Trust & Estate Controversy Experience
A. Defending Executors and Trustees
McDermott’s Trust & Estate Controversy Group has successfully defended executors and trustees facing challenges that could have lost entire estates or cost those parties millions in personal judgments.
Defended Corporate Trustee Represented trustee of charitable trust with family remaindermen, accused of mismanaging $250,000,000 trust by favoring family beneficiaries over charities. Claims dropped in settlement, pending summary judgment. All fees paid from trust.
Defended Corporate Trustee Represented trustee accused of mismanaging investments of $5,000,000 trust invested 92% in equities during "bubble burst" of 2000 investment markets. Held: case dismissed on motion due to various defenses including prudent investor rule "no result oriented" standard of conduct. Cost of fiduciary: $40,000.
Defended Corporate Trustee Represented trustee, recipient of ESOP sale proceeds from grantor's stock, after ESOP collapsed with company, subsequent to sale. Held: No liability for trustee or trust, due to operation of various statutes of limitation including failure to timely re-open grantor's probate estate to pursue personal claims against grantor.
Defended Trustee Represented trustee bequeathed residue of significant dollar estate from executor, the decedent’s surviving spouse. The trustee was sued by beneficiaries of trust when executor and agent depleted estate of millions of dollars. Suit arose after 10 years of probate administration, during which the trustee only wrote letters to executor’s counsel seeking accounting. Case against the trustee was dismissed on motion, court finding in a case of first impression that trustee had no obligation to sue executor to force turnover of the estate. Amount claimed against trustee was $3,000,000. Cost to trustee, including legal fees, was less than $100,000.
Defended Corporate Trustee Defended corporate trustee against charge of mismanagement of trust investment after the trustee participated in E.S.O.P. tender offer of closely held shares of a private company held by trustee; participation in tender offer shifted voting control among dissident family members who were beneficiaries of trust who then sued trustee. Case was dismissed on motion after settlement agreement in which dissident beneficiaries and family members indemnified the trustee for its agreement to make no further tenders of stock. Amount claimed against trustee was in excess of $50,000,000. Cost to fiduciary was zero.
Defended Corporate Trustee Trustee was sued by beneficiaries for allegedly improper distribution of entire trust to senior generation beneficiaries, the cause of multimillion dollar adverse tax consequences to the next generation of beneficiaries. Case against trustee was dismissed on argument that 10-year old release in will contest among related parties effectively barred the action. Amount claimed against the fiduciary was in excess of $10,000,000. Personal outlay by trustee was zero.
Defended Trustee Rescission claim to undo $5,000,000 trust by heirs, claiming that person establishing trust lacked capacity. Defended on grounds that challengers lack standing to sue due to provisions of trust. Settlement among parties, with no payment to heirs and no attack on the trust.
Defended Trustees and Beneficiaries Challenge by creator of trusts, claiming that $10,000,000 trusts were quid-pro-quo for contractual obligations not fulfilled by beneficiaries. Argued that sworn statements by creator of trust made on gift tax returns filed with trusts were binding admissions that trusts were gifts and not in exchange for contractual obligations. Settlement agreement in which trusts made no financial outlay to creator of trust and trusts remained intact.
Defend Trustees and Primary Beneficiary of Trust $60,000,000 intentional interference with testamentary expectancy tort claim by second spouse of decedent, who married decedent at age 90 and then settled invalidity of marriage lawsuit for small portion of estate. Spouse then claimed that settlement agreement was brought about by fraud and duress, costing spouse right to inherit full $60,000,000 estate. Removed to federal court, followed by successive motions to dismiss claiming that allegations were insufficient for tort claim, followed by motion for summary judgment on remaining claims showing that certain post-death payments to spouse were ratification of prior settlements. Entire case was dismissed on motions.
Defended Corporate Trustee Claims that trustee had mismanaged operating business held in trust after business became worthless. Trustee’s accounts approved and fiduciary exonerated for all aspects of handling business.
Defended Executor Defended executor from removal and surcharge action, for alleged mishandling of estate creating perpetual charitable fund for a scholarship program. Obtained dismissal of case against executor by intestate heirs and others. Reversed IRS determination that the charitable trust did not qualify for the estate tax charitable deduction and income tax exemption. Resolved litigation among charitable beneficiaries to implement perpetual scholarship program, all with no personal exposure to fiduciary. Amount claimed against executor was $8,000,000 to $12,000,000. Cost to executor personally was zero.
Defended Executor Executor sued by beneficiaries for alleged mismanagement of operating business held by executor. Defense included counter-suit against beneficiary for misappropriating funds from the operating business. Settlement agreement releasing all claims against executor, with contribution to trust of funds taken by beneficiary. Amount claimed against executor was $5,000,000; Personal exposure to executor was zero.
