New York Attorney General Seeks Reduction of Leona Helmsley Estate Executors’ Fees

Bill for $100 million called ‘astronomical’

Leona Helmsley, shown in 1990, left most of her billions to charity when she died in 2007.

Leona Helmsley, estate planning

Leona Helmsley, shown in 1990, left most of her billions to charity when she died in 2007. Photo: Associated Press

By Peter Grant

Updated Jan. 21, 2016 5:32 p.m. ET

NEW YORK-Nine years after Leona Helmsley died, a battle over her estate erupted Thursday in a New York court. The state attorney general said a $100 million fee sought by the estate’s executors, including two of Mrs. Helmsley’s grandchildren, is “astronomical” and should be cut, potentially by about 90%.

Mrs. Helmsley, a onetime owner of a sprawling property portfolio that included the Empire State Building, left most of her $4.78 billion fortune to charity when she died in 2007. The four executors of her will in 2014 petitioned the estate for the fee to cover their work thus far.

The office of New York Attorney General Eric Schneiderman on Thursday challenged the executors’ petition, calling the more-than-$6,000 hourly rate it amounts to “exorbitant,” according to a filing in New York Surrogate’s
Court.

The attorney general’s charities bureau has the power to contest the executor fees to ensure the amount the charity receives isn’t diminished by “excessive and unreasonable expenses,” the filing states.

The filing asks that a more reasonable amount be set. It suggests one method of calculating under which the fees would be less than $10 million.

The battle marks the latest twist in the unwinding of a real-estate fortune built by Harry Helmsley over a half century. Other issues have included a challenge to Mrs. Helmsley’s will by two of her grandchildren who were cut out of it and the inclusion in the will of $12 million for her dog, Trouble, which eventually was reduced to $2 million.

Mrs. Helmsley served 19 months in jail on tax-evasion charges and garnered a reputation for mistreating her staff.

The four executors of her will include two of her grandchildren from her first marriage, David Panzirer and Walter Panzirer as well as one of her lawyers, Sandor Frankel, and John Codey, a business adviser. Mr. Codey figured in a 2001 page one article in The Wall Street Journal about Mrs. Helmsley and one of her suitors after her husband’s death in 1997.

In a statement released Thursday, a representative of the executors defended their $100 million request, noting that they “administered an extraordinarily complex estate.in the face of enormous risks.” The statement also said that the executors enhanced the estate’s value “by hundreds of millions of dollars” despite the economic downturn that caused real-estate values to plummet after Mrs. Helmsley’s death.

The attorney general’s Thursday filing points out that time records show that the executors spent 15,535 hours on estate matters, making their request for $100 million equivalent to a rate of $6,437 an hour. “By any definition, this hourly rate is exorbitant, unreasonable and improper,” the filing said.

The court earlier awarded the executors $7.2 million in fees as an advance payment. Nothing has been paid since because the attorney general’s office in late 2014 asked the court to hold off paying the full $100 million until it could review the request.

Mrs. Helmsley, who died at the age of 87, left most of her fortune to a charity, Leona M. and Harry B. Helmsley Charitable Trust. Her will included $15 million for her brother, the late Alvin Rosenthal; $10 million each for David Panzirer and Walter Panzirer, and $12 million for Trouble.

Two other grandchildren, Craig Panzirer and Meegan Panzirer Wesolko, received nothing. They contested the will and ended up getting $3 million each, according to people familiar with the matter. The two couldn’t be reached for comment.

The fight over executor fees stems in part from the will’s lack of clarity. The document expressly rules out the executors getting the statutory commission based on the estate’s assets, according to the attorney general’s filing.

The filing describes that provision of the will as a “prudent decision” because the statutory commission would have come to about $200 million, an amount that “would far exceed the reasonable value of the executors’ services.”

But the will doesn’t specify how the executor fees should be calculated, according to the attorney general’s filing. That means the executors “are entitled only to reasonable compensation for the services they actually rendered to the estate and nothing more,” the filing said.

Any resolution will center on the question of what is reasonable. The 2014 affidavit filed by the executors points to out how challenging it was for them to handle more than 80 stakes in real estate in 17 states and the District of Columbia, hundreds of individual bond issues, and hundreds of other pieces of personal property. The real estate included such trophies as the Empire State Building and Park Lane Hotel, garden apartments in White Plains, N.Y., and Wal-Mart Stores Inc. WMT 1.71 % properties throughout the country.

