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Going to the Dogs? Leona Helmsley's Dog, Trouble, Has Her Trust Slashed, but the Rest of the Nation's Dogs May be Sitting Pretty |
By JOANNA GROSSMAN |
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| Tuesday, Jul. 15, 2008 |
When real estate mogul and hotelier Leona Helmsley died last summer at the age of 87, the public was treated to a variety of tidbits of information regarding her estate, many of which seemed to confirm earlier reports about her well-known, though not necessarily well-liked, personality.
As I described in more detail in a previous column, Helmsley disinherited two of her four grandchildren, despite having an estate of 5-8 billion dollars to go around. She left money to other relatives on the condition that they visit her gravesite on a particular schedule and record their visit by signing a mausoleum guest-book. She left money in trust to make sure the family mausoleum was exquisitely cared for in perpetuity. And she left 12 million dollars in trust, purportedly for the care and feeding of her dog, Trouble.
A year later, the story is all about the dogs. Not just Trouble, the world’s second-richest dog, but all dogs, since it may turn out that the bulk of Helmsley’s estate will be devoted to the “care and welfare of dogs” in general.
Trouble’s Fate
Helmsley’s will dealt with Trouble in two ways: First, Trouble herself was left as a bequest to Helmsley’s brother, Alvin. (Animals are property and can be bequeathed like any other kind of property, barking or not.) Alvin apparently disclaimed (that is, refused) this bequest – as all beneficiaries have the right to do. Trouble has thus been living with one of Helmsley’s former employees (presumably not the one who sued Helmsley for allowing Trouble to bite her).
Second, Trouble was provided for through an inter vivos trust (that is, a trust created during the lifetime of its creator). The Will pours $12 million into the Leona Helmsley July 2005 Trust. The terms of that trust were initially private, but it was immediately speculated that Trouble was the sole beneficiary of that trust. That turned out to be true.
Private Versus Charitable Trusts for Animals, and the Rule Against Perpetuities
A trust for the care and feeding of a dog is not valid under the traditional rules governing estates. Animals cannot receive outright bequests of property under a Will because they themselves are property.
Moreover, trust law interposes two separate obstacles to a “care and feeding” trust: First, private (non-charitable) trusts must have ascertainable beneficiaries, which means, in lay terms, that the beneficiaries must have legal standing to sue to enforce the terms of the trust.
Second, private trusts must comply with the age-old Rule Against Perpetuities. Under the Rule Against Perpetuities, a trust can only last 21 years beyond the death of some “life in being” (that is, some live, or gestating, human) existing at the time the trust was created. An animal cannot serve as the “life in being,” so a trust to an animal might theoretically outlast the perpetuities period, if all potential human “lives in being” died, and the animal lived for more than 21 additional years more. Granted, such a lifespan is exceedingly rare for domesticated animals, but the Rule Against Perpetuities deals with possibilities, not realities. And, this theoretical possibility means that such a trust violates the Rule Against Perpetuities, and thus is invalid.
Charitable trusts, in contrast, are not governed by either of these rules. However, a trust for the care and feeding of a specific, privately-owned animal will not qualify as a charitable trust. Such a trust must have a “charitable purpose” such as the alleviation of poverty or the advancement of education. Animals, in groups, can benefit from charitable trusts, as I will discuss below, but a single, pampered dog cannot.
The Special Rules That Allow Humans to Provide for Their Pets When the Humans Die
Legislatures and courts in many states, however, have created special rules allowing humans to provide for their pets after their own deaths. New York regulates such arrangements in a special statute devoted to “honorary trusts.” This statute provides that an honorary trust for a pet terminates upon the animal’s death or after twenty-one years. This solves the Rule Against Perpetuities problem. The statute also permits a pet to be the beneficiary of this type of trust.
The only rule respecting honorary trusts in New York that might, as I speculated in my earlier column on the Helmsley case, cause Trouble some trouble, is the court’s discretion to “reduce the amount of property transferred if it determines that amount substantially exceeds the amount required for the intended use.”
Indeed, pursuant to this provision, a New York judge recently reduced Trouble’s trust from $12 million to $2 million. The dog’s caretaker submitted an affidavit to justify the $2 million principal, including expenses like a $60,000/year guardian’s fee and $8,000 in grooming fees, as well as the mundane expenses of food and veterinary care.
The most striking expense is perhaps the $100,000 cost of “full-time private security.” Aren’t dogs supposed to provide security, rather than require it? In any event, the judge’s decision to reduce the trust seems appropriate, in light of the statutory discretion to rein in the excesses of extravagant pet owners.
At the same time, the judge gave a $6 million settlement to Helmsley’s disinherited grandchildren – a nuisance value compromise to get them to drop any claim they might have to the estate. It didn’t appear they had any kind of valid claim, but probate courts have discretion to approve settlements like this one.
Charitable Trust: Going to the Dogs?
The money allocated to Trouble’s care and feeding is just pocket change compared to the rest of Helmsley’s estate. Although she made bequests to certain family members, they totaled less than $40 million. While that may seem like real money to the rest of us, it’s a tiny fraction of her entire estate, which is estimated, on the low end, at 5 billion dollars.
The bulk of her estate was poured into the The Leona M. and Harry B. Helmsley Charitable Trust, which was established in 1999. When the Will was first read, the terms of that trust were not made public, but reports suggested that New York hospitals were among the primary beneficiaries. (Wills, once submitted for probate, are public records, but “inter vivos” trust documents can be kept private.)
This trust establishes a charitable foundation that will instantly become one of the country’s largest. But what goals is the foundation to pursue? Here, the story gets a little murky. The trust instrument apparently does not specify the nature of Helmsley’s charitable intentions. According to a recent report in the New York Times, Helmsley signed a 2-page mission statement in 2003, which did provide such direction. Though it once expressed her desire to help the indigent and to provide for the “care and welfare of dogs,” she later crossed off “the indigent”.
Whether the trustees of this charitable trust will treat the mission statement as an authoritative document is not clear, but there does not seem to be any other expression of her intent. (The attorney general of New York has the authority to enforce charitable trusts, so the decision whether to fight the trustees is left to that office.) For wills, the law makes it very difficult for executors (or courts) to give effect to expressions of intent that do not fall within the four corners of the document, and are not incorporated by reference. But for trusts, the rules are less formalistic and more open to negotiation at the margins.
If the trustees treat Helmsley’s mission statement as a mandate, the world for dogs could change quite dramatically. After all, as the New York Times story reports, the assets in this trust are nearly ten times as large as all the assets of the existing animal-related nonprofits. State nonprofit law requires foundations such as this one to spend at least 5 percent of their value per year, which would amount to at least $250 million dollars – cause for celebration by needy dogs nationwide.
The Important Policy Questions the Helmsley Will and Trust Raise
Helmsley’s estate provides great fodder for celebrity-watching and learning about the everyday rules governing inheritance. But her idiosyncrasies – and the sheer enormity of her estate – should provoke other conversations as well:
Should all charitable contributions be free of the estate tax, regardless of how large? (By giving her estate to the dogs, Helmsley has avoided a multi-billion dollar estate tax bill.)
Should the state or the public have some greater say on how charitable foundations spend their money? After all, you could certainly make the case that there are other equally needy beneficiaries in this country, many of them human.
Should we permit will-makers and trust creators like Helmsley to provide extravagantly for dogs while deleting “the indigent”? Our system, which exalts the “freedom of testation” – that is, the right to dictate how your property passes at death – is challenged by estates such as hers. But, as our law now reads, Helmsley is allowed to take her place as Queen of the Dogs