27 May 2009

Multi-billion dollar disputed estate will not go to the dogs

Canine welfare charities in the US were hopeful that they would receive a large percentage of hotelier Leona Helmsley’s estate, especially when they learned that she drafted a mission statement expressing her wish that her entire fortune go to the welfare of dogs. However, only $1 million of the first $136 million distributed from the estate will, in fact, be going to the dogs.

Mrs Helmsley died in 2007, age 87, and her will gave some $5 to $8 billion to the Leona M. and Harry B. Helmsley Charitable Trust, which was established in 1999. In 2003, Mrs Helmsley drafted a mission statement stating that she wished the Trust funds go to destitute people and the care and welfare of dogs. A year later, she struck out the portion of the mission statement pertaining to destitute people, but added language giving the trustees the power to fund “such other charitable activities as the trustees shall determine.” The mission statement was not incorporated into the Trust or Mrs Helmsley’s will.

The mission statement was thus of dubious enforceability and, in February, a New York judge ruled that the Trustees of the fund had “sole discretion” to distribute the trust assets. Despite the ruling, animal welfare groups were hopeful that the Trustees would use the Trust’s funds to benefit animals. For example, Bernard Unti of the Humane Society of the United States stated that, regardless of “the legal status of the mission statement, it certainly signaled a clear intent on Mrs. Helmsley’s part to see the money used to help dogs.”

According to the New York Times, there are 7,381 animal-related nonprofit groups in the US which, as at 2005, had less than $500 million in combined assets. Of the first $136 million distributed from the Trust, $1 million was distributed to animal-related charities. But of the $1 million (an amount described by Wayne Pacelle, President of the Humane Society, as “a trifling amount”) $100,000 went to an animal welfare charity, whilst the remaining $900,000 went to organizations that train working animals for the benefit of people.

Mrs Helmsley’s 15 July 2005 will also left $12 million on trust to her dog, a white Maltese named Trouble. Another New York judge later reduced the bequest to $2 million, giving $6 million of the bequest to two of Mrs Helmsley’s grandchildren whom she expressly left out of her will. The Trustees’ decision does not disturb Trouble’s legacy.

The Helmsley case is certainly a unique situation, but it illustrates what some consider to be the difficulties that bequests to animal welfare groups encounter in US probate courts. It is difficult to know whether this is in fact the case, as these cases are few and far between — US testators do not traditionally make substantial gifts on death to charities and, instead, they tend to make lifetime gifts.

In any event, the case demonstrates the willingness of the courts to disregard an unincorporated mission statement and, likewise, the importance of incorporating a mission statement or letter or wishes into a testamentary document. It also illustrates the importance of drafting, as the addendum to Mrs Helmsley’s mission statement provided the Trustees with nearly unfettered power to distribute the Trust funds. Any UK charity (or US/UK charity) seeking to benefit under a trust governed by US law must bear in mind the lessons from Mrs Helmsley’s estate.

Category: Article