The Binger Estate:
Undue Pressure?

The children and grandchildren of James Binger, a former Honeywell chairman and prominent philanthropist, were fine with his plan to leave the bulk of his cash reserves, about $200 million, to his Robina Foundation. They also faced the $112 million estate tax bill, which will provide 14 percent of Minnesota’s projected budget surplus for 2006–07, with equanimity. Though geographically dispersed, the Bingers are a close-knit clan, well known in their home state of Minnesota as the philanthropic descendants of William L. McKnight, founder of 3M and the McKnight Foundation. (Binger married McKnight’s daughter, Virginia, who died in 2002.)

However, they were angry enough to litigate over Binger’s decision, two months before his death in November 2004, to bequeath $50 million to his longtime family office manager and, by most accounts, girlfriend, Jane Mauer. Mauer is likely to testify that she and Binger had a relationship before his wife’s death. His heirs contend that he had earmarked the money for the foundation, and argue that Mauer exerted undue pressure on Binger. Mauer’s affidavit claims Binger loved her, an assertion witnesses supported at trial.

In a case that is expected to drag on until September 2007, the heirs will bring up the fact that Binger hired a new lawyer only a year before his death and that he was taking a prescription for moderate-stage Alzheimer’s.

Lesson learned: In an ideal world, Binger would have had a family meeting–without Mauer present—to explain his intentions. In reality, notes Richard Horwood, a trust and estate lawyer with Horwood Marcus & Berk Chartered in Chicago, “Many clients shy away from having a family meeting for something like this because it could be so confrontational.” Nevertheless, he adds, when the head of a family displays a radical change of mind about the terms of a will, a nasty court battle is practically inevitable unless he has left behind a clear trail of evidence that he was acting of his own volition, with many witnesses able to testify to his competence. Binger should have outlined all of his reasons for doing what he did in a letter or videotape to the family for posthumous viewing, Horwood says. Ideally, there should be evidence that he discussed the new terms with his lawyers without the new beneficiary present. He should have prepared and signed his new will without her around. And, Horwood concludes, “bringing in a new lawyer is often a red flag.”

The Brando Estate:
No Man Is an Island

Marlon Brando’s son, Teihotu, 43, is the sole inhabitant of Tetiaroa, the South Pacific paradise his father bought in 1966, vowing to preserve the oasis of pristine white sands and thatch-roof huts. In 1982, Brando placed Tetiaroa in a trust to ensure that his wishes would be carried out. But instead of becoming a second-generation owner of the island, last year Teihotu Brando became simply the caretaker, employed by luxury resort developer Richard Bailey, who plans to build the Brando, a resort of 30 opulent villas, on Tetiaroa. His father’s convoluted estate planning may be Teihotu’s downfall.

After Brando’s daughter, Cheyenne, committed suicide in Tahiti in 1995, he never returned to French Polynesia; the tiny, rustic hotel Brando had established on Tetiaroa fell into disrepair. In 2002, he drafted a new will and trust agreement that failed to provide specific plans for Tetiaroa. Two years later, he ousted his business manager, Jo An Corrales, and long-standing secretary, Alice Marchak, as executors of his estate—with no explanation. He died two weeks later, and Tetiaroa, Brando’s tropical escape, was doomed.

Without explicit instructions, the new executors of Brando’s estate were bound by a fiduciary duty to reap the island’s maximum cash value for Brando’s nine surviving children. They sold the development rights to Bailey under a 60-year lease; he was reportedly the only party interested enough to offer a proposal. While he has vowed to build an eco-friendly resort in line with Brando’s wishes, the actor’s former executors are livid. “The estate broke a promise Marlon made to the Polynesian people,” Corrales told the Los Angeles Times in 2005.

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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