Defended Executor Attack against estate and trust by second spouse who married decedent two days before his death. Spouse claimed significant share of multimillion dollar estate through marital claims and held original will and trust “hostage.” Obtained original will and trust using probate court citation and implemented challenge to validity of marriage, resulting in settlement in which spouse was paid $14,000. Amount originally claimed against executor was in excess of $2,000,000 of estate and trust property.
Defended Executor Will contest by estranged spouse and son, claiming that deathbed will in favor of decedent’s private charitable foundation improperly disinherited them of $11,000,000. Challenge dismissed on motion claiming that will contest was faulty without parallel attack on trust executed simultaneously with the will on deathbed. Settlement for cost of litigation. Amount claimed was in excess of $11,000,000; amount of settlement was approximately 2.5% of amount in controversy, paid entirely from estate.
Defended Executor Claims against restructuring of estate-held business during period of post-death administration and attack on prior-to-death joint tenancy transfers to executor individually. Total amount claimed was $3,000,000 involving corporate restructuring and $2,000,000 in personal transfer. Corporate restructuring claim dismissed based on special investment provisions of will. Personal transfer successfully defended at trial. No recovery against Executor.
Defend Executor Special claim by beneficiary for mishandling estate, alleging waste of several hundred thousand dollars and unnecessarily paying in excess of $1,000,000 in gift and estate tax. Sought recovery from third party contributing to depletion of estate and obtained refunds of taxes paid based on claims against third party. Settlement with beneficiary for lawyer fees only.
B. Representing Plaintiffs and Others Challenging Provisions of Estates, Trusts and Actions by Fiduciaries
McDermott’s Trust & Estate Controversy Group has been equally successful with creative strategies for plaintiffs, often challenging the validity of wills and trusts, as well as parties seeking to declare themselves heirs or attacking inept, corrupt fiduciaries. Below is a list of the benefits of the McDermott Group’s experience:
Represented illegally disinherited members of multi-billion dollar family financial empire, on grounds that disinheritance from irrevocable trusts by father/trustee was illegal. Held: Despite broad discretion in trusts, breach of trust occurred if no benefit arose to beneficiaries from actions of trustee disinheriting plaintiffs.
Represented heir to long established family fortune: made claim that sibling had taken advantage of elderly parent and diverted tens of millions of dollars from parent to sibling and a fraudulent charitable foundation sibling established to hold the funds. Attacked transfers directly and instigated suit by attorney general to challenge fraudulent foundation. Heir recovered 125% of possible inheritance in special trust fund created in settlement agreement. Heir also obtained use of several unique properties which had been withheld from heir by family members for a number of years.
Represented plaintiff, only child of decedent, who challenged trust disinheriting child and grandchildren in favor of lawyer who had sued the child’s family in several years of litigation after decedent became incapacitated and could not manage affairs. Trust for lawyer diverted $8,000,000 from child’s inheritance and had potential for also generating taxes that would wipe out remaining portion of child’s inheritance. Special declaratory judgment action regarding conflicting provisions of will for child versus new trust created for lawyer caused plaintiff’s inheritance to be preserved and charged trust for lawyer with all taxes and administrative expenses of estate.
Represented beneficiaries of several multimillion dollar trusts against actions of trustee/farm manager, who was converting cash and marketable securities into additional farm property for trusts. Succeeded in forcing trustee resignation after establishing that trust investments resulted in “kickback” of farm management fees to trustee.
In case of first impression, represented intestate heirs (siblings) who sought to exclude parental claims through alleged father and illegitimate children, using R.F.L.P. DNA testing on exhumed tissues from decedent. All claims other than siblings’ rights of heirship defeated by conclusive R.F.L.P. DNA analysis and, on appeal, established case of first impression regarding use of the DNA analysis in heirship proceedings. Recovery by heirs was in excess of $4,000,000.
Represented beneficiaries in will contests and trust contests of wills and trusts created by two parents, who died almost simultaneously. Claims that sibling obtained succession of codicils and trust amendments late in parents’ lives, causing them to disinherit other siblings. Successful three way split of multimillion dollar estates on settlement, after establishing that several of the codicils and trust amendments were forgeries.
Successfully prosecuted “civil murder” cases under “Slayer Statute” against alleged killers standing to inherit from decedent’s estate. In three cases, successfully froze millions of dollars of assets and brought about recovery of all but negligible amounts expended prior to estate freezes; obtained ultimate determination that alleged killer caused the death of decedent, including two cases where no criminal prosecution was ever brought. In one case, judgments put alleged killer into bankruptcy and eventual jailing, thus recovering funds and incarcerating alleged killer who was never prosecuted for crime of murder.