Complicating the executors’ task was the financial downturn and Mrs. Helmsley’s “personal notoriety,” the affidavit said. The executors contended that under these “unprecedented, extraordinary and exceptionally difficult” conditions they achieved enormous savings for the estate by doing such things as keeping taxes to a minimum and waiting for opportune times to sell such assets as the Park Lane.

“The executors confronted innumerable challenges and problems which were addressed successfully, all to the enormous benefit of the Charitable Trust,” the affidavit states.

The attorney general’s filing calls the affidavit “misleading” because it creates the impression that the executors were at the center of the real estate deal-making. In fact, they were “primarily reviewing information, analyses and recommendations prepared by their consultants and counsel,” the filing says.

The attorney general’s filing asks the court to appoint a neutral expert to advise on the “reasonable value” of the executors work.

As an alternative, the papers provide an analysis of what reasonable compensation should be based on the amount of hours the executors worked. That analysis concludes the four executors worked a total of about 15,535 hours and that a fair rate of payment would be $628 an hour based in part on what senior executives at the company were being paid at the time of Mrs. Helmsley’s death.

Mrs. Helmsley left instructions in her will that the fortune be spent on “purposes related to the provision of care for dogs” but a judge ruled that the trustees could give the money away as they saw fit. The trust had made $1.42 billion in grants as of March 2015 to charities including nonprofit organizations involved in health care and education. The four executors of
the Helmsley estate also are the trust’s four trustees, according to its 2014 annual filing.

Write to Peter Grant at peter.grant@wsj.com

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Donor Education – Why Effective Donor Education Programs Are Important

Give sign image, estate planning

Image by Jello Fishy

One of the most effective ways to educate donors and help them achieve financial literacy is through sustained and focused donor education programs. The process of understanding the power of philanthropy and how it works best for a donor’s goals and objectives takes time. When donors learn together, share their ideas and understand what other donors have done and are doing, they become more comfortable with the process.

Donor education programs which focus on philanthropy and related topics, such as financial issues for women, can teach both men and women how to achieve the joy of giving while living. Your institution can incorporate into the donor education event faculty and student presentations which integrate messages into the mission of your institution. These programs can help differentiate/distinguish your institution and create deeper relationships with donors, alumnae, and alumni spouse (Women’s Philanthropy Institute 2009, 15). (8)

Effective donor education, combined with financial literacy, can also provide networking opportunities. Associating with women of similar financial standing increases their willingness to use their money to leave a legacy. This is especially relevant for women who are learning to be comfortable with their wealth. Many baby boomer women in this country will inherit twice—once from their parents and once from their spouse. Nevertheless, donors will not give until they know that they can take care of themselves first. As an estate planning attorney, the most common question I hear from a new widow is, “Do I have enough money to live on?” (Of course that question should be asked many years before that moment in time.) Taking the time to systematically educate your women donors, to help them achieve financial literacy, to teach them that by gifting they can reap both current and future rewards will help empower them to act when they receive their “double inheritance.”

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Estate Planning Conundrum: What to do when a beneficiary has a substance abuse problem

Will ImageIn my 28 years of working with families on their estate plans, many parents have raised the issue of what to do when a child or grandchild struggles with substance abuse. With the recent death of Whitney Houston and her connection to substance abuse, it reminds me of what this means during the estate planning process. These parents are heartbroken and need guidance on how to address this difficult situation in their estate planning documents. Substance abuse – whether it’s alcohol, prescription drugs, or illegal narcotics – affects many of the families we advise. As a result, we developed a list of questions for families to consider when designing their estate plan:

  1. Has the beneficiary ever been diagnosed with a mental illness?
  2. Is the beneficiary having a particularly hard time – is divorce on the horizon? Has he lost his business? Does he gamble?
  3. What is his relationship with other family members?
  4. Who does he trust?
  5. Who is giving him money?
  6. Is he eligible for government assistance?
  7. Who is paying his health insurance?
  8. Is he employed? For how long? What types of jobs?
  9. Has he ever been treated for his addiction?
  10. Is he a member of Alcoholics Anonymous or a similar organization?
  11. Do these issues run in the family?
  12. Has there been a family intervention?
  13. Is he open to counseling? Has this topic been addressed?
  14. Where is he living? Can he live alone?

I have noticed that substance abuse often masks other underlying mental health issues, including undiagnosed or untreated schizophrenia, bipolar disorder, and depression. That these issues are often part of a larger family pattern makes having the discussion much more difficult, but much more essential.

