- Consumer
Brooke Astor: Questions and Lessons
Summary:
The estate of Brooke Astor is embroiled in a headline
grabbing suit with her son, Anthony Marshall, and her former estate planner,
Francis X. Morrissey, Jr. Was she competent when she signed the two
questionable codicils amending her will? Did her Alzheimer’s disease render her
unable to comprehend what she signed? Was son Anthony as bad as the tabloids
make out? The tabloids have raised lots of points, many of them left unaddressed,
or explained inaccurately. Many of these points might be important for you to understand
the case. Even if the tabloid accounts are completely off target (no surprise
there) there are lots of interesting issues for cocktail party conversation.
Were Anthony Marshall’s Perquisites
Theft or Confirmation of Brooke’s Intent.
Well the tabloids make it should that Anthony was a bad boy.
Maybe he was, or maybe he wasn’t. Maybe his increasing his compensation for
managing his mother’s affairs was inappropriate. But maybe it was a good tax
plan! The income tax he would have to pay on the compensation might have been
less than the combined federal and state estate tax had those funds been left
in the estate. Hmmm, most folks do
like to minimize taxes. That might have made excessive compensation a potential
tax issue, but not an abuse of his position. Anthony paid salaries of some of his employees from his
mother’s funds. Was it abuse of his position or perhaps overly aggressive tax
planning? Lots of rich folks aggressively try to find ways to diminish their
taxable estates; perhaps the payments were taxable gifts, but no more than that.
Were these payments authorized? If Anthony was agent under a broad power of
attorney for his mother some or all of the payments might have been permitted.
If the power of attorney gave Anthony the right to make unlimited gifts to
himself or for his benefit, then all of the payments could arguably be
permitted. Why would Brooke have given such broad discretion? Many wealthy
taxpayers give trusted agents unlimited gift authority. Making large taxable
gifts, if the donor survives for three years, can remove the gift tax paid from
the gross estate creating a beneficial tax result. Well what about that retreat
in Maine? Brooke no longer owned or used it, but continued to pay the expenses.
Gee, so do lots of taxpayers. Mom and dad gave the kiddies the vacation home,
but continue to cover the costs, against the advice of tax counsel. Those
payments might constitute gifts to the kids creating a gift tax liability, or
perhaps could be argued by the IRS as being evidence of an incomplete gift of
the vacation property thus pulling it back into the estate. So again, based on
the sketchy tabloid accounts, Anthony may have done what many do. It is
potentially a tax issue, but is he really the bad boy they paint? Tabloid
accounts don’t address much of this, but do leave a distinct impression of
wrong doing. The “No Bias. No Bull.” tabloids seem to have forgotten Sgt. Joe
Friday’s quip “Just the facts ma’am.”
Document a Pattern.
From what can be gleaned from the
tabloid accounts, there were 3 codicils signed. The defense will argue that if
Mrs. Astor’s first codicil, signed a mere three weeks before the second of the
three, was not challenged, why should the second one be in question? If she was
competent for the first, why but three weeks later, should she have been
incompetent for the second? While the details of this argument are unclear from
the tabloid accounts (aren’t most things?) there is an important lesson. If
there are health questions that could affect your competency, establish and
document a consistent pattern. While this can be done with wills (see below)
there are other steps that can also be taken. For example, did Mrs. Astor name
her son as agent under her durable power of attorney? What scope of powers was
he given? If she granted her son a broad general power of attorney, that would
certainly indicate a level of trust in him consistent with the modifications of
her will. If, for example, she had initially named her attorney as her agent,
but then named her son, that pattern could indicate a growing trust and
confidence in her son.
Create a Succession of Wills.
