate. The probate clerks are required to check the will to make sure it was signed properly, and that the proffered will was not tampered with or altered. Many states require ten days to pass after someone dies before admitting a will into probate to allow an interested party to file a caveat objecting to the will. Additionally, interested parties may have up to four months in most states to allow any interested party to object to the will as being a product of fraud, undue influence, or bring a claim 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 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, many will try to profit from 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.

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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 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 percent held in a trust for her benefit, his children get 40 percent held in a trust for their benefit, and 20 percent will pass to charities 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 on like fire marshals to extinguish the brushfires. Three weeks after Michael died, Los Angeles Superior Court Judge Mitchell Beckloff appointed attorney John G. Branca and music executive John McClain, who had been designated in Jackson’s 2002 will as the co-executors responsible for managing Jackson’s estate. Attorneys for Katherine Jackson repeatedly objected to their appointment, but ultimately she respected the court appointments, which were consistent with Michael’s will. No one claimed victory, no one claimed triumph, and there was no bad actor. 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 his father Joe Jackson would contest the plain language of Michael’s will, which named his mother Katherine as the guardian. Ultimately Katherine Jackson,

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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. There was speculation about the possibility that MJ’s sister Janet would raise Prince, Paris, and Blanket, or that Michael’s 59-year-old sister, Remmie, 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 surely, 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 started a Heal the World Foundation, it had been inactive for many years prior to his death on June 25. The plaintiffs in the action were the 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 web sites 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 web sites and on products it sells “is clearly related to Michael Jackson’s commercial success”, and accordingly, didn’t have authority to benefit from Michael’s name.

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Next, the co-executors had to defend a multimilliondollar lawsuit filed by a concert promoter against Michael Jackson’s estate 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 concert. AllGood Entertainment, Inc., a company started in Morristown, NJ, sued Jackson for $40 million on June 10, 2009, roughly two weeks before his death. The lawsuit claimed the Jacksons and their 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. Judge 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 million, the most lucrative documentary film in history. The soundtrack sold 5 million copies, making it the third-biggest album in 2009. The executors also republished the “Moonwalk” book, executed 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

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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, though 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 the three children. 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

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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 new 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 million to pay down debts that totaled more than $400 million at the time he died. Although there still remain unresolved creditor claims, pending litigation, and additional challenging business, tax, and legal issues, the co-executors have made substantial progress in reducing the estate’s debts. Although 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.

Legacy Lesson #23: Raising Helen There’s just no replacement for 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

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more stunned to learn she was appointed as the children’s guardian. Sometimes it makes sense to talk with the proposed guardian to find out whether he or she is 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 faced with the prospect of either letting them know you changed your mind, or risk having them be surprised to find out they’ve been removed. In choosing the guardian of minor children, consider the following factors: • Age of the guardian and actuarial likelihood of being able to raise children until the minor attains the age of majority. • Religion. • Willingness to assume the responsibility. • The guardian’s financial status. • State of residence. • Whether the proposed guardian has children of his or her own. • The health of the guardian. • Who the children would be most comfortable with. • The value system and moral code of the proposed guardian. • Review these considerations 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. Michael’s mom was 79 at the time of Michael’s passing, and Blanket was only seven years old. Katherine will, God willing, be 90 when Blanket attains the age of majority. If she predeceases or is unable mentally or physically to raise the children, then the successor guardian would be Diana Ross. Would Diana Ross assume the

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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, oops, sorry, Brooke Astor’s will and all three codicils are available for all to see in the Westchester County Surrogate’s Court. Individuals who seek privacy, or prefer to keep the terms of their wills 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 publicly 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 called the Sothern 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. Upon the Grantor’s demise, if such property had been retitled in the name of the revocable trust, an ancillary estate proceeding would have been avoided.

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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 million less a charitable deduction of 20 percent, the balance ($80 million) less the then death-time exclusion of $3.5 million multiplied by 45 percent, (the estate tax rate at the time of his death), and 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. Those who have spent a lifetime growing a business, or working for the family business, 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. 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, is Koch Industries. Any given year it could generate over $100 billion 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 percent of the company stock, and J. Howard Marshall II, who owned the other 16 percent of the stock, the company was built by these two brilliant titans into one of the largest privately owned petroleum refinement, energy, and chemical conglomerates in the United States. But money doesn’t buy happiness. In the office, Fred C. Koch was quite the visionary, but from afar, he seemed blind when it came to nurturing his

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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 would 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, 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 brothers’ relationships. The classic dysfunctional family syndrome—strained family relationships, sibling rivalries, and favoritism—were precursors to probate litigation. The trouble started early. Although 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 the $700 dispute and Dad’s act of frowning on that which Frederick did or didn’t do. Then, after Dad died, though Charles was the named successor to the throne, two of, the other brothers sought to buy up shares

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from others and stage a coup. The failed coup set the stage for two brothers, William and Frederick, to be cashed out. Valuation experts were hired, including Goldman Sachs, and brothers William and Frederick sold their shares and netted a cool $1.1 billion. The valuation 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 billion. 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, to not only assure tax efficiencies, but to promote harmony and to facilitate the business growth. To that end, a successor manager should have been appointed and 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 oil reserves that fueled the Koch family litigation was sure to ignite. Business succession planning requires the owners of their prized possession to take a step back and redefine 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

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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. • How did the business start? • What was the goal of the business at that time? • Were there partners? How many and what happened to them? • What’s the business model now? • Who is the leader? • What’s the competition? • If we looked at the tax returns for the past 10 years, what would a chart of the net profits look like? • Is the entity an S-Corp, C-Corp, Limited Liability Company, sole proprietorship, partnership? • Are there corporate books, minutes, and by-laws? • Is there a buy-sell agreement and are shares or units properly allocated among the owners? • Is there an exit strategy? • Are any family members interested in getting involved? • Are any family members qualified to one day assume control? • 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 the children, or just those who together will get along and forward the best interests of the company for all equity owners? • 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?

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• What’s the value of the business? When is the last time the business has been valued? What’s the cost basis? • Who are the advisors: accountant, attorney, insurance professional, investment advisor, and banker? • If you could wave the magic wand and see this business 20 years from now, what would you like to see? • What’s the best part and what’s the worst part of being involved in this business? • What keeps you up at night? (Limit the answer to business issues only.) These questions are just a starting point, but the answers will help chart a direction that could run the gamut from no action to an “aha” 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 provides 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.

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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 percent of the company’s stock or the limited liability company’s units. When asked to value only a 1 percent 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 than the whole, and there’s less of a market to sell to. Since the percentage of the company being valued is small, it may be a minority interest, and therefore, a discount should be attached to its 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 on the factors unique to the company. As a general rule of thumb, however:

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• The more liquid the underlying assets is, the smaller the discount. • The more illiquid the company is, and the more difficult it is to sell company interests, the discount increases. • The more restrictive the buy-sell agreement is, the larger the applicable discount. The range of discounts as added cumulatively could vary from 10 percent to 50 percent. Once the value of a share has been determined and the amount of income that one 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 percent of the limited liability company (LLC) membership interest, or 1 percent of the issued stock in an 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 be filed with an attachment of the business valuation and an allocation of the value of the gift against the lifetime gift tax exemption or if the value exceeds the gift exemption, be sure to attach a check for the gift tax. To illustrate, utilizing a fictional entity MJ Enterprises, LLC that was valued at $7.5 million, less a discount for lack of marketability, lack of transferability and a built-in gains discount, which cumulatively equaled 33.3 percent, the enterprise value for gift tax purposes would be approximately $5 million. If the entity had 100 units, then each unit would be valued at $50,000. If each unit generates income equal to 6 percent, the needed data is established to analyze a transaction. In this case, the units could be gifted without causing gift tax. Even if the value was $15 million and the business owner was married, both husband and wife could use their lifetime exemption amount, $10 million combined, and after the discounts, they could gift the entire amount outright to their children, or in trust for their benefit.