Families in Conflict

An addicted child may have already taken a significant emotional, physical, and financial toll on the entire family. Parents who find it difficult to handle this child become increasingly disturbed when they consider who would step in if they are unable or unavailable. This helplessness often leads to anger, frustration, and conflict.

One parent may want to cut off the beneficiary while the other parent cannot consider doing so. One parent may want to kick the child out of the home, while the other parent believes that doing so would make matters worse. These conflicts add stress to their marriage and the family at large.

Grandparents may have different opinions than the parents. Siblings may already be resentful of their addicted sister or brother. In many families, the troubled child has already received significant emotional and financial assistance. His troubles have already taken center stage at the dinner table. His presence in the home and attitude toward the family may have already created constant disruption.

Estate Planning Tools and Options

As complex and emotional as these issues are, families must address them. And they will welcome having an impartial, yet compassionate advisor to provide guidance, suggestions, and choices.

One planning tool for parents to immediately consider is for that child to designate them as the agent under his health care proxy and his attorney in fact under the durable power of attorney. Without these documents, HIPPA will prohibit the parents from being involved with his treatment. Also, these documents give parents legal access to his health and financial records, which could be extremely important if it becomes necessary to apply for government benefits.

Inevitably, an estate planning discussion will include disinheritance. In my experience, this is a subject frequently discussed and rarely implemented. No matter how angry and frustrated they are, parents still want to provide some sort of safety net for their child.

This pressure to disinherit the troubled child may come from the sense that he has already taken more than his fair share of the family’s resources, possibly at the expense of the other, more responsible children. As the family’s advisor, however, you should ask the parents:

  • If you are not here, how will the child be cared for with no existing financial resources?
  • Who will be responsible?
  • Who will he call?
  • Will disinheriting him place a financial burden on your other children, or will they be able to walk away?

Establishing a Trust

Rather than disinheriting him, a common solution is to establish a trust that includes him as a permissible beneficiary – or is only for his benefit during his lifetime. The hard decision, however, is who will serve as trustee after both parents die. Parents are understandably reluctant to place that burden on their other children or on other relatives.

If there are significant assets, then choosing a corporate trustee is the simple choice. The other children or trusted friends or advisors can then have the right to remove or replace that trustee during the trust duration. If there are not sufficient assets to warrant a corporate trustee, then the parents must identify friends or trusted advisors – who should be paid for their services. The trustee should review the trust document to ensure that he has the right to resign from his office, and understand the mechanism for subsequent trustee appointments. The document should provide the trustee with the authority to expend funds for purposes such as counseling, detectives, drug testing, and private security.

Trust Terms and Provisions

After deciding on the line of succession and identifying who will operate the trust, parents need to focus on the various purposes for which the trustee may or may not distribute income and/or principal from the trust to the beneficiary.

If the beneficiary is likely to require government assistance, then the terms of the trust must contemplate that. The trust document may also give the trustee authority to withhold payments if deemed advisable. This is often preferable to asking that trustee to determine whether a beneficiary is drug-free. Those suffering from substance abuse can be clever, and making such a determination is tricky.

Rather than withholding payments, another approach is to provide the beneficiary with incentives for staying clean. The trustee could provide additional distributions if the child holds a full-time job or regularly attends counseling sessions. Making the distribution provisions restrictive and under the trustee’s sole control can help protect those assets from the troubled child’s creditors, or from any of the many “friends” and acquaintances who might take advantage of him if they believe there is money in his pocket.

Many parents have a sense of shame or denial, and may rightly choose not to make these troubles public, or put them in a trust document that others can access. I encourage parents to write an annual side letter to the trustee that describes their observations and offers details that they are reluctant to share while living. This letter could be placed in a sealed envelope, kept with the original estate planning documents, and updated/revised as circumstances change. It can be comforting to the trustee to understand more about the parents’ goals and objectives from their own voice.

Planning for the beneficiary with a substance abuse issue is complex and can have consequences that affect the entire family. Remind parents that life is a movie, not a snapshot. A plan created now should be good enough to handle today’s circumstances, yet flexible enough to contemplate the unknown. Encourage parents who are dealing with this difficult situation to revisit their plan every few years as circumstances change and evolve.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Clients Divorcing? Be Sure to Handle These Estate Planning Details

Review all documents to ensure the right people inherit.

