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The Importance Of An Estate ‘Plan B’

President Clinton and Attorney General Janet Reno
Janet Reno and Bill Clinton, June 29, 1995. Photo by A. Greenseid,
courtesy the National Archives and Records Administration
.

Janet Reno inadvertently illustrated a cardinal rule of estate planning: Whenever possible, include a plan B for significant bequests.

Reno, the first woman to serve as U.S. attorney general, died in 2016. But a Florida appellate court decided the fate of one of her assets only weeks ago. Reno was raised in a homestead in what was then rural Dade County, Florida, in a house her mother built by hand in the 1940s. It’s not a very imposing house, or so I have read – I’ve never visited. But it is historic and, today, a rarity in its undeveloped setting from the rest of Miami-Dade County. The property is part of a hammock, an ecological island formed by elevated trees surrounded by wetlands.

Like a lot of Floridians, Reno arranged her estate through a revocable trust, with herself as trustee in her lifetime. She left no spouse or children, and she was the last survivor among her siblings, so she controlled the homestead outright via the trust. The trust left the property to the University of Miami, so long as the house and surrounding property would be preserved “as is” in perpetuity. But the university didn’t want it under those conditions, due to the anticipated cost of maintenance.

The remaindermen of Reno’s trust were her seven nieces and nephews, who presumably would have stood to inherit the property had Reno lacked other specific plans for it. But her successor trustee – James Alan Hurchalla, one of those nephews – suggested to the probate court that the property instead go to Miami Dade College, which agreed to accept it. Five of the other beneficiaries agreed with Hurchalla’s plan, but one of Reno’s nieces sued. The trial court, and now a midlevel appeals court, agreed with the plan to redirect the bequest to the college on the grounds that this best reflects Reno’s intent. The legal doctrine in question is called “cy pres.” The niece who brought the lawsuit, Janet Meliha Reno, intends to appeal the ruling.

Does giving the house to Miami Dade College really reflect Reno’s intent? I would have been doubtful if, for example, Reno had been an alumna, faculty member or administrator at the University of Miami. That would have implied to me that she had a particular affinity for that institution, rather than a more general idea to give the property to a college or university. But I don’t see that Reno ever had such a connection. She was a Cornell undergrad and a Harvard Law graduate.

The moral of this story is that it was at least somewhat foreseeable that the University of Miami might decline to accept a restricted gift of no obvious practical use to its mission. Considerable trouble and expense might have been spared if Reno and her attorneys had specified in the trust instrument what should happen if the university declined the property. Since the trust was revocable, and thus subject to alteration at any time, Reno or her attorneys could have even made such inquiry periodically. She could have amended the trust during her lifetime to make different arrangements if necessary. Once Reno died, the trust became irrevocable. Because the trustee could not carry out its specific terms, he had to go to court to get permission to do something else.

At my financial planning firm, we don’t draft estate planning documents – only attorneys do that – but we consult with our clients and their attorneys, often and in considerable detail. One of the things we try to do is look at issues from multiple perspectives to try to anticipate situations like this one. We have no crystal ball; neither do attorneys. But sometimes we have experience with a party or situation that the client and lawyer may not have encountered, and we see how many different law firms handle comparable issues.

Every good plan includes a contingency or two. If you want to be sure your wishes are carried out with a minimum of intrafamily strife and court intervention, remember to include a plan B.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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