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If the value exceeded $15 million, gifts of all the LLC units would cause gift taxation over the exemption amount of $5 million per spouse. Since the current gift tax rate is at a historic low of 35 percent, many wealthy business owners are choosing to pay the gift tax now, because: (a) the valuation of the underlying assets is low given recent economic downturns; and (b) gift tax rates have historically ranged from 45 percent to 55 percent. Therefore, the current environment 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). Although this summary constitutes a possible violation of the no legalese rule, this trust can easily be broken down into plain English. The GRAT is simply an irrevocable trust whereby the owners transfer a portion of their wealth into this trust, and retain a benefit for a term of years. At the end of the term, the remaining assets, including growth, pass to their children or other heirs. The benefit 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 10 years, then the current value of the gift for the children, who have to wait 10 years, is actuarially reduced. If they have to wait 20 years, the current value of the gift is reduced even more. One catch—it’s 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, in this example, at the rate of 10 percent a year, then the GRAT was a home run and allowed you and your spouse the right to transfer not $15 million of LLC units, but $30 million of LLC units without paying gift tax. Sometimes business owners listen to such an explanation and the eyes glaze over, and despite a perfectly succinct

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summary, when a planner asks the client whether they’re interested in utilizing such a technique, the response may be, “Frankly, that was all Greek to me.” In a no legalese environment, charts and graphs better represent the strategy. To that end, a 10-year GRAT, paying you 5.85 percent, and growing at 10 percent a year, would yield the result shown in Figure 6.2. So what’s the benefit of this GRAT? Based on the preceding assumptions, it allows you, the business owner, to gift not just $7.5 million reduced by a discount to $5 million but instead you could gift $30 million of MJ Enterprises, LLC without paying any gift tax, so long as you live past the 10-year term. Exciting, right? Wait, it gets better. The Grantor Retained Annuity Trust $1,000,000 $950,000 $900,000 $850,000 $800,000 $750,000 $700,000 $650,000 $600,000 $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Asset Value

Retained Interest

Taxable Gift

Figure 6.2 Grantor Retained Annuity Trust Reducing the Value of the Taxable Gift

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value of MJ Enterprises at the end of the term, based on an assumed growth rate is a whopping $43.98 million—all passes to the children free of estate tax. But the assets should earn enough to pay the annuity to you, and appreciate above a Treasury benchmark (the 7520 rate) over the life of the trust for the benefit to be instantly derived. If MJ Enterprises didn’t earn 5.8 percent a year, there wouldn’t be enough income to pay the annuity. It would become a dirty GRAT, so called because the underlying MJ Enterprises interests must be used to repay the obligation, and therefore the administration of the GRAT is more involved that just satisfying the GRAT obligation with cash. Even if units are required to pay back the annuity obligation, or even if it doesn’t outperform the benchmark years after the termination of the trust, the beneficiaries of the trust may recognize meaningful growth on their units in years later. Therefore, if a wealthy business owner already has a taxable estate, the ability to move $43 million of LLC units to loved ones who perhaps are interested in being involved in the family business anyway could make the GRAT a home run. But if MJ Enterprises is worth $100 million, even transferring $30 million to a 10-year GRAT, while helpful, doesn’t resolve the estate tax exposure. The terms of the GRAT could be modified and tweaked to accomplish a different result, though some prefer not to rely completely on betting to live out the trust term to achieve total success. Therefore, as part of evaluating outright gifts versus gifts into GRATs, consider staggering the GRATs: a 5-year GRAT for one-third, a 10-year GRAT for one-third, and a 15-year GRAT for onethird. Once the calculator’s batteries are re-charged, then compare the GRATS with sale transactions and perhaps utilize both strategies: several GRATs and a sale of some interests. Selling assets is typically simpler and not as reliant on survival to succeed. The theory is that once you have the value of one share, and you know how much income one share is likely to throw off, you can hedge, and structure

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the business transfer partly to staggered GRATs and partially in sales to the children or trusts for the children and grandchildren. A sale of $15 million of MJ Enterprises, LLC growing at the rate of 10 percent per annum, and generating 5.85 percent over the same 10-year term could be structured to replace the income to the seller/parent with the note payments, and the buyer/children could utilize the cash flow to fund the note obligation. The amortization could be interest only, with a balloon at the end of 10 years, a self-amortizing loan over the term, or a blend thereof based on the goals and objectives of the grantor and the children who may assume the obligation to buy units individually, or by their trustees. One of Michael Jackson’s best investments was the purchase of ATV Music, which included the rights to some 250 Beatles’ tunes. He bought ATV Music for $47,500,000 in 1985. In 1995 the King of Pop sold half of ATV to Sony for approximately $150,000,000. The ATV-Sony sale still left Michael Jackson’s Estate with one-half of the asset which could be valued at as much as $1,000,000,000. Had Michael transferred his interest in ATV Music into a GRAT back in 1985, or waited until his three children were born, that billion

Amortization Schedule

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Purchase price Down payment Annual interest rate First year Term (years) Months in first year Annual or monthly report?

$15,000,000 $0 4.110% 2012 10 12 Annual

Amount financed Monthly payment Months in last year

$15,000,000 $152,653.12 0

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asset could have avoided a 45% estate tax in effect when he died. 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 lifetime gift exemption is at an all-time high, and your company could outperform the benchmarks, you can move the mother lode. Mix in some charitable planning, and there’s no limit to how much wealth can be transferred, and your legacy is all but assured. Business succession planning: it’s a real thriller!

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7

C H A P T E R

Lessons from the Dead

Circa 1978

Sitting in high school algebra class, you looked to your left and saw one student copiously taking notes, then looked to your right and saw another student drawing a skull, surrounded by roses with the words “Grateful Dead” etched out in a series of disconnected dashes-looked pretty good, too. Finally, the bell rang, class was dismissed, and thank God it was Friday. Six friends piled into an old jalopy, wearing their favorite tie-dyed Dead shirts, and headed off to the show. For some, it was their seventh time seeing the Grateful Dead perform, others simply lost count. En route, the debate wasn’t how to get tickets; surely a few could be scalped. Instead, it started with how Jerry lost his finger; one Deadhead was sure he lost it in a card game; the other just laughed and said with certainty, “no, the finger was accidently cut off by an axe when Jerry was just a kid”. Huh. Pop in a cassette tape, and the debate continued, “What’s the best Dead live recording? Winterland ’78, Europe ’72, or Fillmore West ’69?” You could barely remember the value of x as the car headed into the fog and some passengers were laughing— but not sure why. They looked unsure of themselves, and were told, if you get confused, listen to the music play. More laughter. As this ship of fools pulled into the parking lot, 183

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they joined the throngs of Deadheads who all peacefully made their way through the turnstiles. Lost in thought, one long-haired hippie realized they were all coming to hear the same songs sung a different way, and were all coming to the show for a different reason; some to laugh their past away, and some to make it just one more day. For some the lights dimmed, for others the light show just began, and what a show. Jerry Garcia, Phil Lesh, Bill Kreutzmann, and Bob Weir played for hours; it seemed like they sang every song, then a space jam long enough for all to hit the bathroom, grab some munchies and a drink, and settle in for two amazing encores. Whew! Happy to have made it home, but before passing out, the scribbled notes of each song and the ticket stub were proudly tacked into the corkboard to join the other memories. This account is just a glimpse into the life of a generation of Deadheads who now wonder—where does the time go? No doubt the life of one Jerome John “Jerry” Garcia was a long, strange trip. Starting with his reality, at only four years old he did lose two-thirds of his finger to a falling axe, and less than a year later, his father drowned while fly fishing. His mother picked up the pieces and took over the father’s tavern, leaving Jerry to live down the road with his grandparents. In his first Rolling Stone interview with Jann Wenner and Charles Reich, Jerry recounted his days as an adolescent and musingly described himself as a hoodlum. Nearing age 15 there seemed to be a turning point in Jerry’s life. “I got turned on to marijuana. Finally there was marijuana: Wow! Marijuana! Me and a friend of mine went up into the hills with two joints, the San Francisco foothills, and smoked these joints and just got so high and laughed and roared and went skipping down the street doing funny things and just having a hell of a time. It was great; it was just what I wanted.” Jerry’s journey really changed on August 1, 1957, his fifteenth birthday, when he got his first guitar. He practiced, experimented and just loved playing the guitar. Though

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he joined the Army and smuggled his guitar in, military life was not for him. It was the 1960s and Jerry was about to shape the decade with his music, with his drugs, and with his peaceful kindness. Put a man who loves music in a music store and anything can happen. Although he wasn’t making much money, he started his career at a local music store and seemed to enjoy teaching guitar, as he explained in the Rolling Stone interview, “I tried to teach them how to hear. My whole trip with teaching kids, was teaching them how to play by ear, teaching them how to learn stuff off of records, because kids were coming in” with a record wanting to play the tune on guitar. Having never learned to read or write notes, Jerry tried to teach his students how to associate the guitar with what they heard. He continued teaching, strumming, and singing and soon found himself performing in local coffeehouses in the early 1960s. While playing at the coffeehouses, Jerry Garcia would meet two of his bandmates, Phil Lesh and Ron “Pigpen” McKernan, who played country music, old-time string band music, and together they started experimenting with bluegrass. In the interview, Garcia described meeting his next bandmate Bobby Weir as “a young kid at the time, learning how to play the guitar and he used to hang around in the music store and he used to hang around at the coffeehouse,” he went on to say “he was like 15 or something . . . really young . . . he’s the kid guitar player.” Jerry bought a banjo from that same music store, and the salesman, none other than Bill Kreutzman. The makings of The Grateful Dead were in place, and all they had to do was plug in. In describing the transformation of the band in the interview, Garcia said, “Yeah, well . . . theoretically, it’s a blues band, but the minute we get electric instruments, it’s a rock ’n’ roll band. Because, Wow! Playin’ rock ’n’ roll . . . it’s fun. Pigpen, because he could play some blues piano and stuff like that, we put him on organ immediately, and the harmonica was a natural, and he was doin’ most