In my 30 years of practice, I have come to the conclusion that while a client may not want to be married to the person he or she is married to, that does not mean he or she wants to be divorced. Therefore, as the divorce progresses, emotions swirl, and anger and angst set in. The CPA, who has ongoing, in-depth knowledge of the client’scracked egg shell image, estate planning financial situation, can be instrumental in making sure that all details are attended to during this turbulent time.

Here are some issues CPAs and their clients must take into account during a divorce:

  1. Restraining orders. In many states, when a divorce petition is filed, what is known as an “automatic temporary restraining order” is put in place. Under a restraining order, most estate planning (such as changing estate planning documents or the designation of beneficiaries) cannot occur without a court order. In essence, all planning comes to a halt (unless a court rules otherwise) until the divorce is over. However, some documents may be revised while the divorce is pending. These may include a financial durable power of attorney and health care proxy documents, and documents that pertain to the disposition of the client’s remains. Ensure that your clients review such documents, especially if they put the client’s spouse in charge.
  2.  

  3. State law, particularly as it applies to wills. In many states, a divorce, once completed, revokes the provisions in a client’s will that name a spouse as a beneficiary. However, you should still encourage divorcing clients to review and revise all estate planning documents, especially wills. Otherwise, they may unintentionally leave portions of their estate to an ex-spouse or former in-laws, as happened in a recent case in New York (In re Estate of Lewis, 978 N.Y.S.2d 527 (N.Y. App. Div. 1/3/14)). New York resident Robyn Lewis left everything to her husband, including her home, in her will. She got divorced, but did not change her will before she died at age 43. Though, under New York law, her ex-husband was now not allowed to inherit, Lewis had left her home to her father-in-law as a default provision—a provision not automatically revoked under New York law. Lewis’s family of origin contested the will, but the New York appellate court upheld the decision that the home now belongs to her ex-father-in-law.
  4.  

  5. Beneficiary designations. When a client gets divorced, you should review all primary and secondary designations of beneficiaries for his or her life insurance policies, IRAs, and annuities, as getting a divorce does not automatically revoke those contract beneficiaries. In Hillman v. Maretta, 133 S. Ct. 1943 (U.S. 2013), for example, the U.S. Supreme Court ruled that a man’s ex-wife was still the beneficiary of a $124,558 life insurance policy, even though he had remarried before his death, as he had not changed his beneficiary designation after they divorced.
  6.  

  7. Life insurance. Life insurance policies need be carefully reviewed to determine how the divorce will affect them. For example, if a couple purchased a second-to-die life insurance policy because they thought the marital deduction would defer the estate taxes until they both died, that policy must be reviewed to see what happens in the event of a divorce.
     
    Sometimes, after a divorce, one party does rightfully remain the beneficiary of a life insurance policy on his or her ex-spouse’s life. In these situations, the named beneficiary should, during divorce proceedings, mandate that the policy remain in force and that duplicate statements be mailed to his or her ex-spouse to ensure that payments are made on time.
  8.  

  9. Estate tax. After they divorce, clients will lose the estate tax marital deduction—and therefore incur higher estate taxes if their spouse dies before they do. Prepare clients for these extra taxes by discussing topics such as what assets will cover the estate tax and whether they should obtain additional insurance.
  10.  

  11. Embedded income taxes. In a divorce, many clients view the assets at their current values. The reality is that an asset may have a significant embedded gain because of a very low cost basis, depreciation, or recapture or because it is a non-Roth retirement planning asset. CPAs can call a client’s attention to embedded taxes and make sure they are taken into account in determining how the assets are to be divided.

 
If you are representing both spouses, be aware of potential conflicts of interest when providing advice to either of them that may be perceived as being adverse to the other spouse. In addition, ensure that both spouses have formally agreed to have the CPA represent both parties during the divorce. CPAs should consider the guidance on conflicts of interest in the AICPA Code of Professional Conduct (1.110.010 Conflicts of Interest for Members in Public Practice).


Patricia Annino
is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

You Can’t Litigate Love (so why are you trying)?

I love my brother image, estate planning attorney, trustsThis week a woman came into her attorney’s office wanting to sue her oldest brother in a trust dispute. She felt he had been taking advantage of her, not giving full financial information and making decisions that only benefitted himself.

