Lesson
learned: Several attorneys Worth interviewed agree that, with no specified terms
in the will, the fiduciaries acted appropriately in trying to obtain maximum
value for the island. David Wheeler Newman, an estate lawyer who co-chairs the
family wealth planning practice at Mitchell Silberberg & Knupp in Los
Angeles, says Brando could have locked in his plan to preserve the island by
entering it into a conservation easement. Because this would have been a
cross-border agreement, he could have established it with an environmental
nongovernment organization. “The beauty of this is that once an irrevocable
easement is set up, it is not affected by later revisions to the will,” Newman
points out. “You can change the terms of who ultimately receives the property,
but anyone who inherits or buys it is subject to the same conservation
agreement.”
The Hughes Estate:
How Much Is Enough?
Alex Hughes was only 13 last year when his mother, Suzan Hughes, filed papers
in Los Angeles County Superior Court seeking to oust the fiduciaries of the
boy’s $400 million trust. His father, Mark Hughes, the troubled but highly
successful founder of nutritional supplement company Herbalife International,
had died of a fatal combination of alcohol and anti-depressants in 2000 at the
age of 44.
The Hughes trust is a discretionary vehicle, set up to look after
Alex’s needs until he is 35. Suzan, the third of Hughes’ four wives and a former
Miss Petite USA, claims that her son requires an annual disposable income of
$877,000. While the payouts to date have varied, the trustees—who include Alex’s
paternal grandfather and two former Herbalife executives—have refused to grant
the sums Suzan Hughes requests. They maintain that such an excessive allowance
would be damaging to a beneficiary so young. Because the case is still being
tried, Kenneth A. Ziskin, a lawyer for the Hughes Family Trust, could only say,
“Litigation is far from over.”
Lesson learned: This is certainly a case of
the trustees having too much discretion and not enough guidance, says Douglas K.
Freeman, chairman and national managing partner at IFF Advisors in Irvine,
Calif. “When estate planners establish trusts that have significant economic
impact on heirs, both positive and negative, counsel must raise the issues,
require clarity and consider the impact of the trusts—not just the tax
benefits,” he explains. “They should anticipate changed circumstances and, above
all, give sufficient guidance so that the fiduciaries can continue the financial
parenting that the settlor had begun.”
Alexis Neely, an estate and family
lawyer with Martin Neely & Associates in Redondo Beach, Calif., says Hughes
could have set up the trusts with criteria that locked his ex-wife out of the
payout decisions. “He could have made the trustee discretion unreviewable, or
reviewable only by another person whose name is specified,” perhaps a
grandparent, Neely points out. “Or he could have created a trade-off situation
in which she would be entitled to a certain amount of money if she didn’t
challenge the trustees.” Neely was not involved in this case, but, like many
California residents, had heard about the Hughes’ acrimonious divorce. She says
that her firm often sets up this sort of arrangement to placate angry
ex-spouses. “It is,” she concedes, “a way of bribing her not to sue.”
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