Back on July 26 we wrote about how trusts have become a new territory within the divorce landscape. At the time the press was just starting to write about California Senator Diane Feinstein’s troubles with the trust her husband created to benefit her and his children from his first marriage (i.e., not Feinstein)
Therein lies the rub and we have encountered similar problems locally. Richard Blum died in February of this year leaving an estate purported to be $1 billion. He was married to Andrea Schwartz from 1959-1977, producing three children. In 1980 he hooked up with then San Francisco Mayor Feinstein. As you might expect, when he did his estate planning he set aside money for his incumbent wife together with a house on Stinson Beach. According to Feinstein, the trust was supposed to be funded with $5 million dollars, less than 1% of his reported net worth when he died.
From the reports circulating, Feinstein has sued because she has medical expenses which are unpaid and there is a fight over control of Stinson Beach. Again, these are just the allegations filed with the court. But a struggle for control is often “unleashed” when children from Marriage #1 confront spouse from Marriage #2 in a setting where father/spouse steps off life’s stage.
The irony here is that it has been reported that Feinstein has a net worth of $50-100 million in her own right. Thus, it appears that the cost of her recent treatment for encephalitis is well within her means. Yet, we are seeing cases like this where the children of the first marriage are squaring off with the widow of their father. Chances are this battle is motivated by things that happened 40 years earlier.
Feinstein is suing to have the trustee removed for failure to follow the terms of the trust. The only thing certain here is the expense of the litigation. As we noted in our July 26 post, trustees often find themselves “monkeys in the middle” of competing interests and needs. Even if Blum’s net worth is half of what is suggested and Feinstein’s wealth is also overreported one would think that no beneficiary will ever miss a meal nor will any physician go unpaid for the widow’s treatment. But, the battle lines have formed because the anger has eclipsed the money in controversy.
What would have been the solution here? If you are the person of means with children from one marriage who don’t get along with your spouse, your estate documents may benefit from some in terrorem clauses. Examples:
“Any dispute over the beach house will result in sale at auction of the beach house.”
“Any failure to fund the marital trust within 90 days of decedent’s death will require the trust or executor to pay $50,000 per month to the widow until the funds are remitted in full notwithstanding disputes about whether credits are due.” Even rich people abhor penalty clauses.
People like Mr. Blum sometimes naively think that everyone will do right by each other as a matter of respect for his demise. As demonstrated in cases on both the west coast and here, all too often, the death of the patriarch just signals that the gloves can come off.