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of the lead vocals at the time. We had a really rough sound and the bass player was the guy who owned the music store that I had been workin’ in, which was convenient because he gave us all the equipment; we didn’t have to go out and hassle to raise money to buy equipment.” The band, then known as the Warlocks, played gigs at a local pizza parlor and continued to play coffeehouses. “The first night at the pizza place,” Garcia recalled, “nobody was there. The next week, when we played there again on a Wednesday night, there was a lot of kids there, and then the third night, there were three to four hundred people . . . all up from high schools, and in there, man, in there was this rock ‘n’ roll band . . . we were playin’ and people were freakin’ out.” Garcia described how branding the band as The Grateful Dead was another one of those really trippy moments. He had opened a big Oxford dictionary, and the first thing he recalled seeing was “The Grateful Dead,” and though not immediately embraced by the band members – the name stuck. Fans knew them as The Grateful Dead, and the more they played, the more fans they had—and the more fans they had, the more they played. It seems in everyone’s lives there are certain turning points and on February 20, 1961, Jerry was a passenger in the car of a 16-year-old friend. As the car encountered a curve, as described in Dennis McNally’s book, A Long Strange Trip: The Inside Story of the Grateful Dead Band, the car collided with the guard rail, sending the car rolling turbulently. Jerry was thrown through the windshield and though he escaped with a broken collarbone, his friend, Peter Speegle, was fatally injured. Garcia recalled, “That’s where my life began. Before then I was always living at less than capacity. I was idling. That was the sling shot for the rest of my life. It was like a second chance. Then, I got serious.” Seems Jerry got serious about several things—his band, LSD, and women. In the winter of 1963, Jerry met Sara Lee Ruppenthal, who was then an undergraduate student at Stanford, and together they formed a duo called

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Jerry and Sara. They were married on April 25, 1963 and their daughter, Heather Garcia, was born on December 8, 1963. But Garcia’s take on the relationship was altered by another love affair-LSD. Talking about his psychedelic experiences during the Rolling Stone interview he said, “Well, it just changed everything, ya know, it was just-ah, first of all, for me personally, it freed me, ya know, the effect was that it freed me because I suddenly realized that my little attempt at having a straight life and doing that is really a fiction and it just wasn’t going to work out. Luckily I wasn’t far into it for it to be shattering or anything, it was like a realization that just made me feel immensely relieved, I just felt good . . .” It was this experimentation and fascination with LSD that led Garcia, or Captain Trips as he came to be known, to The Chateau. There he met Ken Kesey and became a charter member in the Acid Tests. Garcia described the Acid Tests as “something much more incredible than just a rock ‘n roll show with a light show. It was just a million more times incredible. It was incredible because of the formlessness, because of the thing of people wandering around wondering what was going on . . . and . . . stuff happening spontaneously, and everybody bein’ prepared to accept any kind of thing that was happening.” Enter love of his life #2, Carolyn Adams. More commonly known as Mountain Girl, she was a charter member of The Merry Pranksters, a drug-happy clan who distributed free LSD during the Acid Tests that sparked the psychedelic revolution of the 1960s. Although they were both married at the time, and though Mountain Girl had recently given birth to Ken Kesey’s child, Sunshine Kesey, they nevertheless decided to shack up together at the communal home of the Dead, 710 Ashbury Street in San Francisco. Hey, it was the 1960s, all about peace, love, and . . . formlessness. Jerry seemed to embrace all the women in his life—Mountain Girl and her daughter Sunshine and, though getting divorced, he still loved Sara and their daughter, Heather.

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As the Grateful Dead’s fan base grew and the band seemed to be on an endless tour, Jerry’s family grew, too. He and Mountain Girl had two daughters of their own: Annabelle, born on February 2, 1970 and Theresa (Trixie) born on September 21, 1974. Now he had six women in his life. And knowing that stuff happens spontaneously and you have to be prepared to accept any kind of thing that happens, then you could understand that in 1973 while touring Jerry met Deborah Koons, fell in love, provided her with a home, and then he had seven women in his life. Note for the record, the bad blood between Mountain Girl and Deborah Koons started then. Anyway, knowing that stuff happens spontaneously and you have to be prepared to accept any kind of thing that happens, then you could appreciate all the beautiful flower children that Jerry got to meet, including Manasha Matherson, a Dead head herself. A love affair or his continued search for happiness, no one will know for sure. She was intent on getting Jerry to live a clean life and had intentions of getting married, but that never happened. The two were nevertheless blessed with Keelin Garcia on December 20, 1987, and then there were nine women in his life. Although Jerry was different things to different people all agreed he was kind, had a heart of gold, was generous, and was a phenomenal musician. But he was also addicted to heroin, the devil’s drug, and though Jerry would say, a friend of the devil is a friend of mine, such a friendship usually doesn’t work out well. Over the years, Jerry’s drug use escalated from marijuana to LSD, from LSD to heroin, and all the while he reportedly wasn’t eating properly, had gained weight, performed 85 to 100 shows a year, cumulatively over 2000 shows, and had nine mouths to feed. You just know—something’s going to give. In 1986 he collapsed into a diabetic coma and didn’t wake up until five days later. Band members and loved ones tried to help

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him break the heroin addiction, but all the interventions, methadone treatments, and acupuncture treatments proved no match for the grip the drug had on him. And the years of formlessness and going with the moment had culminated into, at that point, one ex-wife, one current wife, two girlfriends, four marital daughters from two different marriages, one daughter born out of wedlock, and one “daughter” from another marriage—Jerry had a lot of mouths to feed, as summarized in Table 7.1. In 1993 Jerry and Mountain Girl split, but before doing so, and tired of delays from lawyers and accountants, they signed a one-paragraph agreement that he would pay her $5 million, and apparently agreed to equal monthly payments over 20 years. He honored this agreement and made the payments. He then married his old flame from 1973-Deborah Koons, on February 14, 1995. The marriage would be cut short. In July of 1995 Jerry Garcia checked himself into the Betty Ford Center. Jerry was known to say, “I was feeling so bad, I asked my family doctor about what I had. I said, doctor, Mr. M.D., can you tell me what’s ailing me?” But no amount of good love could save the damage done to his body after so many years of drug abuse. He was moved to Serenity Knolls Treatment Center, where on August 9, 2005, he died of a heart attack. May the four winds blow you safely home.

Table 7.1

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Jerry Garcia’s Wives and Daughters

Sarah Ruppenthal Wife #1

Carolyn “Mountain Girl” Adams Wife #2

Manasha Matherson Girlfriend

Heather Garcia

Sunshine Kesey Annabelle Garcia Theresa (Trixie) Garcia

Keelin Garcia

Deborah Koons Wife #3

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While alive, Jerry could keep the peace. But with his passing, there was trouble ahead and trouble behind. Some were simply ungrateful and some had no desire to keep the peace. As is so often the case, planning a funeral can be a divisive process and will shine its light as a beacon of what’s to come. Only three days after his death, Deborah Koons, according to Phil Lesh’s book, Searching for the Sound: My Life with the Grateful Dead, barred Mountain Girl and Sara Ruppenthal from attending the funeral ceremony. When Jerry was later cremated and his ashes were dispersed, Koons again sought to block Mountain Girl from boarding the boat for Jerry’s final sendoff. Thereafter the gloves came off and the floodgates of probate litigation opened. His last will and testament dated May 12, 1994, signed less than three months after his marriage to Koons, was fairly well thought out and seemed to reflect his intentions. In fact, no one challenged the terms of his will, but many challenged the decisions of Deborah Koons and longtime attorney David M. Hellman, Esq., who were appointed as co-executors. First, a summary of the relevant portions of his will: • All of Jerry’s guitars were bequeathed to their maker, Douglas Irwin. • All debts were to be paid, including specifically, any support obligations for the benefit of Keelin, any balance still due under the marital settlement agreement to Carolyn Adams, the division of property between Manasha, and a trust created for the benefit of Keelin. • The balance of the estate was directed to be distributed, one-third (1/3) to Deborah Koons. And the other two-thirds (2/3) in the following percentages: • Heather Garcia Katz—20 percent • Annabelle Walker Garcia—20 percent

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• Theresa Adams Garcia—20 percent held in trust until she attains 21 • Keelin Garcia—20 percent held in trust until she attains 21 • Sunshine May Walker Kesey—10 percent • Brother, Clifford Garcia—10 percent Excerpts of Jerry’s will follow. WILL OF JEROME J. GARCIA I, JEROME J. GARCIA, also known as JERRY GARCIA, a resident of Marin County, California, hereby make, publish and declare this to be my Last Will and Testament. FIRST—REVOCATION OF PRIOR WILLS I revoke all Wills and Codicils heretofore made by me. SECOND—DECLARATIONS I declare that I am married; my wife’s name is DEBORAH KOONS. We have no children by our marriage. I have four children now living from prior relationships, namely HEATHER GARCIA KATZ, born December 8, 1963, ANNABELLE WALKER GARCIA, born February 2, 1970, THERESA ADAMS GARCIA, born September 21, 1974, and KEELIN GARCIA, born December 20, 1987. I have no deceased children leaving issue, and I have not adopted any children. The terms “child” or “children” as used in this Will shall refer only to my children and if any person shall claim and establish any right to participate in my estate other than as provided in this Will, whether as heir or in any other capacity whatsoever, I give and bequeath to each such person the sum of One Dollar ($1.00). THIRD—COMMUNITY PROPERTY Omitted.