Represented relatives of childless uncle who left inherited estate to two caregivers who had sequestered uncle from family members for over 30 years. Successfully defeated long-standing set of six wills and trusts over 25 years, all in favor of caregivers, by challenging only final trust created for caregivers on decedent’s deathbed after allowing will to remain unchallenged. Relatives end up settling for recovery of major portion of deceased uncle’s estate, after caregivers are faced with prospect of defending deathbed trust for their entire claim to the uncle’s estate.
Represented numerous plaintiffs, including first such plaintiff in “Nemeth,” Illinois case of first impression, creating intentional tort of “Interference with Testamentary Expectancy,” making actions by persons obtaining stealing inheritances by undue influence compensable by those persons (as opposed to simply out of the estates at issue if recovery occurs).
Represented elderly plaintiff who had transferred entire estate into irrevocable charitable trust drawn up by allegedly fraudulent charitable promoter, depriving plaintiff of property. Recovered all properties transferred in trust; placed charitable promoter out of business pursuant to attorney general’s investigation and obtained significant settlement against lawyers involved, arising from alleged malpractice in handling situation.
Successfully obtained termination and distribution of partnership, created with trust assets, where beneficiary claimed partnership had been fraudulently created to prevent distribution to children of multimillion dollar share of father’s trust. Obtained judicial order terminating and distributing trust properties immediately with accounting by second-spouse fiduciary for handling of funds.
C. Guardianship Litigation and Guardianship Estate Planning
McDermott’s Trust & Estate Controversy Group has represented guardians and parties litigating with those guardians for over 20 years. The Group is a leader in the new practice of establishing, after hearing by court order, new wills and trusts for disabled persons to achieve tax planning and other results. McDermott’s group has also defended many corporate guardians from claims arising from the stewardship or management of personal injury or wrongful death litigation undertaken by contingent-fee lawyers during the guardianship. Among the successes of this group include the following:
Represented corporate fiduciary in establishing nationally recognized guardianship estate plan restructuring disabled person's billing dollar, single investment estate. Created landmark charitable gifts, pre-empted will contest and saved hundreds of millions in death taxes.
Defended corporate trustee/guardian in claim by disabled person that trust for her benefit with $10,000,000, created by disabled person when competent, should be terminated. Case dismissed in settlement pending motion to dismiss action to terminate trust. Cost, paid for trust, $58,000.
Defended corporate guardian against claim that settlement in excess of $1,000,000 releasing certain defendants in personal injury suit was improper after guardian agreed to allow entire settlement to pass to family members other than disabled person’s estate. Obtained dismissal of complaint against corporate guardian after establishing that guardian had no obligation to interfere with trial strategy of plaintiff’s personal injury lawyer and bring about particular settlement results. Amount claimed against guardian was in excess of $1,000,000; personal outlay by fiduciary was only legal defense fees.
Defended corporate guardian against claim by relatives of disabled person that guardian should have prevented plaintiff’s personal injury lawyer from taking allegedly excessive fees for involvement in personal injury action. Claims dismissed in trial court and affirmed on appeal on finding that corporate guardian had no duty to object to or otherwise interfere with determination of personal injury lawyer fees.
First lawyers in metropolitan Chicago area to obtain wills and trusts for disabled persons after 1996 legislation allowing creation of these documents by hearing in the guardianship court. Obtained millions of dollars of tax savings in over a dozen estates of disabled persons, after courts have allowed the creation or modification of wills and trusts to effectuate tax and other family and estate planning objectives.
In one case of guardianship estate planning, resolved potential will contest by bringing about amendment of will and obtaining consent of all family members and legatees who could have objected to the disabled person’s will, eliminating costly will contests in the process.
Successfully challenged creation and use of power of attorney, used to defeat guardianship, by having power of attorney declared invalid and recovering any property transferred under power of attorney.
Represented several guardians charged with managing or liquidating privately held businesses and operating entities held by disabled persons in guardianships. Obtained court orders exonerating guardians for management and disposition of operating businesses. Discharges obtained where family members or other parties have claimed significant sums from guardians for alleged mismanagement or mishandling of operating businesses.
Defended Guardian in an alleged failure to account to court for handling of disabled person’s assets and alleged failure to properly manage decedent’s operating business, claims seeking millions of dollars of damages in addition to removal of guardian. Guardian served through balance of guardianship with no personal outlay or exposure after claims were dismissed.
Represented several adjudicated disabled persons in successful full or partial restoration proceedings, to recover some or all legal capacity to contract, manage estate or handle personal affairs.
