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?
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