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FOURTH—PERSONAL PROPERTY Omitted. FIFTH—GUITARS I give all my guitars made by DOUGLAS ERWIN, to DOUGLAS ERWIN, or to his estate if he predeceases me. SIXTH—DISTRIBUTION OF RESIDUE OF ESTATE After payment of all my debts, my last illness and funeral expenses, and provision for my child support obligations for KEELIN GARCIA, my marital settlement agreement with CAROLYN ADAMS GARCIA which is being drafted at the time of signing this will, and my agreement with MANASHA MATHESON regarding the house to be owned one-half by her and one-half by the trust established for KEELIN GARCIA which is being drafted at the time of signing this will, my Executor shall divide and distribute the remainder of my estate for my wife/husband and children as follows: A. If my wife survives me for sixty (60) days, I give her one-third (1/3) of my estate outright and free of trust. If my wife fails to survive me for sixty days this bequest shall lapse and the amount shall be included with the remainder of my estate under paragraph B. B. I give the remaining two-thirds (2/3) of my estate, or if my wife fails to survive me, my entire remaining estate, to my daughters, my friends, and my brother as follows: 1. The following shares shall be distributed outright and free of trust, by right of representation, to the persons indicated: HEATHER GARCIA KATZ ONE-FIFTH (1/5) ANNABELLE WALKER GARCIA ONE-FIFTH (1/5)

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SUNSHINE MAY WALKER KESEY ONE-TENTH (1/10) CLIFFORD GARCIA ONE-TENTH (1/10) 2. I give to the Trustee hereinafter named, IN TRUST, for the benefit of my younger daughters, THERESA ADAMS GARCIA and KEELIN GARCIA, one-fifth (1/5) of my estate for each, to be held, administered and distributed as a separate trust for each child as follows: a. So long as my child is living and is under age twentyone (21), the Trustee shall pay to or apply for her benefit, as much of the net income and principal of the Trust as the Trustee, in the Trustee’s absolute discretion, shall deem necessary for her proper support, health, maintenance and education, after taking into consideration, to the extent the Trustee shall deem advisable, any other income or resources of my child, known to the Trustee. Any net income not distributed shall be accumulated and added to principal. b. When the child attains the age of twenty-one (21), the trust share allocated on account of such child shall thereupon be distributed free of trust to that child. SEVENTH—ULTIMATE DISTRIBUTION Omitted. EIGHTH—TRUSTEE’S POWERS Omitted. NINTH—PAYMENT OF TAXES AND EXPENSES Omitted. TENTH—NO CONTEST CLAUSE If any beneficiary of my Will or any Codicil hereto or of the Trusts created hereunder before or after the admission of this Will to probate, directly or indirectly, contests or aids in the contest of the same or any provision thereof, or contests the distribution of my estate in accordance with my Will or any Codicil, the provisions

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herein made to or for the benefit of such contestant or contestants are hereby revoked and for the purpose of my Will and any Codicil, said contestant or contestants shall be deemed to have predeceased me. ELEVENTH—SPENDTHRIFT PROVISION Omitted. TWELFTH—EXECUTOR’S APPOINTMENT AND POWERS I hereby nominate and appoint my wife DEBORAH KOONS, and my attorney DAVID M. HELLMAN, as Executor of this Will. If either of them shall be, or become unable or unwilling to act, then the survivor shall act with JEFFREY E. EHLENBACH. No bond or other security shall be required of any person who acts as Executor hereunder. THIRTEENTH—TRUSTEE’S APPOINTMENT AND COMPENSATION I hereby nominate and appoint my wife DEBORAH KOONS, and my attorney DAVID M. HELLMAN, as Trustee of this Will. If either of them shall be, or become unable or unwilling to act, then the survivor shall act with JEFFREY E. EHLENBACH. No bond or other security shall be required of any person who acts as Trustee hereunder. The individual Trustees shall be entitled to receive reasonable commissions similar to those charged by corporate Trustees in the San Francisco Bay Area. Any successor Trustee shall be entitled to reasonable compensation for its services. FOURTEENTH—GUARDIAN If MANASHA MATHESON does not survive me, I hereby nominate and appoint SUNSHINE MAY WALKER KESEY, as the guardian of KEELIN GARCIA, if she is then a minor. No bond shall be required of any person who acts as guardian hereunder.

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FIFTEENTH—DELAYED DISTRIBUTION Omitted. SIXTEENTH—DEFINITIONS Omitted. IN WITNESS WHEREOF, I have hereunto set my hand this May 12, 1994. Jerome J. Garcia On the date indicated below, JEROME J. GARCIA, declared to us, the undersigned, that this instrument, consisting of sixteen (16) pages, including the page signed by us as witnesses, was the testator’s Will and requested us to act as witnesses to it. The testator thereupon signed this Will in our presence, all of us being present at the same time. We now, at the testator’s request, in the testator’s presence and in the presence of each other, subscribe our names as witnesses. It is our belief that the testator is of sound mind and memory and is under no constraint or undue influence whatsoever. We declare under penalty of perjury that the foregoing is true and correct and that this declaration was executed on May 12, 1994, at San Rafael, California.

The will was properly drafted, properly signed and truly seemed to reflect Jerry Garcia’s intentions. But there were two big problems. First, appointing wife #3, Deborah Koons, as a fiduciary was asking for problems. Casting no judgments on her abilities, but nevertheless stating the obvious, she was wife #3, a one-third beneficiary of his estate, and was supposed to simultaneously pay ex-wife #2, Carolyn Adams, the balance of monies owed, protect a prior girlfriend’s real estate interest, and look out for Jerry’s four daughters from three other women. That’s a lot to ask of someone so emotionally and financially vested

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in the outcome. Second, administering an estate that consisted of interests in the Grateful Dead and all its marketing arms, side projects like Cherry Garcia ice cream and the popular Garcia ties, and managing the estate’s future royalty income and intellectual property requires an enormous amount of time, energy, skill, and prudence. You have to wonder, if you’re Mountain Girl, or you’re any one of his daughters, whether this train’s on the wrong track and headed for you. The fire on the mountain started promptly when Koons stopped making the payments to Mountain Girl that were due as provided in the marital settlement agreement. Jerry had made 18 payments of $20,833 a month totaling just under $400,000 of the $5 million due Mountain Girl. Koons, as co-executor, took the position that the obligation ended when Jerry died, and that Mountain Girl coerced him into signing the homemade agreement at a time when his judgment was compromised, and that their marriage wasn’t legal. In short order, this brushfire was in front of Honorable Superior Court Judge Michael Duffy in Marin County, California. The court was asked to enforce or set aside the agreement between Jerry and Carolyn Adams which provided as follows: To whom it may concern: Carolyn Adams Garcia and Jerome John Garcia hereby announce their decision to end their marriage and reach a settlement on the division of assets and property belonging to them. Since their relationship began in 1966, they lived together as husband and wife: the birth of their two children Annabelle in 1970, Theresa in 1974; their legal marriage in 1981, and their joint assets have grown greatly. In order to simplify the process of distribution, Carolyn Garcia agrees to a cash settlement of five million dollars, to be paid to her by Jerome Garcia, his estate, or his heirs . . . when the settlement is paid in full, both

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Carolyn and Jerome agree to hold each other blameless and free.

A month-long trial followed. Koons testified that the marriage to Carolyn Adams was a “tax sham,” and that Jerry had been “ripped off” in the 1993 settlement. Phil Lesh testified, too, and when asked to recall details about the Garcia/ Adams marriage, he had to admit, “The last thirty years have been one big smoky haze,” and though he provided some laughter, he also came across as a very sincere guy; when asked about Jerry, he said, “He was a cool dude. . . He was a very lovable guy, and excellent musician, full of life, full of humor. I miss him a lot.” The judge heard from all who testified and in a 10 page opinion ruled that the marital support agreement was a binding contract, that Jerry’s 18 payments evidenced his commitment to the agreement, and the estate was bound to make the payments until the entire $5 million was paid in full as agreed. Although this finding seemed so obvious, Koons’ response to the court’s decision was a promise to appeal to a higher court. Mountain Girl’s daughter, Trixie, was quoted as saying, “If Deborah wasn’t in control, we wouldn’t have been in court right now. My mother was willing to take less, but Deborah wouldn’t go for anything like that.” The prospect of more fighting had Mountain Girl at wits end, and though she was owed roughly $4.4 million, she simply didn’t want to fight anymore—and settled for $1.12 million. Her two daughters were 40 percent beneficiaries of the estate anyway, so perhaps she felt if this settlement put an end to the fight, there would be more for her daughters. Or she may have reasoned the estate’s value was approximately $10 million, but claims against the estate were reported at over $38 million, so better safe than sorry, or as Jerry might say, don’t shake the tree when the fruit ain’t ripe. But Mountain Girl wasn’t the only one who had to sue to enforce her rights. For Keelin Noel Garcia, being named as a 20 percent beneficiary of Jerry’s estate, life could look like easy street,