D. Trust Construction, Reformation and Judicial Rescission
McDermott’s Trust & Estate Controversy Group has successfully and economically completed so many trust constructions, reformations and judicial rescissions of trusts (usually by the grantor) that their experience is invaluable to clients. Participating in such actions on an ongoing basis, Mr. Baker, Mr. Raynal and the other lawyers in the group have often handled complete construction actions, from start to finish, in a matter of months and on an efficient basis. The depth of their knowledge and experience and the frequency with which they engage in these actions has made them the most economical and assured way of dealing with will and trust constructions and reformations. The unique results can be illustrated by the following:
Corporate trustee was charged with mishandling post-death administration of trust, after obtaining disclaimer by surviving spouse designed to save taxes, when surviving spouse died shortly after signing disclaimer. With several hundred thousand dollars at stake, the trustee retained McDermott Will & Emery’s Trust & Estate Controversy Group. Within a four-week deadline, McDermott’s group commenced a construction action of the disclaimer and obtained a favorable construction order, “fixing” the allegedly ineffective provisions of disclaimer and bringing about the intended favorable tax result on the decedent’s estate tax return. Total personal outlay by fiduciary: zero. Entire legal proceeding commenced and concluded in less than four weeks. Total fees for entire proceeding were less than $15,000.
This creative and economical resolution is typical of the results obtained by McDermott’s Trust and Estate Litigation Group in handling these cases.
E. Charitable and Exempt Organization Litigation
McDermott’s Trust & Estate Controversy Group has also represented many parties involved in litigation regarding charitable trusts and exempt entities, such as public charities and private foundations. These matters are generally governed by law involving trusts and by tax provisions, which are the focus of much of the expertise of McDermott’s Will, Trust and Guardianship Controversy Group. The group has also achieved many unique and compelling results in litigation involving charitable trusts and organizations:
Successful restructuring of defective charitable trust and not-for-profit corporation, which faced millions of dollars of delinquent federal excise taxes due to failed charitable administration and potential income taxes for failure to maintain exempt status. Potential exposure to charitable fund and personal exposure to charitable trust and fund managers was approximately $4,000,000. Outlay by charity and its trustees resulted in lawyer fees only.
Defended party that purchased failing hospital operation from not-for-profit hospital corporation, managed its recovery and then resold successful hospital operation to new not-for-profit corporation. Multiyear challenge of all aspects of transaction by local attorney general, sought rescission of initial purchase and assessment of significant penalties and fines against private party, alleging the party took advantage of the charitable seller in the initial purchase and of the charitable purchaser when the “revived” hospital was sold back to charity. Attorney general’s investigation and enforcement proceeding dropped with no action taken.
In a case representative of many undertakings for charitable entities, represented private foundation in obtaining multimillion dollar charitable bequest which executors had sought to divert to a different charity using certain broad powers and provisions in will creating bequest. Using claims against executor for self-dealing and other abuse of fiduciary power, the group successfully obtained settlement that doubled endowment of private foundation.
Represented community trust in obtaining and maintaining public charity status to avoid application of private foundation regulation and secure court approval of reorganization of the foundation.
Represented trustees of charitable trust in bringing outdated trust with historically antiquated, impermissible grant-making categories into Illinois and Indiana compliance with non-discrimination rules. Obtained court reorganization of scope of grant-making authority to comply with federal and state non-discrimination regulations.
F. Tax Litigation, Attorney Malpractice and Other Estate, Trust and Guardianship Related Litigation
McDermott’s Trust & Estate Controversy Group has also called upon the resources of McDermott’s long-established estate tax, income tax and estate and trust administration practices to represent parties in tax-related litigation, defend lawyers charged with malpractice in the estate and trust area, litigate regarding legal fees in dispute in estate, trust and guardianship matters and other aspects of estate and trust litigation. The group has defended one of the largest condemnation cases in recent Illinois history, representing a charitable foundation in its condemnation fight with a local park district over the last working farm in Cook County, Illinois.
The group has successfully defended several lawyers against alleged drafting and other estate, trust and tax-related malpractice, often exploiting its expertise to find ways to “fix” arguably improper will and trust provisions to avoid lawyer liability. The group has obtained exempt status for private pension plans that were never properly established during decedent’s lifetimes, avoided estate tax on personal injury and wrongful death settlements by successfully structuring and then defending allocations between non-taxable, wrongful death and taxable, survivorship actions and successfully argued for the exclusion from death tax of many estate and trust interests that had flaws which potentially subjected them to confiscatory taxes.
Contacts
- David A. Baker
+1 312 984 7597
Send E-mail - Lazar P. Raynal
+1 312 984 3653
Send E-mail
