Top 10 Money Lessons by Dissecting Billionaire Leona Hemsley’s Will

Leona Hemsley, dubbed by the press as the “Queen of Mean” for her demanding ways and irascible personality, passed away in August 2007 leaving behind an estimated total estate of $5 billion. Alongside her husband, Harry, Helmsley ran a $5 billion real estate empire that at one time included the Empire State Building, the New York Palace Hotel, the Park Lane Hotel and the Harley Hotel chain.

After dissecting her 14-page will [pdf] filed in Surrogate’s Court, I am going to elaborate some personal finance money tips in this post. Some facts will amuse you while some lessons are to be learned to alert you of planning your estate more effectively. Here are the top lessons I learn from researching Leona’s will.

10. Ensure the one you love is well taken care of (even though it is a dog)

Image: Leona Helmsley July 2005 Trust
Source: Pg3 of Leona Helmsley’s will

Leona Helmsley’s dog will continue to live an opulent life, and then be buried alongside her in a mausoleum. Helmsley left her beloved white Maltese, named Trouble, a $12 million trust fund. Trouble shall be taken care by Leona’s brother Alvin Rosenthal.
$12 million dollars is obviously too much for a dog. How much you need to raise a pet? I wonder how Alvin plans to withdraw money from the trust fund. Any suggestion for Alvin? Here are some thoughts:

• Buy a lot of beautiful clothes for Trouble, make sure your clothes are included in the bill too
• Get Trouble a legal husband. If they divorce in the future, you might get some handsome compensation
• Spend everything you need to spend in order to take care of Trouble. Who is the Trustee to overlook all these expenditure? The Trustee might not be Alvin because Alvin is the Trustee of her estate, not for the LEONA HELMSLEY JULY 2005 TRUST as stated in the will.
• Hire the best chef to prepare meal for Trouble. But make sure that the chef cooks human food too.

When someone who is still minor (below 18 years old), you can appoint a guardian to take care of her/him. Trouble is only eight years old. She is still a minor in this case.

Photo source: New York Times
Image: 8-year-old Maltese named Trouble now a multimillionaire.

9. Don’t Give Your Heirs Too Much Money

Image: Lump Sum Distribution to Helmsley’s Heirs
Source: Pg3 of Leona Helmsley’s will

It is a fact that most people don’t understand that MONEY WON’T MAKE YOU RICH. I believe that Leona did a wise decision. She distributed outright to:

• her brother Alvin Rosenthal $5 million
• her grandsons David Panzirer and Walter Panzirer $5 million each.
• her chauffeur Nicholas Celea $100,000

In fact, $5 million is just 0.1% of Leona’s total estate. People might think that $5 million is an insult to the heirs because if the estate was distributed equally amongst the legal heirs, each of them might had become a billionaire instead of a multimillionaire.

$5 million is already more than enough for a person to live a decent life. If they had inherited billion of dollars, it will probably turn them into spendthrift. Imagine your account with billion dollar now! What would you do with it? I am sure that most people will feel highly motivated to spend the money than anything else. Private jet? Cruise? Private luxurious Vegas party? How about those friends who suddenly became friends of a billionaire? If you don’t know how to manage your wealth, more money will only cause more financial problems.

8. Secret shouldn’t be kept in the Grave

Image: No provision for Craig & Meegan Panzirer
Source: Pg3 of Leona Helmsley’s will

Helmsley left nothing to two of Jay Panzirer’s other children — Craig and Meegan Panzirer — for “reasons that are known to them,” she wrote. This is the part that the will might cause objections. Why don’t Leona just state the reason? What did they do wrong to deserve zero inheritance? If you keep the secret in the grave, nobody is going to find out even though they dig up your grave.

Possible reasons (just wild guess)

• they didn’t show respect to Leona
• they don’t love her
• the extreme love Leona showed to the pet cause jealousy
• they are spendthrift? Is it true? I guess only their close friends know the answer.
• Leona wants them to be interviewed and get exposure. They can work themselves up to be celebrities because people just love to gossip about their secret.

If you are going to exclude anyone from inheriting your wealth, I suggest that you write down the reasons in your will. It is important not to cause any dispute. You can’t speak for yourself from the grave.

