slimy schemes

Crime Does Pay (especially when it comes to frivolous estate challenges)

Several years ago, a client came to me to help work out language to establish a restricted endowment for someone donating land to establish a camp – all nice stuff.  About year or two later, the client called and said that the donor has passed away.  The endowment agreement never was signed but the donor had done his estate plans without involvement of the charity.  The result: he left everything he had to this charitable organization, including the valuable land and more, around $15 million in total.  No strings, either!  Not that it mattered since the nonprofit knew the donor well enough to create a board restricted fund to meet the donor’s wishes posthumously.  All nice stuff until a long lost relative got notice that great uncle Charlie passed – and all of his money is going to charity, do you object?

So, the client asked me what they should do in the face of the challenge to the estate.  Apparently the donor’s attorney had done everything right, even a video of the client attesting to no undo influence and mental capacity.  Upon hearing these facts, my advice was to hire the largest, nastiest law firm in that state and instruct them to squash the other side.  Having had the misfortune of being in a small law practice and having run up against big law firms, I knew exactly the pain a large firm would put the challenging attorneys through.  Make is so not worth their time and money that they will walk away.  In any case, the charity’s bequest was completely solid – it was just a matter of time (they just didn’t want to wait years for the funds).

The client consulted with a top law firm in the state and lo and behold, they settled with the family – a few hundred thousand to send the great nephew off in style.

I found out that what would normally be considered a frivolous law suit (estate challenges only can be instituted by someone who would have received estate funds had the person died without a will – i.e. a next-in-line descendant), was actually a smart move.

For regulars to this blog, you should know my personal involvement and feelings regarding the Huguette Clark estate (search my blog for numerous posts on the topic).  So, when Bill Dedman’s email with a link to his latest piece on the Clark estate came through this morning, it wasn’t surprising.  The title says it all:  “Kin of heiress Huguette Clark in talks to receive share of $300 million estate.” Click the title if you want to see the article!

All not surprising – the whole story was a ruse from the start to squeeze some bucks out of the estate.  All of the accusations, negative stories about the estate attorney and accountant, the law suit against the hospital, all of it was for one purpose and one purpose only: how much money can we (the relatives who had nothing whatsoever to do with Ms. Clark) get out of the old lady – who to their chagrin lived to the ripe old age of 104 and only signed a will very late in the game.  Ironically and perhaps with divine justice, Ms. Clark outlived so many of the family who were to me scheming and planning and waiting to get her money (having squandered their wealth over the years).  It could have been billions of dollars, too, had her assets been managed professionally.

Here is a snip-it from the linked article that says it all:  “Fourteen of the 19 said in legal papers that they never met their reclusive aunt. The last time any of them recalled speaking with her in person was in 1957, although some said hello when their parents were on the phone with Huguette on holidays.”  I think they were stretching the truth even there.  Ms. Clark was a recluse and these “relatives” were descendants of her half-siblings (all of whom were adults when she was born) who probably didn’t appreciate their father’s new late in life family.

So what do walk away with from these stories?  The unfortunate reality is that estate challenges – from next-of-kin only – don’t follow the normal “frivolous law suit” standard that other legal cases do.  There is almost no way around it.  Planned giving fundraisers – do your best to make sure family knows what your donors are doing, keep good files and don’t be surprised when the family fights the will.  Usually it is the long lost nieces and nephews and other more distant relatives who fight the most.  No guilt about their parents, just greed and easy money.

Too Many People In My Contacts Folder Going To Jail

Pretty depressing Monday morning when you find out that a very well respected tax lawyer, formerly from Ernst and Young (“E&Y”) no less, is off to jail.

This would be the 3rd person in my outlook contacts folder heading off to a federal penitentiary for various white collar crimes this year.

Why a post? I am going to quote from the TaxGirl blog ( from where I got the story. I clicked through to the story from my email thinking I was going to see interesting stuff about E&Y – not a favorite of mine for various reasons.

Here is the quote from TaxGirl:

As part of their scheme, Coplan, Nissenbaum, Shapiro and Vaughn helped clients manufacture losses within the tax shelters. The four then solicited opinion letters from law firms that claimed that the tax shelter losses or deductions would “more likely than not” survive IRS challenge, or “should” survive IRS challenge. The IRS claimed that the four defendants were aware that the transactions did not meet those standards.

As I read this paragraph closely, it dawned on me that these former E&Y guys, all headed to the big house, relied on the age-old idiocy of the vaunted law firm opinion letter to justify their tax fraud schemes.

In other words, a letter from a law firm backing up some questionable tax avoidance scheme is absolutely worthless.

Why I am reporting this to the nonprofit world is that this is the typical proof of one of those newfangled get rich quick charitable schemes out there. It usually involves insurance, your donors lives, etc.. And, they always have a letter from a law firm explaining that the scheme is fine.

Well, the only letter that counts is a letter from the IRS – a private letter ruling. Period. Never be fooled by any promoter, of any scheme that is any bit questionable or risky, with one of these law firm letters. It doesn’t matter which law firm. They are all garbage and if the promoters really feel that they have a worthwhile plan, they should go to the IRS for their opinion.

This is just a pet peeve of mine since I have had to sit through so many garbage meetings and presentations on such ridiculous plans. And, the next time one those idiots shows me an official law firm blessing letter, I am going to pull out this case and shove it down their throats (not literally, of course).

Maybe this week will get better, please G-d!