At the end of a two-hour meeting (and her admission that a prior attorney had retained a forensic accountant who went through all the trust books and did not agree that her brother had breached his fiduciary duty), it made me think one more time that in family dynamics it is much safer for some family members to walk into a law office than a therapist’s office and it is critically important as attorneys that we do not fall into the trap of believing that what a client says is what the client means. If the client is trying to litigate love it just can’t happen…

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Understanding Your Estate Planning Goals

estate planningMany of the families I have worked with have unwritten rules about what their true north fundamental values are, and when entering into a family through marriage, it is important to look at what those are, what the undercurrents are and how they mesh with the entering spouse’s value system. To create a sustainable legacy the values must mesh so that when shocks (good or bad) come to the system, the system becomes stronger because it has built in mechanisms to sustain those shocks.

When a family does not have a clear vision of its own true north, or when that vision is clouded or destroyed, chaos happens. One family I have worked with has an unwritten rule that in-laws will never really be part of the family. The daughter-in-law never understood that rule (although all the warning signs were there) and after a lavish wedding was hurt and surprised that she was not treated better by the parents.

Four children and ten years later she sued the son for divorce, and it is one of the ugliest divorces I have ever seen, with continuous litigation in which the parents have had to participate through depositions and discovery. This is a wealthy family, but the root of the disagreement has nothing to do with money and everything to do with the family value that excludes in-laws. The son never stood up to his parents and allowed the emotional abuse of his wife to continue for a very long time.

Observing this from the sidelines it is interesting to note that if the daughter-in-law had understood the family code and accepted that she was not going to change it and gone in knowingly, her surprise and resentment could have been mitigated. If her husband had stood up to his parents, that may have helped. If they had strengthened their bond through counseling, that may have helped. If husband and wife had had a frank discussion with the parents, that may have helped. None of that happened and chaos ensued.

In another family I worked with, the father, patriarch of the family and founder of a very successful business, was diagnosed with cancer in his 50’s and knew that the cancer was a death sentence. His 25-year-old son was working in the business with him, and the father knew he was not ready to take the helm. We decided to have a very frank discussion with the family so that the family and his son could hear from the father himself what mattered. The family had been under the impression that the prime value in the family was working hard and making a successful business. That was true, but the father’s final illness put on the table the true value – family first, business second. In a very poignant discussion three months before the father died, he gathered his family (and me) and told his son that he did not want the legacy of the business to be his son’s legacy, that he knew his son was not quite ready, that he would fight for his life as long as he could but that death was inevitable. He gave his son permission to try to run the business (even if he failed), shrink the business, hire others, sell the business or do whatever else was prudent. (As will be discussed in the next chapter the financial security of his wife had already been handled by another mechanism so the son did not have the additional concern of knowing that any business risk impacted his mother’s financial security).

The meeting was one of the most powerful discussions I have ever witnessed. There were a lot of tears. The father died. The son decided to try to continue his father’s legacy and fifteen years later the business is very successful and the family is intact. What is most impressive to me is the fact that in the final inning the father had the courage to have this discussion and made it clear to all that he was giving permission for the son to make the decisions, even if that meant the business failed. It was one of the clearest examples of family first I have ever had the privilege to observe.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Create a Congruent Estate Plan

A core issue that surfaces in almost every congruency audit is the lack of enough education about what the plan is, what it means and what its Family values image, core value, legal documentsconsequences are. In fact, all planning should be congruent.

 

  •  Are you and your family prepared for what lies ahead?
  • Do you know what the core values of your family are?
  • Do new members marrying into the family know what the core values are?
  • Do they accept those core values?
  • Have these values been articulated?
  • Do all other family members also know what your core values are?
  • If there are issues that are affecting your core values, are you prepared to deal with them?
  • Have you set your goals?
  • Do you have up–to-date legal documents that enable your goals?
  • Do you have the right financial structure to facilitate those goals?
  • Do you have your team of advisors?
  • Is your plan congruent so that it relates back to your true north?
  • Have you established a system so that as life changes, your legacy is sustainable?

Let’s broaden some of those questions:

If you have minor children, do the persons named as guardians have your values? Do they understand what you would like your children to learn in life (not just for the time frame they are living with the guardians, but as part of the bigger legacy)? Have you provided the guardians with sufficient financial means to achieve the goals? Have you thought about the financial condition of the guardians? Will your children have more wealth than they have? If you intend that your children attend private school, should your estate also pay for their children to attend private school? Who is paying for family vacations? Is it your intent the now blended family continue on as one unit? How should any difference in wealth be addressed? Have you established the proper legal documents so that the guardians can effectively carry out their role?