7. Cultivate Filial Piety

Image: Incentive unitrust for grandsons
Source: Pg2-3 of Leona Helmsley’s will

A separate unitrust, which is a form of charitable remainder trust was set up with $5 million each to provide yearly income to the David and Walter Panzirer. The amount receivable is equal to 5% of the trust market value. However, according to page 7 of the will (Article 4 Section D)

Image: Conditions to be met by grandsons to be entitled for the income distribution
Source: Pg7 of Leona Helmsley’s will

So long as they visit their father’s grave site once each calendar year, preferably on the anniversary of Jay Panzirer’s death (March 31, 1982), they will be entitled to receive the 5% income distribution, which is at least $250,000 per annum. Otherwise, she wrote, neither would get a penny of the $5 million she left for each. If anyone of them fails to visit the grave during any calendar year, his interest shall be terminated at the end of such calendar year.

In order to make sure that they comply with the conditions, the Trustee
(Alvin) shall place in the Helmsley Mausoleum a register to be signed
by each visitor. Alvin just need to verify the signature at the end of
the year. Then pay the grandchildren the money they deserve.

Some reader points out that in order to streamline the process of complying with their provisions, Walter
and David need only go to said grave at around 11:59 PM on December 31
of a given year, wait two minutes, and leave with 2 calendar years’
worth of visits completed.

Is this a smart way to cultivate the value of filial piety? The Panzirers just need to visit their fathers grave, sign the register, and jolly the rest of the year. If you were to cultivate great value from your heirs through a testamentary trust, you can consider the following suggestions:

• ask them to blog about you monthly, weekly or even daily.
• Use the trust fund to pay any taxes they are due to pay. The more they earn, the more they will get from the trust fund. If they can’t make any decent income, there will be no tax to pay, result in no income received from the trust

6. The Rich are Generous

Image: Residuary estate left to The LEONA M and HARRY B HELMSLEY CHARITABLE TRUST
Source: Pg4 of Leona Helmsley’s will

She ordered that cash from sales of the Helmsley’s residences and belongings, reported to be worth billions, be sold and that the money be given to the Leona M. and Harry B. Helmsley Charitable Trust. Among other things, the will orders that Helmsley’s jewelry, art, cars and other valuable property be sold, with proceeds going to unnamed causes through the Leona M. and Harry B. Helmsley Charitable Trust.

About 99% of Leona’s estate are given to charity. She is generous and I think this prove that rich people are more generous than the poor. Would you give 99% of your wealth to charity?
Who shall benefit from the trust? It depends on the trust deed which is of course not covered in the will. I believe that those persons in need will get their shares.

5. Co-Trustees vs Corporate Trustee

Image: Appointment of Executors and Trustees
Source: Pg8 of Leona Helmsley’s will

Leona appointed the following persons as joint executors and trustees:

• her brother Alvin Rosenthal
• her grandchildren David and Walter Panzirer
• her attorney Sandor Frankel
• her friend John Codey

When there are fewer than 3 persons of the above acting as fiduciaries, they shall designate a corporate fiduciary to serve as Executor and Trustee.

In my understanding, the above person will be the trustee of the following trusts:

• unitrust for Alvin Rosenthal ($10 million)
• unitrust for David Panzirer ($5 million)
• unitrust for Walter Panzirer ($5 million)
• The Helmsley Perpetual Care Trust ($3 million) for the Mausoleum maintenance.

It seems that the trustees themselves are also the beneficiaries, except the attorney and the friend.
In very general terms, a trust is an agreement among three people.

• The grantor contributes property to the trust (Leona Helmsley in this case)
• The trustee owns the property and carries out the purposes of the trust.
• The beneficiary receives the benefits of the trust in accordance with the trust agreement.

One person can often serve as two of the three people in a trust agreement. That is, the same person can be the grantor and trustee, trustee and beneficiary, or grantor and beneficiary. It is even possible for the same person to be all three. The “person” does not even have to be a natural person. For example, the trustee can be the trust department of a bank and the beneficiary can be a charity.

Using an individual on the other hand means that there may be no cost and the trustee may have a personal relationship with the beneficiary. The flip side of that, of course, is the risk of a conflict of interest for the trustee.

