Tag Archive for: Trust

Clark Estate

Undue Influence and Fiduciary Breach Can Reverse Terms of Will In Probate, a quick look at Clark and McCormick

Recently, there has been much publicity surrounding the estate of Huguette Clark, and the heirs and beneficiaries fighting over the vast (roughly $300 million) estate. Interestingly, when reviewing the value of the estate and the amount of attorney’s fees distributed from the estate, I couldn’t help but think about the number of attorneys salivating to get hired to represent the parties involved.
Huguette Clark
Roughly two years after her death, the interested parties reached a settlement. Interestingly, the attorney’s fees to be paid from the settlement are almost $25 million. While that number seems staggering, it is roughly 8% of the total value of the estate.

In her original will, Ms. Clark made a provision for a significant amount to be distributed to her nurse and companion, Hadassah Peri. Ms. Peri had received a substantial amount of gifts during Ms. Clark’s lifetime (approximately $31 million). In the settlement, Ms. Peri agreed to pay back the estate $5 million over the course of 6 months. The settlement also provided that if any other assets totaling over $100,000 are determined to have been given from Ms. Clark to Peri or her heirs, the estate could seek the return of additional funds from Ms. Peri, leaving her obligation to the estate open.

This case brings to mind the fiduciary duties associated with probate matters and probate litigation. In a recent case from the 3rd District Court of Appeal of Florida, McCormick v. Cox, 118 So. 3d 980 (Fla. 3rd DCA 2013). McCormick, the attorney for the decedent, prepared two trusts. McCormick was also named as the trustee.

McCormick arranged for an appraisal of the property as of the decedent’s date of death. The appraiser reported a fair market value of the property, as an operating golf course, of $2,500,000. However, billing records provided by McCormick shows he had been working to convert the property from a golf course into residential property. The appraisal McCormick used on the decedent’s estate tax return did not reflect the best use of the property, nor did McCormick communicate with the beneficiaries about the value. The property ultimately sold for $12,000,000.

McCormick also did not provide a trust accounting report to the beneficiaries until April, 2005. The trial court found this to be a “significant breach of obligation”. Then, when the property did sell, McCormick instructed the closing agent to make separate distributions to the trust, primarily to fund “trustee’s fees”, totaling over $1 million. The beneficiaries ultimately filed a lawsuit against McCormick and his firm. After a trial of 8 days, the trial court ruled, and the appellate court later upheld, the removal of McCormick as trustee, that McCormick had breached his fiduciary duty, and required McCormick to repay funds to the trust.

The Court noted that McCormick’s extraordinary and unilateral payment to himself of a seven-figure fee from trust monies, without prior disclosures of alleged entitlement and amount to either the beneficiaries or the court, constituted a flagrant breach of duty. Even when the beneficiaries learned of the funds paid to McCormick’s firm and confronted him about the amount McCormick, instead of restoring the payments or placing the disputed funds in a separate account, simply retained the funds and waited for the beneficiaries to sue him.

The trial court required McCormick (and his firm) to pay back $2,146,812 in expenses incurred due to their undervaluation of the property, found the legal fees charged were unreasonable, and required disgorgement of $1,348,000 in attorney’s and trustee’s fees.