Worried about a possible will
challenge? Create a succession of wills. Legally, if your February 2009 will is
overturned based on a successful challenge of your competency, then the will
you signed prior to that one, say your September 2008 will, becomes the
governing document. For example, if you’ve been diagnosed with Alzheimer’s it
might be years before there is a cognitive impact so significant that it
impairs your ability to sign a will. So, if you sign a will now, revise it in
six months and sign a new 2nd will. Then revisit it again a few
months after that and sign a 3rd will. A challenge to your third
will reinstates the second. A challenge to the second, reinstates the first,
and so on. Further, if each will reflects a step along a constant continuum
(e.g., each further increasing bequests to your only son, and a reducing
charitable bequests that had been your primary beneficiary), the sequence lends
credibility to your actions. If the 7% unitrust payment to Anthony (see below)
would have exhausted the trust with a reasonable degree of certainty, perhaps
that was a logical step on the continuum to an outright bequest? Have a
disenfranchised child you have disinherited? After you sign the will
disinheriting them, go back to the same firm a few months later, add a new
charitable beneficiary and perhaps make other changes to demonstrate that you
reconsidered the will, although you chose to exclude the same child. Have a
different attorney and witnesses supervise the execution. Repeat the process. Using
different witnesses each signing makes it less likely someone will convince a
court that so many independent witnesses could have all been mistaken as to
your competency.
Careful with Codicils.
Codicils, or amendments to an existing
will, are often not the preferred approach since the Codicil highlights the
modification from the prior will and can potentially introduce inconsistencies
or interpretive issues between the various codicils and the will they modify.
In most cases signing a new will is a better option. One notable exception,
which may have applied in the Astor case, is that if your competency is in
question, the Codicil merely amends the prior will, it doesn’t revoke it. If
you are proven to have been of questionable competency when you signed the
codicil, than only the modifications effected by the codicil are in question,
not the issue as to whether by signing the codicil you intended to revoke the
prior will.
Basic Math: 7% Unitrust Belies
Tabloid Statements.
Brooke
wanted to leave her estate to charity say the tabloids. So instead of giving
her assets outright to Anthony, she put them into a trust. Anthony was to get
7% of the value of the trust every year (that’s called a unitrust). So the
tabloids conclude that Anthony was a bad boy trying to defeat his mother’s
intent to leave her estate to charity. Who’s doing the math at those tabloids?
If you read the studies published by those smart folks at Alliance Bernstein
you’d know that you really might want to payout only 3-4% a year if funds
should stay intact. If Anthony was to get 7% of Brooke’s estate, the trust was
clearly a wasting asset, meaning a lot of principal would be distributed to
Anthony under what the tabloids say her trust provided. Brooke died in 2007 at
age 105. Anthony was in his early 80s which could mean a 20+ year life
expectancy. Factor into the analysis the huge drop in asset values in 2008-9,
but continue the 7% payout. The tabloids don’t even mention whether Anthony had
any principal invasion rights. If you have some Monte Carlo simulations done on
these facts the odds are pretty high that not a large part of the estate would
ever be distributed to charity under what the tabloids describe was Brooke’s
plan. If you believe that Brooke intended her estate to eventually be
distributed to charity with these assumptions, we’ve got a bridge to sell you.
Competency.
Was Brooke competent? If Brooke was not competent, than any
document she signed, or any transactions she completed, during the time period
in question will be ineffectual. Did she make large charitable gifts or sign
other significant legal documents other than a codicil during the time period
in question? If so have they been challenged too? The degree of competency to
sign a will (testamentary capacity) is less than that required to execute a
contract. So if Brooke’s codicils are even subject to question, any contract
documents signed would be more prone to being overturned. The tabloids are
silent. Many people mistakenly believe competency is purely a medical concept.
Competency is really a legal determination. The tabloids made hay out of the
fact that a laundry list of famous socialites would be called to testify as to
Brooke’s condition. In a competency determination, the weight of a gaggle of
famous folks on one side of the scale, and a qualified lawyer supervising the
signing on the other, should tip the scale towards the lawyer’s determination. The
circumstances of the specific matter weigh on how competency in that situation
should be assessed. Anthony was her only natural heir. He appears from tabloid
accounts to have been managing her affairs. A 7% unitrust with a potential 20+
year time frame could conceivably have paid out a substantial portion, even a
substantial majority, of Brooke’s estate to Anthony. These circumstances, if
correct, might suggest a rather low threshold for assessing Brooke’s
competency. Attorneys are to consider the degree of physical, financial or other
harm to the client when assessing competency. Based on the above, how much harm
was there?