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but as it turned out, there was danger at her door. Like a speedy arrow, sharp and narrow, Keelin sued the co-trustees of her father’s estate to enforce her rights under the will as well. At the time her lawyers brought the case to court, Keelin was just nineteen, and a trust was supposed to have been established for her benefit and held for her until she attained age 21. The claim was that Koons and Hellman, as co-trustees, breached their fiduciary duty to her as a 20 percent remainder beneficiary, and they, as co-trustees, had an obligation to prepare an accounting of all their actions so that Keelin or her attorneys could verify that once she attained age 21 she would actually inherit the right amount of money. She was spot-on correct. She had such a right to bring the action and the trustees were obligated to provide such information. Keelin may have thought the co-trustees should know the rules, and the fire from the ice. Had they provided this information to her voluntarily, she would not have had to hire lawyers to demand what she was already entitled to. The litigation was resolved, but shouldn’t have been required in the first place. It seemed Jerry had good intentions when he included a bequest of his guitars to their talented maker Douglas Irwin. However, this bequest, too, became the subject of litigation. The question was, were the guitars Jerry’s or were the guitars owned by Grateful Dead Productions, Inc.? Irwin alleged that five electric guitars, First D. Irwin, the Wolf, the Tiger, the Rosebud, and the Headless were probate assets and should be distributed to him per the terms of the will. Grateful Dead Productions, Inc., claimed it owned the guitars, not Jerry and not his estate. This case wasn’t amicably settled, but decided by a Superior Court, and the ruling was adverse to Irwin. He appealed the decision to the Court of Appeals. Ultimately he was partially successful and did obtain two guitars, the Tiger and the Wolf. He promptly sold them for $1.74 million. Enjoy that yummy Cherry Garcia ice cream? Seems as though its maker, Ben & Jerry’s, sold the brand initially

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without Captain Trips’ approval. Suzanne Stephens, Jerry’s former office manager, claimed that she contacted Ben & Jerry’s and negotiated a licensing agreement in favor of her boss, Jerry Garcia, such that he would be paid monies based on the amount of sales. That deal proved lucrative as the flavor was big hit. After Jerry died and she left her job, she sued the estate claiming she was owed 50 percent of the monies paid to the estate from that licensing agreement based on a severance agreement she executed. Nothing was sweet about that litigation either. Although tie-dyed shirts may have been the fashion of the sixties, Jerry’s artistic talents became the basis for a new and timeless fashion statement-the Garcia necktie collection. A licensing agreement between Jerry’s company, Grateful Dead Merchandising, and Stonehenge LTD proved quite the success during his lifetime, but at death, Stonehenge claimed the co-executors and Grateful Dead Merchandising breached the agreement and consequently Stonehedge Ltd. sued claiming money damages. There’s just nothing fashionable about litigation, and years later, this matter was settled through mediation. What can you make of this mess? Jerry was all about love and peace, surely this is not what he intended. What would he say? Were they all just another ship of fools? Maybe nothing left to do, but smile, smile, smile. Circa 2010

Looking to the left, one student was copiously taking notes and to the right another student was texting about something seemingly more important than how to calculate the estate tax. The alarm on the BlackBerry sounded and the NYU adjunct professor announced it was an early night—class dismissed. Off to the Metropolitan Opera with his 20-yearold daughter. The car service was waiting at the corner of Park and 33rd and the orchestra tickets for Il Trovatore were being held at will call. “Dad, that new Jerry Garcia tie is the

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perfect match for that worn pinstripe suit,” commented his McGill University bound daughter while looking out the window. He looked at her and they both laughed. The professor and his daughter debated the meaning of the libretto as the black sedan pulled up to the David H. Koch Theater behind a sea of black sedans and patrons wearing pinstripe suits and evening gowns. They were ushered to their seats and whispered how remarkable it was that this opera was performed the same way 150 years ago. The lights dimmed as the curtain rose. The estate planning drama unfolded in front of the professor’s eyes, though sadly, his daughter saw only a tragic story of love and revenge among misguided souls. After a standing ovation, the two shared a Cherry Garcia with two tall cappuccinos. The absentminded professor checked his watch and muttered, “If I get home before daylight, I just might get some sleep tonight.” Hours later, the two finally made it home. Dead tired, she thanked him and bid him a good night. The professor proudly tacked the tickets into the corkboard, tossed his old worn suit in the back of the closet, then neatly hung up his new Garcia tie.

Legacy Lesson #26: A Legacy in the Hands of Fiduciaries When it comes to drafting your will, take a step back and think how your fiduciary would interact with the beneficiaries of the estate. Would they work well together? Do they get along? Is there a history of animosity? Are there family issues that have been suppressed by your presence that might bubble over after you’re gone? Then, think about the skill set that an executor or trustee should have, such as: diplomacy, fairness, reason, and a comfort level working with attorneys, accountants, financial planners, and bankers. If you’re 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?

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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, that is, 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, or advisor, or any combination of them. Every family has different needs. If you’ve been married a long time to your first and only spouse, and you trust each other, each spouse may be named as the other’s executor. If it’s a second or third marriage, and there are children from prior marriages, or prior relationships, choosing a spouse as executor may not be a good idea. Once you introduce that spouse as a fiduciary who’s supposed to work for the benefit of other, children from prior marriages, the children tend to resent the second spouse’s actions and react to it with skepticism. If you think your estate may be complicated, involves a business, own assets that are difficult to value, or leave assets to heirs unequally, or involve a second spouse and children from prior marriages, think about hiring an independent individual executor or corporate executor. Appointing a corporate executor with an independent neutral thirdparty co-executor, who understands the family dynamic, typically prevents the heirs from fighting among themselves, or second guessing the actions of their stepparent. Some people are reluctant to appoint a bank as a corporate executor or trustee and cite as their reasoning the fees involved or the institutional feel. The reality is, corporate executor fees, in the long run, could save the estate money because a smoother estate administration is much more cost effective than the costs of an estate in litigation. Would a corporate trustee unilaterally terminate a marital support agreement, call a long term marriage a tax sham, or not

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properly account to a minor beneficiary? Not a chance. Again, not being judgmental to Deborah Koons, but many of the actions she deemed prudent, seem from afar emotionally motivated and not the acts of a neutral third party. Actions that beneficiaries perceive as hostile tend to be met with an equal dose of hostility. Would a corporate executor take such actions? Just wouldn’t happen. So, think about it, it may just keep the peace.

Legacy Lesson #27: Heirlooms Can Define a Legacy On hearing that her mother passed, one daughter dropped everything, boarded a plane, and hours later, entered the home to discuss arrangements with her sister, who was already in the home—“organizing things.” A quick look around the home, a peek inside the china closet and the jewelry box, and 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 previous two years, “Mom gave me that stuff years ago, she said she wanted me to have it.” Boom-instant combustion. Inheriting money is one thing, and it’s important. But heirlooms can define a legacy. And when an engagement ring or china or photo albums are missing in action, emotions heat up quickly. The will hasn’t 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 e-mails 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, don’t leave the disposition of prized possessions to chance. Most wills have a clause that governs the distribution of tangible personal property and leaves the distribution of bric and brac to the executor to divide among the beneficiaries as equally as is

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practicable. When families are tight and get along well, this is usually not a problem. But when there’s friction, and all the heirs aren’t on the same page, this standard clause is an invitation for litigation. What defines Jerry Garcia’s legacy—aside from formlessness, spontaneity, Acid Tests, thousand of concerts, the shaping of a decade, and a generation of peaceniks? If you guessed his guitars, then you probably did well in algebra class. Jerry left his guitars to Douglas Irwin. The thought was good, but obviously incomplete. These guitars had names, so clearly it would have been better if he specifically named each guitar and then bequeathed them to their maker. But what would Irwin ultimately do with them, anyway? Give them to his grandchildren? Sell them? These guitars were in part Jerry’s legacy. There’s the Rock and Roll Hall of Fame, or Historical Society, or some other public interest group that would bring throngs of balding exhippies peacefully through the turnstiles singing the same old songs a different way. Instead, Douglas Irwin had to sue to take possession of the bequeathed guitars. Years of anxiety and litigation, and once the litigation finally ended, he promptly sold the Tiger and the Wolf. When it comes to drafting a will, spend as much time on the distribution of personalities as you would the distribution of the residuary. You should describe each item that is meaningful to you, and name a beneficiary in your will. Some states allow you to use a separate memorandum that could be edited each time you collect a new goody; you could add it to the list without having to call the lawyer and sign a codicil to your will. Imagine the joy and utter jubilation the professor’s grandson will experience when he inherits the corkboard containing all the concert ticket stubs and barely legible handwritten set list for each concert attended.