If you own a business with partners or shareholders, what do your values say that about the business? Is it an investment; is it part of the family DNA to be put in the hands of the next generation? Is it up to the next generation to make the best decisions? How have you coordinated that with your goals and objectives? Are your estate taxes covered? Do you have key man insurance? Buyout insurance? Are your legal documents (trusts, shareholder agreements) current and up to date? Do you have a coordinated team of advisors? Has this plan been recently reviewed? Is your plan congruent with your values?

If your son or daughter is about to marry, what is the family feeling about your future in-law? Is it assumed that person is part of the family? Is there a dividing line between being part of the family and having access to the business or the money? Is there a dividing line between being part of the family business and money? Is the rule that an in-law benefits from the family as long as he/she is in it? Is it that the in-law will always be the mother/father of my grandchildren and therefore is part of the family? What are your goals and objectives as your family expands? Do you require prenuptial agreements to protect your family assets? Do you include in-laws as part of the estate planning process? Are your financial and legal documents up to date and congruent with the goals and objectives? Did you discuss this with your team of advisors, or did you sign standard documents?

If you are older and concerned about your ability to care for yourself and your finances, have you selected (individuals or institutions) to do so? Do they understand your values? Do they have the ability to carry out your goals and objectives (to stay at home, or live in nursing home) and pay for care? Have you arranged for the financial ability to implement that lifestyle and establish the proper legal documents, so that the persons in charge of your physical, custodial and medical care and the persons or institutions in charge of paying for the care are on the same page, and there is no conflict between those in charge of the purse strings and those in charge of the physical care? To what extent should family members be involved? As care givers? As overseers? Have you expressed your intent on these matters to those who will be making the decisions? Are you certain they are willing to take on these responsibilities?

None of these planning decisions should be made in a vacuum. When congruency does not occur, the foundation of the entire system can be disrupted. You will always need a team of expert advisors to assist you, but you must be the Captain, always aware of the true north of the compass to keep the plan on course. You should be planning to:

  • Focus on your family’s true north – its fundamental values – and understand that is the underpinning of all planning and legacy;
  • Look hard at your core issues, and if there is hard work that has to be done there, start the process of working on it;
  • Define the goals that build from true north and bring the family on the right course;
  • Implement your plan through proper and current legal documents, financial structures and a team of advisors;
  • Perform a congruency audit on what is currently in place to see where the black holes and opportunities exist; and
  • Develop a congruent system in which you, as the family leader and Captain of the ship, understand how to navigate these ever-changing elements to stay on the course that will enable your family to achieve sustainability and legacy.

This is just the bare minimum when planning for your family’s future. Find out more in my new book: It’s More than Money, Protect Your Legacy, available at Amazon.com. http://bit.ly/protectlegacy

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

The Importance of Boilerplate Trust Clauses: Sterling, the Clippers, and Incapacity

Shelly and Donald Sterling Image, estate planningNBA team owner Donald Sterling was recently in a highly publicized court battle, in part, because of a trust clause that most clients likely gloss over.

Many clients sign estate planning documents without paying much attention to the clauses they contain. That is no surprise; the documents are complex, and death and disability are issues that no one wants to face.

While they may not be fun to contemplate, these clauses have real consequences. One clause in particular that few clients pay attention to is how that client’s incapacity could be determined—and therefore how the client could be stripped of the authority to serve in a fiduciary or trustee capacity. A high-profile case on this topic is playing out in California probate court. At issue was whether Shelly Sterling, the estranged wife of Los Angeles Clippers owner, Donald Sterling, had the authority to sell the NBA team to Steve Ballmer for $2 billion.

The Clippers were owned in a trust. Shelly Sterling gained control of the trust by assuming the role of sole trustee. This gave her the authority to negotiate the sale of the franchise. The trust agreement contained a provision (which Donald Sterling agreed to when he signed the trust) that authorized his removal as trustee based on expert determination he lacked mental capacity.

Trustee troubles

Shelly Sterling assumed the role of sole trustee after two doctors determined that Donald Sterling was mentally incapacitated and no longer able to conduct his legal or business affairs. Papers filed in the court include medical records that allege that Donald Sterling has mild cognitive impairment consistent with early Alzheimer’s disease or some other form of brain disease, and is at risk of making potentially serious errors of judgment.

The trust documents apparently did not prevent Shelly Sterling from assuming sole trustee power even if the couple were estranged.

