How to Avoid an Estate Battle After You Die

It might seem that a woman who died at 104 after spending 20 years in a hospital despite being healthy enough to live in one of her three stately homes, accumulated a vast collection of dolls and preferred to communicate in French even though her father had been a United States senator would have little to teach the rest of us.

Enlarge This Image

Associated Press

Huguette Clark in 1930. Her wills — signed a month apart when she was 98 years old — are the crux of a legal dispute.

But two years after the death of that woman, Huguette Clark, the last surviving daughter of William A. Clark, who made a fortune in copper mining, her $300 million estate is still being disputed. And the battle has plenty of lessons for people with far less money.

At issue in Mrs. Clark’s case are two wills signed six years before her death in 2011. The first would have left most of her fortune to 21 distant relatives she did not know, may never have met and did not list by name. The second, signed a month later, increased the bequest for her caregiver, gave money to a goddaughter and established a foundation at her mansion in Santa Barbara, Calif., for her art and doll collection. The distant relatives got nothing.

The dueling wills have become part of a highly publicized court case involving Washington’s Corcoran Gallery of Art and one of Claude Monet’s Water Lilies paintings, valued at the time of Mrs. Clark’s death at $25 million. The case has also ensnared New York’s Beth Israel Medical Center,accused of pressing Mrs. Clark to make a big donation.

Documents full of intrigue have been filed in court — including a new cache just this week challenging theCorcoran Gallery’s claims — in preparation for a trial in September. The relatives could receive millions of dollars each if one or both wills is overturned or a settlement is reached. The caregiver and charities Mrs. Clark gave her money to could get nothing. Then there are the millions of dollars in legal fees to law firms and the tens of millions of dollars in estate taxes to the federal government, which will rise substantially if more money goes to the heirs than to charitable organizations.

“What we’re trying to do is make sure this case is being litigated with the right parties and not people who are trying to align themselves for ulterior motives,” said a lawyer, John D. Dadakis, in explaining the latest filings against the Corcoran. Mr. Dadakis is a partner at the law firm Holland & Knight, which is representing Mrs. Clark’s estate

It’s a big mess. But the dispute over Mrs. Clark’s two wills has implications for people with far less money. When is a person too old to decide her affairs? How can you insure that your money goes to the people and institutions you want to get it? Is there a way to prevent expensive lawsuits?

“People are living longer and they’re having periods of diminished capacity that are more and more common,” said Alan F. Rothschild Jr., a lawyer in Columbus, Ga., and a former chairman of the American Bar Association’s real property, trust and estate law section. “The litigation in this area is increasing because people are willing to sue more, even family members and the banks.”

Here is a look at some common issues raised in Mrs. Clark’s case.

DISPUTING HEIRS Challenges to wills by distant relatives are so common that lawyers have a nickname for those people: “laughing heirs” — as in they will be laughing all the way to the bank if their challenge succeeds.

“People tend to come out of the woodwork and believe that they’re closer than they are and should have some claim,” said a litigator who specializes in contested wills who spoke anonymously because other lawyers at her firm worked with some of the heirs in the Clark case. “The most often-challenged wills are those for people who don’t have direct, obvious heirs.”

A more common situation arises when a parent treats children differently. The trickier cases are those in which family members have had a falling out.

Paige K. Ben-Yaacov, a partner in the private client section of Baker Botts, said she counseled clients not to divide their estates unevenly. “They’re just making matters worse and opening the estate up to litigation.”

In Mrs. Clark’s case, she did not name her relatives in her wills because she did not know most of them. For people who intentionally leave out children, Ms. Ben-Yaacov advises creating a trail of estate documents over many years laying out their wishes in detail.

Mrs. Clark’s second will was in effect for six years before she died — normally long enough to establish that this was her intent, had she not been 98 when she signed it.

LEAVING A COLLECTIBLE The Corcoran Gallery is objecting to the will that gave it a $25 million Monet. If there were no will, the museum would receive a half-interest in a trust worth $3 million. That choice would seem to make little sense.

In an article in The Washington Postearlier this year, the Corcoran said it simply wanted to be sure that the second will, which gave it the painting, actually represented Mrs. Clark’s final wishes. Others have speculated that the Monet is not as valuable as once thought and that the museum would rather have cash than a painting it won’t display.

For people planning to leave something tangible like a painting to a museum, advisers suggest checking with the institution beforehand.

“You’d like to run that by them while the decedent is alive to make sure they’ll accept it,” said Sharon L. Klein, managing director of family office services and wealth strategies at Wilmington Trust. “You can’t force someone to take it.”

If the Corcoran doesn’t take the painting, the estate will have to pay about half of its value to the United States Treasury in estate taxes, since it will no longer be a charitable gift.

Mrs. Clark also set up, in the second will, a private foundation for the rest of her art and doll collection, to be housed in her mansion in Santa Barbara. Mr. Dadakis said the assets in the foundation accounted for about $125 million of the estate, including the mansion, worth $82 million. If that will is rejected, all will be subject to the estate tax.

PREVENTING DISPUTES Contesting a will is costly, time-consuming and emotional. One way to ensure that doesn’t happen is to make the downside of losing a risk too severe to take.

Long before death, when a will is filed and takes effect, people can put their assets into a revocable trust. They still have access to the money during their lifetime and can keep those assets out of the probate process. The trust could also act as a substitute for a will by naming other beneficiaries.

“The disappointed family member doesn’t have a legal right to challenge it,” Mr. Rothschild said. “They’d have to go to the court and say, ‘Even though it’s been in existence for many years, mother wasn’t competent to put it together.’ ”

When it comes to a will, one way to reduce the chances of a challenge is to put in a no-contest clause. In doing so a parent would leave a little to the otherwise disinherited children, but if they contest the will they get nothing.

“The trick is to strike the right balance between giving them enough so they’ll take it and not contest it and risk losing their inheritance,” Ms. Klein said. She said $5,000 might not do it, but $250,000 might.

For the big or contentious estates, like Mrs. Clark’s, the best option may be to appoint a professional trustee, usually from a trust company, who will be neutral. “If there is any kind of tension between family members it makes no sense to put a family member in there” as trustee, Ms. Ben-Yaacov said. “An independent trustee deals with this day in and day out. They’re good at defusing these situations.”

Source: www.NYTimes.com