It is possible to appoint the beneficiary as trustee, but of course making a sole beneficiary the sole trustee would not be wise in the situation where the assets have been placed in the trust to be protected from the
beneficiary themselves. In such a situation, it may be wise to appoint an unrelated trustee company as co-trustee with the beneficiary, or instead of the beneficiary.

In my understanding, it seems better to appoint a corporate trustee for all the trusts stated above. Helmsley can easily afford the trustee fees. Probably she did that due to these myths:

Myth #1: Corporate executors or trustees are too expensive

All executors and trustees are entitled to compensation (except in Quebec, where if the executor is also a beneficiary he or she may not be able to claim compensation unless the will so indicates or the beneficiaries agree). In many cases, a fee is negotiated in advance, based on the size of the estate assets held by the trust, the nature of the assets and the responsibilities involved.

Individual executor/trustees are entitled to the same compensation as a corporate trustee. Even if they waive their right to a fee (or don’t realize they can charge one), they may have to hire lawyers, accountants, agents or other professionals to carry out many of the tasks they’re not qualified to perform.In all cases where there is no set agreement, the beneficiaries of a trust or estate have to agree on the trustee fees and approve expenses. If an agreement can’t be reached, the trustee must obtain court approval.

The charges involved is probably higher than the amount Helmsley distribute to her heirs. At the same time, I don’t think that the appointed fiduciaries will work for free. They would and should claim the compensation they deserve.

Myth #2: Corporate executors or trustees take too long to make decisions

Trust officers are expected to act as quickly as they can when making a decision, but they also have a duty as trustee to be even-handed. Favouring one beneficiary over another is not allowed, unless the trust specifically permits it.Some decisions inevitably take time, especially when additional facts are needed. A little fact-finding in the situation above could have prevented the escalating tensions.A good corporate trustee will have published service standards outlining the time it takes to perform typical transactions. At the same time, however, the duty of fairness, and other fiduciary duties of a trustee, must prevail.

When there is dispute amongst the appointed trustees, I can foresee that it will be a longer delay because there are 5 different brains thinking for their own benefits.

Myth #3: Corporate trustees are remote and uninvolved

Few people realize how “hands-on” the job of a trust officer is. A trust officer could spend up to half of the week out of the office, inspecting property, meeting with beneficiaries, settling disputes, closing safety deposit boxes and listing assets.While in the office, they must arrange the financial affairs of the estate and trust and complete the administration. A trust officer may not have the emotional involvement of a friend or family member, but he or she is actively involved. And the lack of any personal stake in family matters often makes it easier for the trust officer to be impartial.That’s why a corporate executor or trustee is frequently appointed in cases where there are contentious issues or family disputes.

Myth #4: Continuity will suffer because of staff turnover

While no corporate trustee can guarantee a trust officer’s presence for life, the issue of continuity is a bit misleading.Just as corporate trust officers can change jobs or careers, individual trustees can leave the country, become incapable, die or simply ask to be relieved of their duties.The advantage of a corporate executor or trustee is that a qualified replacement can be named immediately. In many ways, this can enhance continuity rather than hinder it.A corporate trustee will appoint a trust officer to handle each trust file. Depending on the terms of the trust, the trust officer could handle the file for years, even decades. If the trust officer leaves, another qualified officer will be appointed immediately.In all cases, the trust records will be maintained in an organized way so that future officers can easily and quickly familiarize themselves with the history of the trust.

4. Only the little people pay taxes

Image: Contribution eligible for income tax and estate tax charitable deductions.
Source: Pg4 of Leona Helmsley’s will

One employee had quoted Helmsley as snarling, “We don’t pay taxes. Only the little people pay taxes.”. Her saying hold true even after she had passed away. She just wouldn’t let uncle Sam take his share from her billion estate.

