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The inexperienced brother had indeed made some mistakes in managing the trust, Kast said. But the sister's wrath was far out of proportion to the size of those mistakes.
And, to some extent, she was slicing off her nose to spite her face. Trustees are allowed to tap money in trusts to defend themselves against lawsuits, so any legal action can wind up costing beneficiaries twice -- in money from their own pockets and in reduced distributions from a depleted trust.
In any case, this pair spent more than $1 million in legal fees before Kast's firm was brought in to mediate. A therapist the firm hired uncovered the real motives behind the heiress' lawsuit: Because of how her brother had treated her as a child, she felt she couldn't trust him to take care of her interests.
When told this, the brother was "shocked," Kast said. "He had no idea how those (incidents) had affected her."
The two siblings were sitting in separate offices at Atherton at the time, and the brother was urged to apologize.
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So the vast estate was divided in two, and the heiress hired Atherton as trustee of her half.
More trust issues
A trust can be a handy estate-planning tool that often comes with a built-in conflict of interest. Many times, a surviving spouse is left in charge of money that's ultimately meant to benefit others.This can cause tension even in functional families but can really create fireworks when the trustee is a second spouse and the beneficiaries are children from the first marriage.
Such is the case with another family Kast knows. The father had left his first wife for his secretary. When he died, his will named this second wife as trustee of his $58 million estate.
The man's children from his first marriage never liked the second wife. When she married again two months after the father's death, the children's already-low opinion of her was confirmed.
The children are convinced the second wife will drain the trust rather than manage it in their interests. They might have been daunted by the idea of taking on a woman who controls a huge trust -- except that their lawsuit is being bankrolled by their mother, the first wife.
"Now that," Kast said, "is revenge after 20 years."
I'll show you
Family attorney Violet Woodhouse, a co-author of "Divorce & Money: How to Make the Best Financial Decisions During Divorce," relates two tales of financial revenge that backfired.One involved a couple in which the husband had firm goals for retirement and wealth accumulation. His wife, however, didn't think she was being given an equal say in how they handled their money because she earned less. Instead of hashing out a solution with her husband, she secretly applied for and maxed out several credit cards, undermining the marriage as well as her credit rating.
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The second couple also disagreed about what to do with their money, Woodhouse said. They had been married for more than 30 years, were at retirement age and had three grown children.
The husband wanted to make financial gifts to their children, but the wife balked. He believed they could afford to be generous; she did not.
The husband was angry about his wife's reluctance. He secretly cashed in investments and retirement funds to give to the kids, falsely claiming the transfers were donations and incurring the IRS' wrath, along with interest and penalties. He then started a business, Woodhouse said, for the sole purpose of getting credit cards on which he could take cash advances.
When the wife discovered the debts, she agreed to take out a $250,000 mortgage on their nearly paid-off home to prevent creditors from going after their remaining assets.
But instead of paying off his debts, her husband "in turn gave that money to the children as well," Woodhouse said. "In about three years, he obtained and gave away about $1 million in cash."
The couple are now headed for divorce, and the husband is likely to file for bankruptcy, Woodhouse said.
Is there a moral to these tales? Of course:
- Many attempts to get revenge backfire, and a lot of money is wasted in the process.
- If you still are tempted to settle scores with money, at least get good professional advice first.
Published Dec. 10, 2007
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