Donald Sterling and his attorneys were challenging his wife’s authority to sell the team and are taking the position that he is mentally competent to handle his financial and business affairs. Regardless of how the matter played out, the Sterlings are in court in part because of a boilerplate trust clause that many clients would simply have glossed over.

Lessons learned

There are several lessons that an estate planning team, including personal financial planners and attorneys, can learn from this case—and pass on to clients. They include:

  • Clients should review all the “boilerplate” clauses in a document to make sure that clauses that may seem benign when the donor is healthy and competent would also apply later.
  • Planning for disability or incapacity should be as important to a client as planning for death.
  • Thinking through who will serve as successor trustee if the donor/trustee is removed as trustee for reasons of incapacity is important. Nuances, such as whether spousal estrangement should disqualify a party from serving as sole trustee, really do matter.
  • What checks and balances should a client put in place to avoid conflicts that may arise down the road?

For example, should someone who has a vested economic benefit in the outcome of such a critical decision be able to overrule the donor? Should Donald Sterling have designated someone to replace him so there would always be two trustees?

  • Should a donor such as Donald Sterling have mandated that his own personal physician be one of thephysicians who had to determine him to be incapacitated?
  • When legal estrangement with a spouse happens, it is good practice to review all financial structures and estate planning documents—especially the control provisions. Did Donald Sterling affirmatively decide that his wife would have control if he was unable to serve as trustee or did that happen by default?
  • Think through to whom the trustees should be accountable—the spouse and who else? Children? Independent advisers?
  • Who will serve as guardian of person and property if protective proceedings commence? That designation would be included in a client’s durable power of attorney. Being named guardian gives a person legal standing in most states to defend the client in an incapacity hearing.
  • This case underscores the importance of regular review. Disability or incapacity does not occur at once—it can creep in over time. Continuous (or at least annual) attention to planning is a safety mechanism that catches inconsistencies early on and allows adjustments to be made.

Life is a movie (with sequels), not a snapshot. The donor, as director of the movie, needs to understand that the course will not be linear and that care should be taken in the “casting” of those who will play important roles.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Shine That Light: Ghosts in Your Client Families

estate planning  word artClients come to us with their version of their life, their finances and their problems; but whenever a new client comes in with a complicated situation, I know there is a ghost lurking in the background. I just never know whether it’s “Casper the Friendly Ghost” or a scary ghost lurking in the attic. I do know that the ghost impacts how a family operates and how they communicate. After 30 years practicing estate planning law, I have learned that if I don’t pay attention to that ghost, any solution I can offer won’t help solve the problem – in fact, it may make the problem even worse. So when I hear the client’s tangled story, I listen to what they don’t say just as much as what they do say. The client may think there’s a legal solution to their problem, but the solution may be much more fundamental.

An Example: The Ghost of Authority

An elderly couple I have represented for ten years came to me with a family dilemma. One of their sons had left the family business a few years earlier to work for a competitor but had since lost that job. He still owned stock in the family business and wanted his old job back. The other children in the business did not want him back, so the parents came to me to find out what his legal remedies were and how they could facilitate a solution.

A red flag went up when I heard that he was no longer working in their company but still owned stock. Another red flag went up when I heard he had been let go by the competitor. The parents were divided. The mother felt he should not be allowed back into the family business, because he chose to leave it and because the other children did not want him back. The father did not take a position and remained quiet. He had been in charge of the family business for many years, and although not currently active full time, he still owned stock in the business. The family respected him and to them, he remained the authority figure.

The parents asked if they could come in with the children to discuss the issues, and I agreed. The son was suspicious of the meeting and did not attend.

During that meeting the children told me emphatically that their brother was trouble while he worked there. He was a know-it-all and difficult to get along with. He left for more money when their company was struggling, and under no circumstances did they want him back. They had two main issues: a) they wanted him to sell his stock back to them, and b) it didn’t matter what they said, since unless their father took a stand with them, the brother would believe he still had a chance to come back. The father felt badly that his son was having financial trouble, and wouldn’t come out and say that he couldn’t rejoin the business. It became clear that this was not a sandbox I could or should be in. I represented the parents and this was not an issue that dealt with them directly.

I saw the ghost and it was the ghost of authority. The father no longer had the authority he once had, but it was enough to keep the game in suspense. Everyone was waiting for him to act, but his age and his switch from business to fatherly concerns had benched him and it was unlikely he was ever going to get back in the game. The family was stuck and no legal mechanism would unstick it.