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8

C H A P T E R

At the End of the Day

O

ur lives are but a blip on the evolutionary time line—but our legacies can last forever. One gladiator preparing for battle said, what you do in life, echoes in eternity. Hopefully your legacy will be etched in the hearts and minds of those you loved, based on what you did in life, not what you failed to do. To a large degree, you control your legacy. You are the president of Me, Inc. Our lives can be complicated, and effective estate planning may seem easier said than done. For some, balancing the needs of a second spouse with the needs of children from prior marriages could be the thorny issue. For others, choosing a successor leader for the family business and figuring out how the wealth should be equitably divided is the sticky wicket. For too many, their children didn’t play well together when they were young, and don’t get along well now. If riches are a curse, at least one milkman said, please smite me with it now. But distributing such wealth so that it helps loved ones and needy ones alike, can be a daunting task. We hope to live long productive lives, but as Sophocles once said, you never know when your number’s up. Hmmm . . . maybe it wasn’t Sophocles, but someone once said it.

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Probate Wars of the Rich and Famous

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 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 or beneficiary designations typically results in bitterness and dispute. Fifth, there’s a casual relationship between effective estate planning and protecting one’s legacy. Mention the name Brooke Astor, and most will tell you about a wealthy woman who was taken advantage of by her son. Sadly, her legacy was overwhelmed by estate planning deficiencies. J. Howard Marshall II had a brilliant career, but his marriage to Anna Nicole Smith and his ineffective estate plan has marred both of their legacies. Don’t judge from afar, but look within. It’s not about celebrity faux pas. It’s about you, and 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. Jack could be your neighbor, your friend, your brother—or your husband.

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At the End of the Day

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Probate Wars of the Rich and Famous

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A

A P P E N D I X

Fact Sheet for Last Will and Testament

Date: SECTION 1: PERSONAL INFORMATION About you: Name:

SS#:

-

-

DOB: Home address: Home Phone:

Work:

Cell: E-mail Address: Employer:

Occupation:

Employer’s Address:

209

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210

Appendix A

Marital Status: Single Widowed

Married

Remarried

Divorced

Domestic Partnership

Please list your children, if any, and their birth dates: Name:

Date of Birth:

Name:

Date of Birth:

Name:

Date of Birth:

Name:

Date of Birth:

Name:

Date of Birth:

About your spouse: Name:

SS#:

-

-

DOB: Employer:

Occupation:

Employer’s Address: U.S. Citizen:

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Yes

No

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Appendix A

211

SECTION 2: GENERAL INFORMATION Circle yes or no for each question. Yes

No

Do you have a will or trust now?

Yes

No

Are you expecting to receive property or money from: Inheritance Gift Judgment Other

Yes

No

Do you have any living children? If so, how many?

Yes

No

Do you have any deceased children? If so, how many?

Yes

No

Are all your children legally yours? (e.g., adopted, stepchild)

Yes

No

Do you have any children under 18? If so, how many?

Yes

No

Do you have any children who require special care?

Yes

No

Do you have any grandchildren? If so, how many?

Yes

No

Do you have any brothers or sisters still living? If so, how many?

Yes

No

Does your spouse have any brothers or sisters still living? If so, how many?

Yes

No

Do you have any children from a relationship other than with your current spouse?

Yes

No

Do you want to specifically disinherit anyone? If so, who?

Yes

No

Do you have long-term health care coverage?

SECTION 3: CURRENT ESTATE VALUE Circle yes or no for each question. 1. Yes No

Do you own a home or any other real estate?

Property address

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Title Holder

Value

Mortgage

Equity

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212

2. Yes

Appendix A

No

Do you own any other titled property such as a car or boat?

Describe Property

3. Yes

No

No

No

Loan

Title Holder

Equity

Balance

Do you have any savings accounts and/or CDs?

Name of Bank

5. Yes

Value

Do you have any checking accounts?

Name of Bank

4. Yes

Title Holder

Title Holder

Approximate Value

Do you have any stocks, bonds, or mutual funds?

Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account:

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Appendix A

213

Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account: Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account: 6. Yes

No

Do you have any profit sharing, IRA’s, or pension plans?

Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account: Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account: Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account:

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214

Appendix A

7. Yes

No

Do you have any life insurance policies?

Name of Insurance Company: Choose one: Term

Variable

Universal

Whole Life

Universal

Whole Life

Owner: Primary Beneficiary: Secondary Beneficiary: Death Benefit: Cash Value:

Name of Insurance Company: Choose one: Term

Variable

Owner: Primary Beneficiary: Secondary Beneficiary: Death Benefit: Cash Value:

8. Yes

No

Do you have any other items of particular value such as coin collections, antiques, jewelry, heirlooms, etc.?

Description: Beneficiary: Description: Beneficiary: Description: Beneficiary:

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Appendix A

9. Do you own an interest in a business? a. If so, do you have a Shareholder Agreement?

215

Yes

No

Yes

No

b. Please list the names of other partners or shareholders:

c. Please estimate the value of your share of the business: 10. Please estimate the approximate value of all your remaining personal property not listed above (clothes, furniture, etc.) $ 11. Yes

No

Do you have any debts other than your mortgage and loans listed above, i.e., credit cards, personal loans, etc.? If so, please list them below.

Who do you owe?

Amount owed

12. Total value of everything you and your spouse own. (Add lines 1–9)

$

13. Total amount you and your spouse owe.

$

14. Subtract line 13 from line 12. TOTAL NET ESTATE

$

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216

Appendix A

SECTION 4: APPOINTMENTS The following questions ask whom you would like to serve as Executor, Trustee, and Guardian if necessary. Executor An Executor is the person or corporation named in your will to administer the settlement of your estate. This appointment involves significant responsibility and therefore is compensated as provided by the laws of the state where your estate is administered. Please fill in who you would like to serve as Executor: 1.

If this person/bank predeceases you or fails to qualify, who would you like to serve as successor Executor? 2.

If this person/bank predeceases you or fails to qualify, who would you like to serve as successor Executor? 3.

Trustee The Trustee is the person/bank who would manage the assets held in trust when and if necessary. This appointment also involves significant responsibility and therefore is compensated by the laws of the state where the trust is held

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Appendix A

217

or by separate agreement. Please fill in who you would like to serve as Trustee: 1.

If this person/bank predeceases you or fails to qualify, who would you like to serve as successor Trustee? 2.

If this person/bank predeceases you or fails to qualify, who would you like to serve as successor Trustee? 3.

Guardian Your guardian is the person who would raise your minor children in the event your spouse predeceases you. Please fill in who you would like to serve as guardian. 1.

If this person predeceases you or fails to qualify, who would you like to serve as guardian in default? 2.

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218

Appendix A

If this person predeceases you or fails to qualify, who would you like to serve as guardian in default? 3.

SECTION 5: DISPOSITIVE PROVISIONS Gifts: Do you want to make a gift to a charity, foundation, religious or fraternal organization? If so, please list the organization and the dollar amount? Organization

Amount

Do you want to give any personal items such as a wedding ring or watch to a family member or other individual? Name of Person

Description of Gift

Who do you want to receive the remainder of your estate? Name of Person (relationship to you)

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Percentage

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Appendix A

219

SECTION 6: LIVING WILLS Executing a living will is a directive to your family and doctors to withhold artificial life support equipment or heroic measures if your medical condition is irreversible. Are you considering executing a living will? Who would you appoint as your agent to follow your directive?

SECTION 7: POWER OF ATTORNEY Executing a power of attorney authorizes a person who you select to carry on with your financial affairs in the event that you should become unable to do so yourself. Who do you want to appoint to be your attorney in fact?

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B

A P P E N D I X

Probate Litigation Fact Sheet

Name of Decedent:

SS #

Address of Decedent: Date of Death: County/State of residence before death: Surviving spouse’s name (if applicable): Is the spouse the first spouse, or subsequent spouse, please provide detail:

Was there a divorce? Property Settlement Agreement.

If so, please attach the

Names and ages of children from this marriage:

221

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222

Appendix B

Names and ages of children from prior marriages:

Did the Decedent own a home or any other real estate? If so, please list below. Property address

Title Holder

Value

Mortgage

Equity

Did the Decedent own any other titled property such as a car or boat? If so, please list below. Describe Property

Title Holder

Value

Loan

Equity

Did the Decedent have any checking accounts? If so, please list below. Name of Bank

bapp02.indd 222

Title Holder

Balance

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Appendix B

223

Did the Decedent have any savings accounts and/or CDs? If so, please list below. Name of Bank

Title Holder

Approximate Value

Did the Decedent have any stocks, bonds, or mutual funds? If so, please list below. Name of Brokerage Firm/Investment Manager: FMV of Account: Name of Account: Name of Brokerage Firm/Investment Manager: FMV of Account: Name of Account: Name of Brokerage Firm/Investment Manager: FMV of Account: Name of Account: Yes

No

Did the Decedent have any profit sharing, IRAs, or pension plans?