3. Final Resting Places Perpetual Maintenance Trust

Image: The Helmsley Perpetual Care Trust
Source: Pg1 of Leona Helmsley’s will

Leona set up a testamentary trust, “THE HELMSLEY PERPETUAL CARE TRUST” for the maintenance of her mausoleum, referred as the FINAL RESTING PLACES in the will. $3 million is allocated as the trust fund. She had instructed that the Trustee shall distribute any part of the trust income and principal in their sole discretion to carry out the following maintenance trust:

• care, cleaning, maintenance, repair, and preservation of the interior and exterior of the Final Resting Places
• care, planting, and cultivation of the lawn, trees, shrubs, flowers, plants and hedges located on the cemetery plots
• the Mausoleums to be acid washed or steam cleaned at least once a year
• inspection of the Final Resting Places not less often than quarterly to ensure their proper care and maintenance.

I believe that it will cost a substantial amount of money to maintain a luxurious Mausoleum in the manner described above. Whether $3 million is enough, it will be questionable.

Suggestion for improvement

Even though it is a finely detailed trust, I still think that there are a better arrangement if she could have included the following suggestions:

• the Trustees shouldn’t be allowed to use the trust income and principal in their sole discretion. This clause permitted the Trustee to spend the money as they “wish”. When the trust fund is exhausted, there will be no perpetuality. I would suggest that the Trustee to spend only the income portion and leave the principal trust fund untouched. This will give them an estimated budget to work with every year.
• Because there is no living beneficiaries, there will be nobody to ensure that the mausoleum is well taken care of. If possible, a protector or supervisor shall be appointed in the will to overlook the maintenance job quality. The supervisor shall have the power to change the Trustees with new appointment if they fail to carry out the task in a proper manner.

2. Verify first- Dog can’t be buried together

Leona Helmsley’s last request that her dog be buried in the family crypt in a New York cemetery won’t be honored because it’s illegal. An official with the Department of State’s Division of Cemeteries told The New York Post a dog can’t be buried in a cemetery meant for humans.

Lesson: Before you write something like this in your will, please make sure that it is implementable. You won’t have second chance to alter it from the graveyard.

1. Can Helmsley’s heirs contest her Will?

Everything is contestable in this world. That’s what make the lawyer rich.

Image: Further conditions
Source: Pg13 of Leona Helmsley’s will

If any beneficiary under this Will shall, directly or indirectly, file or cause to be filed objections to this Will, ………..then any bequest for the benefit of such beneficiary (whether outright or in trust) ….. shall not be paid to them …. deemed to have predeceased me for all purposes of this Will.

It is unlikely that the mentioned beneficiaries will ever contest her will. But the other excluded heirs might want to take their shot. They have nothing to lose after all.

Here are something they can do to contest the will:

1. Prove that it wasn’t properly signed or that the deceased was under coercion or mentally incapacitated. A probate court could rule the will invalid if Helmsley had been threatened, tricked into thinking she was signing another document, or had her signature forged. Otherwise, relatives in search of a bigger payout would need to show that Helmsley signed in good faith but didn’t understand what she was doing.
2. She signed the will in front of three witnesses, who were supposed to withhold their signatures if they knew she wasn’t of sound mind. To convince the court that Helmsley was mentally incapacitated, one might need to prove that the witnesses were mistaken—or that they were themselves incapacitated.
3. If the heirs can’t invalidate the will, they might still be able to get their hands on Trouble’s money. If Helmsley provided for the dog under what’s called a “statutory pet trust,” then a court can rule that some of the $12 million should be redistributed. In New York, a statutory pet trust can be challenged if it “substantially exceeds the amount required for the intended use.” If a judge decides to shift money out of the trust, it’s more likely to end up going to her charitable trust than to her relatives, since that’s where the bulk of her property—worth a reputed $2.5 billion—went. On the other hand, if Helmsley set up a traditional pet trust for Trouble, the courts would be less likely to reduce its size.* (Statutory trusts provide more court supervision and can be very easy to draw up, but they’re not available everywhere.)

Lesson:

• For your pet, set up a traditional pet trust instead of statutory pet trust. Or you can also set up a living trust and grant the money outright instead of forking out money from your estate. For Leona, $12 million is a tiny amount that should have been set aside before she died.
• Since the further condition prevent the beneficiary to contest the will, Leona should have distributed the other legal heir a dollar or two, just to keep their mouth shut.

Just my two cents. Do you have any opinion? What do you think Leona should have done better in planning her estate? We would like to hear from you.

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