I referred the family to a psychologist who worked with the father, the children in the business and the son who sought re-entry. He was able to put the ghost of authority in the light and facilitate family communication, which led to an acceptable resolution. The son was cashed out and is now otherwise employed. The family still speaks to each other and they will spend holidays together. Although the parents came to me for legal guidance this was not a legal dilemma.

As advisors, we need to be aware of what we know and what we don’t know. We need to read between lines – look for clues as to where the ghosts lurk, knowing that well-meaning clients will say just what they think is acceptable. They may not share the full story, and they may not be in a place where they can address the underlying issues. As seasoned advisors we must be able take the helicopter view, take a step back, and assess how best to shine the light on them.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Strategies to Strengthen the Accountant/Attorney Team

Peter Brown, BeatlesCasey Stengel once said, “Finding good players is easy. Getting them to play as a team is another story.” In my 30 years of practice, I have found that to be true for the client/advisor team too, since the advisors are, understandably, focused on their own jobs, their own responsibilities, and they all have their own relationships and methods of communication with the client.

However, the client and the client’s team of advisors are best-served if the advisors work well together. The client would receive consistent, more integrated advice and communication, and the advisors could potentially generate more work from that client and from their deepened relationships with each other.

Based on my experience working with accountants in many client situations, the most successful accountant/attorney client teams have these five essential characteristics:

  1. Trust and respect. Each advisor has unique skills and expertise and should be respected for his/her contribution to the common effort. When problems do occur, the client’s best interests are best served if concerns or mistakes can be raised and addressed openly and honestly without posturing and finger-pointing. Most families start with one key advisor who has “grown up” with them. That advisor has been there through difficult financial times, during family crises, and may even have been the first person that a troubled family member turned to for help. The value of the legacy advisor is that he is trusted by all and has a proven history of acting in the family’s best interest, not his own. One can’t put a price tag on that level of trust and loyalty.
     
    That does not mean, however, that the trusted advisor can or should continue to play all of his historical roles. When it becomes necessary to bring in specialized professionals, transitioning to other advisors does not have to be awkward. When the trusted advisor is assured of his continued importance, role, and compensation, the pathway to transition can be easy.
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  3. Open communication and conversation. Advisors must feel comfortable enough with each other (and have the client’s permission) to openly communicate ideas and strategies. They also need to be able to speak freely and to share their insight with the team. For example, the accountant may know that the son of the family business owner client is having financial difficulties, and that the client is concerned about a possible divorce – important information for the estate planner and/or corporate lawyer. Over the years I have seen many problems occur when families block that contact – either because they don’t want to pay to have the advisors speak to each other or because they don’t want the team to have full comprehension of what is going on. Sometimes the problems are significant; sometimes they remain dormant because the issues are not brought forward; and sometimes the problems are just missed opportunities. And missed opportunities can cost as much as mistakes.
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  5. Keen understanding of their respective roles. The key to a successful collaboration is to leave your respective egos at the door. Each advisor brings something different to the table, so it’s important to understand what role each team member plays. If someone on the team is a “weak link,” that will eventually become clear. If that person happens to be the longtime trusted family advisor, do not move to replace him or her. A strong and effective team will shore up any weaknesses and find a way to get results. Over time, that advisor’s role may diminish (but not evaporate), and other advisors can be brought in. Building and maintaining an effective advisory team is an ongoing process, not a static snapshot.
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  7. Billing the client. Communicating as a team and acting together in the client’s best interest certainly sounds like a good idea – in theory. But in reality, how will the client feel about all that communication once the bill arrives? That is why the team and the client must first agree on a billing process. When the team of advisors has a comfortable working relationship, they will learn that some conversations will occur whether or not a bill is paid. Another option I have seen is to create a standard monthly or quarterly billing arrangement that is not based on time, but instead takes into account any and all cross communication.
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  9. Importance of reciprocity in client referrals. Advisors who are fee-based are paid for the time they put into an engagement. Part of creating an effective advisory team is understanding that the more the team works together, the more they learn from each other, the stronger their relationships become, and the better their clients are served. When advisors work together on several key client relationships there is also more tolerance for unbilled communications, as they know that they are making a profit on the totality of their experiences and the collective results – and that those engagements will ultimately lead to additional business.

 
Trust, respect, open communications, and reciprocity are the hallmarks of good teamwork, and client advisor teams that include these characteristics will likely find success. As James Cash Penney once said, “The best teamwork comes from men who are working independently toward one goal in unison.”

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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