Name of Brokerage Firm/Investment Manager: FMV of Account: Name of Account:

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224

Appendix B

Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account: Name of Brokerage Firm/Investment Manager:

FMV of Account: Name of Account: Did the Decedent have any life insurance policies? If so, please list below. Name of Insurance Company: Choose one: Term

Variable

Universal

Whole Life

Universal

Whole Life

Owner: Primary Beneficiary: Secondary Beneficiary: Death Benefit: Cash Value:

Name of Insurance Company: Choose one: Term

Variable

Owner: Primary Beneficiary: Secondary Beneficiary: Death Benefit: Cash Value:

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Appendix B

225

Did the decedent have any other items of particular value such as coin collections, antiques, jewelry, heirlooms, etc.? If so, please list below. Description: Beneficiary: Description: Beneficiary: Is there a Will? (If so please attach.)

Is there a Codicil?

Are there any trust agreements? attach.)

(If so, please

Who are the executors of the estate?

Who are the trustees of the trusts?

Has a Federal or State estate tax return been filed?

Have any estate assets been distributed, taken, or sold?

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226

Appendix B

Do you believe there was any: a. Undue Influence? If so, please explain.

b. Lack of Capacity? Did the Decedent lack capacity to make a gift, sell an asset, or sign a Will or Trust? If so, please explain.

c. Fraud? Was there any fraud in the transference of assets? If so, please explain.

d. Abuse of Trustee Power? Has an executor or trustee been dilatory or tyrannical? If so please explain.

Have you been represented by an attorney regarding this estate before?

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Appendix B

227

If so, by whom?

Why do you seek to make a change of attorney?

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Jerry Garcia 989 F.Supp.539 United States District Court, S.D. New York. STONEHENGE, LTD. Plaintiff, v. Deborah Koons GARCIA and David Hellman, Co-Executors of The Estate of Jerome J. Garcia, Grateful Dead Merchandising, Inc., and Peter McQuaid, Defendants. No. 97 Civ. 6606(SAS), January 13, 1998. 1998 WL 118177 (N.D.Cal.) United States District Court, N.D. California. The Estate of Jerome Garcia, Deborah Koons Garcia, an individual, David M. Hellman, an individual, Grateful Dead Merchandising, Inc. and Peter E. McQuaid, an

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Index

Acid Tests, 187 Adams, Carolyn, 187–188, 189–190, 196–197 Administering estates, 163 Advisors, communication among, 11–12 AllGood Entertainment, Inc., 166 Ancillary estate administration in foreign jurisdictions, 170 Animals, protection for, 119–124 The Anthony Marshall Fund, 63, 64–65, 74 Assets: retitling, 94–97 selling, 180, 181 titling, 94 Astor, Ava, 34 Astor, Brooke Russell: abuse of, 40–42, 88 V. Astor and, 34–35 death of, 44, 73 discovery order in probate litigation, 79, 80–87 executors for, 44, 59–60, 66, 74 first codicil to will of, 61–65, 66 guardianship of, 40–41 last will and testament of, 44–61, 170 legacy of, 7, 40, 79, 206 monies pilfered from, 42–43 probate litigation, 79 second codicil to will of, 67–70 third codicil to will of, 66–73 Astor, Jack, 35 Astor, John Jacob, 33 Astor, John Jacob, III, 33

Astor, John Jacob, IV, 33–34 Astor, Vincent, 34–35, 36–37 Astor, William Backhouse, Jr., 33 Astor, William Backhouse, Sr., 33 Banbury Fund, 137 Beneficiary designations: fiduciaries and, 198–200 titling of assets and, 94 Ben & Jerry Ice Cream, 198–199 Birkhead, Larry, 23 Branca, John, 163, 165, 168 Brown, Joseph Michael, 101, 103 Burial instructions, 129–134 Business succession plans: description of, 9 Grantor Retained Annuity Trusts, 178–183 importance of, 173–174 overview of, 10–11 questions for, 174–175 team for, 11–12 valuation of businesses and, 175–176 Caretakers for pets, 119–124 Caveats, filing of, 90 Celebrity probate disputes, 7 The Central Park Conservancy and Astor wealth, 56, 63 Chan, Tony (Chan Chun Chuen), 142–145, 148 Charitable remainder trusts, 66, 124 Charitable trusts. See Leona M. and Harry B. Helmsley Charitable Trust; Mission statements

251

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252

Index

Children: disinheriting/omitting from wills, 29–32 minor, guardianship of, 168–170 from prior marriages, provisions for, 27–29 trusts for grandchildren, 127–129 Chinachem, 139, 140–141 Chinachem Charitable Foundation, 142, 143–145, 148 Christensen, Henry, III, 48, 59–60, 66, 74 Confidential relationships and undue influence, 91, 92, 95 Conservators, 88 Contested estates. See also Probate litigation anatomy of, 88–91 anticipating, 8–9 as increasing in number, 29 legacy and, 5–6 origins of, 6–7 Contested wills. See also Probate litigation burden of proving undue influence, fraud, or lack of capacity in, 73 filing of, 44 omitted children and, 30–32 undue influence claims in, 91–94 Corporate executors, 203–204 Cushing, Minnie, 34 Death: of loved ones, reactions to, 5–6, 7–8 of spouses, 150–151 De la Renta, Annette, 40, 41, 43, 47, 50, 79 DiLeo, Frank, 166 Discounts attached to valuation of businesses, 176–177 Discovery: in B. Astor probate litigation, 79, 80–87 setting matters down for, 90 Disinheriting family members, 30–32 DNA testing, 23–24 Documenting intentions, 150–151 Documents, storage of, 148–149

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Donative intent, 95 Dummar, Melvin, 103 Elective share claims, 16, 27–28 Estate litigation. See Contested estates; Probate litigation Estate planners, developing rapport with, 9 Estate planning. See also Business succession plans; Wills consequences of absence of, 12 document storage, 148–149 maintenance of, 9 role of, 10 for second spouses and children of previous marriages, 28–29 teaching of, 2 team for, 11–12 themes and recurring fact patterns in, 3–4 Estates, administering, 163 Estate taxes: exemptions and rates, 126 protecting estates from, 171 trusts and, 124–127 Executors: access to documents by, 148–149 for B. Astor, 48, 59–60, 66, 74 beneficiaries and, 202–204 burial plans and, 132–134 corporate, 203–204 for Garcia, 190, 195–196, 197, 198, 201–202 for Jackson, 163, 164, 168 role of, 200–201 Fact Sheets: for Last Will and Testament, 209–219 for Probate Litigation, 221–227 Family disputes: anticipating, 8–9 disinheriting family members, 30–32 origins of, 6–7 Family members. See also Children; Guardianship disinheriting/omitting from wills, 30–32

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Index monitoring health and wealth of vulnerable, 79, 88 Farm animals, trusts for, 123–124 Federal estate taxes: exemptions and rates, 126 protecting estates from, 171 trusts and, 124–127 Fiduciaries, 164, 200–202 Filing: of caveats, 90 of contested wills, 44 Forgery of signatures, 145–148 Fraud, protection against, 99–103 Garcia, Annabelle, 188, 190 Garcia, Clifford, 189 Garcia, Heather, 187, 190 Garcia, Jerry: death of, 189 death of friend of, 186 drugs and, 187, 188–189 early life and music of, 186–185 executors for, 190, 195–196, 197, 198, 201–204 funeral of, 190 guitars of, 190, 198, 205 last will and testament of, 170, 190–195 marriages of, 186–187, 189 on meeting bandmates, 185–186 probate litigation, 195–199 women in life of, 187–188, 189 Garcia, Keelin, 188, 190, 191, 197–199 Garcia, Theresa “Trixie,” 188, 191, 197 Generation-skipping transfer tax, 127–129 Gifting business interests, 177–181 Gladiator (movie), 99–101 Grandchildren, trusts for, 127–129 Grantor Retained Annuity Trusts (GRATs), 178–181 The Grateful Dead, 183–184, 185–186. See also Garcia, Jerry Grateful Dead Merchandising, 199 Grateful Dead Productions, Inc., 198 Gravesites, move of, 129–132

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253

Guardianship: of adults, 88, 99 of Jackson children, 164–165, 169–170 of minor children, 168–170 Heal the World Foundation, 165 Heirlooms and legacy, 202–203 Hellman, David M., 190, 198 Helmsley, Harry, 106, 107–108, 109, 129–130 Helmsley, Leona: book about, 107 charitable trust of, 109–110, 111, 113–119, 135 conviction and sentencing of, 108–109 death of, 105 estate settlement, 111 indictment of, 108 last will and testament of, 109–110, 170 legacy of, 119 life and marriage of, 106–107 litigation against, 108 mission statements of, 113–115, 134–135 move of husband’s gravesite by, 129–130 philanthropy of, 105 Trouble (dog), 109–112 Hughes, Howard, 101, 103 Humane shelters as caretakers of pets, 120–121 Humane Society of the United States, 118 Huntington, Helen Dinsmore, 34 Income in respect of decedent (I.R.D.), 168 Intent: for burial, 129–134 donative, 95 making clear, 150–151 In terrorum clauses, 32 Irwin, Douglas, 190, 198, 205 The Island Foundation and Astor wealth, 54

