The children of late billionaire Richard Mellon Scaife are accusing their father of misspending a family trust fund–one worth $210 million–to keep his newspaper printing. The executor of their father’s state vowed to fight the children in court and called their allegations “outrageous, frivolous and contrary to the terms of the trust.”
Trusts can be powerful estate planning tools, but even the most powerful tools will be challenged from time to time. And the relationship between a trustee and the beneficiaries is one of “trust.” In explaining it to a class in law school one time, I referred to it as the “grandmother rule.” You have to treat the trust as if it was for your grandmother. No funny business, not sharp trading or cutting corners. And you don’t have to be a billionaire to need trusts, but lets look at how the rich are just like the rest of us.
When billionaire Richard Mellon Scaife passed way last July his children expected to find at least $90 million in a family trust fund that had once been worth $210 million. Instead, they found that the trust had been depleted and there was no money left.
Now, the children, Jennie and David Scaife, allege that their father improperly used the funds in the trust to keep his newspaper running. Not surprising, because the article says that David, the son, was “estranged” from his father. In big money circles, this usually means you have already been given enough money you no longer feel like you have to be nice to your parents.
As Forbes reports in "Late Mellon Billionaire's Kids Say Dad Misused $210M Trust Fund," the children are suing their father's estate. The father’s executor denies the allegations and has vowed to fight the suit. However it turns out, millions of dollars will be spent on Court costs and attorney’s fees, and a family that was already at odds will be even more so. While, this is a family that was recently ranked as the 19th richest family in the United States, you do not have to be that wealthy to face similar issues in your own family.
Trusts are incredibly useful. They can protect children from creditors, their own indiscretions, bad marriages, keep family money, even if it is hundreds of thousands instead of hundreds of millions of dollars, in the family. But they have to be taken seriously, and always with the thought that any beneficiary can sue the trustee, whether right or wrong, and it will always be expensive.
When families disagree over how trust funds should be used, they often fight, in court and out of court. For this reason, trusts should be as specific as possible about how the money is used, what the trustee can and cannot do, and the trustee needs to follow those guidelines. At the same time, for trusts that will last for several generations, the instructions must be flexible enough to allow for changing times and a constantly changing world. One of the more famous trustee cases, which I will write about at a later time, is about a trust that provided “don’t sell the Kodak stock.” The question is, will the phrase, “don’t sell the Apple stock” sound just as silly?
Trustees can be held personally liable if a court finds they have acted improperly. These issues can best be avoided by working with an experienced estate planning attorney to help design and administer a family trust.
Reference: Forbes (November 10, 2014) "Late Mellon Billionaire's Kids Say Dad Misused $210M Trust Fund"