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254

Index

Jackson, Joe, 163, 164, 166–167 Jackson, Katherine, 164–165, 167–168, 169–170 Jackson, Michael: address at Oxford University, 155 celebrity of, 153 death of, 155 estate of, 163–164, 167–168 executors for, 163, 164, 168 guardianship of children of, 164–165, 169–170 last will and testament of, 156–162 life and music of, 153–155 litigation by father of, 166–167 protection of intellectual property rights and image of, 165–166, 167 restructuring of debt of, 166 reunion concert litigation, 166 J.K. Lasser Pro: Estate & Business Succession Planning, 2 Johnson, Melissa, 165 Joint accounts, 94–96 JP Morgan Chase, 41, 43, 79 Kesey, Ken, 187 Kesey, Sunshine, 187, 191 Kissinger, Henry, 40, 41 Koch, Charles, 172 Koch, David, 172 Koch, Ed, 107 Koch, Fred C., 14, 171–174 Koch, Frederick, 172, 173 Koch, William, 172, 173 Koch Industries, 171–173 Koons, Deborah: as executor, 195–196, 197, 198, 201–202 Garcia and, 188, 189, 190 Kreutzmann, Bill, 186, 185 Kuser, Anthony Dryden, 34. See also Marshall, Anthony Kuser, J. Dryden, 34 Last Will and Testament Fact Sheet, 209–219 Last will and testaments. See Contested wills; Wills

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Legacy: of B. Astor, 7, 40, 79, 206 contested estates and, 5–6 control of, 205–208 estate planning and, 10 fiduciaries and, 200–202 heirlooms and, 202–203 of L. Helmsley, 118–119 of Jackson, 168 of J. Marshall II, 25–26, 206 mission statements and, 138 as work in progress, 9 Leona M. and Harry B. Helmsley Charitable Trust, 109–110, 111, 113–119, 134–135 Lesh, Phil, 186, 185, 190, 197 Liberace, 119–120 A Long Strange Trip (McNally), 186 Loss of loved ones, reactions to, 5–6, 7–8 Mann, Howard, 167 Marine Corps University Foundation and Astor wealth, 57, 64 Marriage: prenuptial agreements, 27–28 provisions for second spouses and children of previous marriages, 28–29 Marshall, Anthony. See also The Anthony Marshall Fund allegations against, 41–42 Astor family and, 40–41 bequests to, 45–46, 50, 51–52 conviction of, 7, 75–78, 101 criminal indictment of, 73–75 as executor and trustee, 48, 59, 75 mentioned in mother’s will, 57 pilfering claims against, 42–43 sentencing of, 78 stepfather of, 34 trust for, 58, 66 Marshall, Charlene, 43, 47, 51, 58 Marshall, Charles H., 34 Marshall, E. Pierce, 15–16, 24–25 Marshall, J. Howard, II: career and wealth of, 13–14

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Index death of, 15 estate of, 24–25 first meeting with Smith, 14–15 Koch Industries and, 171 legacy of, 25–26 Marshall, Philip, 40–41, 46, 52 Marshall, Vickie Lynn. See Smith, Anna Nicole Matherson, Manasha, 188, 190 McClain, John, 163, 164, 165, 168 McKernen, Ron “Pigpen,” 185–186 McNally, Dennis, A Long Strange Trip, 186 Mediation, 96 Mental capacity of testators, 96–99, 149 The Merry Pranksters, 187 The Metropolitan Museum of Art and Astor wealth, 55, 62, 65 Michael Jackson Family Trust, 164, 170 Mission statements, 113–115, 134–138 Morrissey, Francis X., 73–75, 76–77 Mountain Girl (Carolyn Adams), 187–188, 189, 190, 196–197 Never Can Say Goodbye book, 167 New York City Bar Association, “Planning for Your Pets in Your Will,” 120–124 New York City schoolteachers and Astor wealth, 63 The New York Public Library, Astor, Lenox and Tilden Foundations, 47, 49, 55, 56, 62, 65 New York University and Astor wealth, 53–54 The New York Zoological Society and Astor wealth, 56, 64 No-contest clauses, 32 Onassis, Jackie, 7 Oxman, Brian, 167 Pacelle, Wayne, 118 Panzirer, Craig, 109, 128 Panzirer, David, 109–110, 124

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255

Panzirer, Jay, 109, 128 Panzirer, Meegan, 109, 128 Panzirer, Walter, 109–110, 124 Perez-Zarraga, Yvonne M., 127 Personal property, distribution of, 204–205 Pets, protection for, 109–112, 119–124 Pierson, Ransdell, 107 “Planning for Your Pets in Your Will” (New York City Bar Association), 120–124 Pour-over wills, 170 Power of attorney, co-agents for, 88 Prenuptial agreements, 27–28 Presley, Lisa Marie, 153 Princeton University and Robertson Foundation, 136–138 Privacy and revocable trusts, 170 Probate litigation: B. Astor and, 80–87 of celebrities, 7 J. Garcia and, 195–199 origins of, 88–91 Probate Litigation Fact Sheet, 221–227 Property owned in other states or countries, 170 Protection: for animals, 109–112, 119–124 from estate taxes, 171 against fraud, 99–103 Psychological evaluations and mental capacity, 149 The Queen of Mean (Pierson), 107 Rain Man (movie), 30–31 Raising Helen (movie), 168 Retitling of assets, 94–97, 171 Revocable trusts, 170 Robertson, Charles and Marie, 136–138 Rockefeller, David, 40, 41, 47 Ross, Diana, 169–170 Rowe, Debbie, 164 Ruppenthal, Sara Lee, 186–187, 190 Russell, Roberta Brooke, 34. See also Astor, Brooke

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256

Index

Saul Ewing, LLP, 2 Searching for the Sound (Lesh), 190 Second spouses, provisions for, 28–29 Selling assets, 180, 181 Sfara, Zamfira, 110–111 Siegel, Barry, 163 Signatures, forgery of, 145–148 Signing of wills: videotaping, 98, 151 witnesses to, 149–150 Smith, Anna Nicole: bankruptcy filing of, 15–16 career of, 13 death of, 17 death of son of, 16–17 estate of, 23–25 first meeting with Marshall, 14–15 last will and testament of, 17–23 Supreme Court and, 16, 24–25 as widow, 15 Smith, Daniel, 16–17, 23 Smith, Dannielynn, 16–17, 23–24 Speegle, Peter, 186 Spouses: death of, 150–151 as executors, 201 Stackhouse, John E.H., 41 Steinbrenner, George, 126 Stephens, Suzanne, 198–199 Stern, Howard, 18, 19, 23 Stonehenge LTD, 199 Surrogate’s Court, New York, 44, 73, 79, 88, 116–117, 170 Suspicious circumstances and undue influence, 91–94 Tabak, Ivan, 127 Talmadge, Madeline, 34, 35 Taxes: generation-skipping transfer, 127–129 protecting estates from, 171 trusts and, 124–127 valuation of businesses and, 175–178 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 1990, 126

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Taylor, Elizabeth, 170 Team meetings among advisors, 11–12 Testamentary pet trusts, 120, 121–123 Testators, mental capacity of, 97–99, 149 This Is It (documentary), 166 Titanic (ship), 34, 35 Titling of assets, 94 Transferring wealth in business interests, 177–179 Triumph International Inc., 165 Trump, Donald (The Donald), 107 Trusts. See also Mission statements charitable remainder, 66, 124 estate taxes and, 124–127 for farm animals, 123–124 for grandchildren, 127–129 Grantor Retained Annuity, 178–181, 183 revocable, 170 testamentary pet, 120, 122–123 Undue influence: contested wills and, 91–94 in retitling of assets, 94–97 The United States Trust Company of New York, 2 Universal truths, 5 Valuation of businesses, 175–178 Videotaping of signing of wills, 98, 151 Vincent Astor Foundation, 62, 63 Wang, Nina: charges and appeals, 141 Chinachem and, 140–141 death of, 141–142 estate litigation, 142–148 life and marriage of, 139–140 signature of, 145–148 Wang, Teddy, 139–140, 144 Wang Din-Shin, 139, 141 Weir, Bob, 186, 185 Weitzman, Howard, 167

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Index Williams, Ted, 132–134 Will of B. Astor: discovery order, 79, 80–87 excerpts of, 44–61 first codicil to, 61–65 probate litigation and, 78–79 second codicil to, 67–70 third codicil to, 71–72 Wills. See also Contested wills; Will of B. Astor of V. Astor, 35–37 burial intentions in, 129–134 children omitted from, 30–32 destroying copies of previous, 149

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257

Fact Sheet for Last Will and Testament, 209–219 of J. Garcia, 170, 190–195 of L. Helmsley, 109–110, 170 of M. Jackson, 156–162 outdated and ineffective, 23 personal property in, 202–203 planning for pets in, 119–124 pour-over, 170 setting aside as products of fraud, 101, 103 of A. Smith, 17–23 videotaping of signing of, 98, 151 witnesses to signing of, 149

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