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Leona Helmsley’s Executors’ Fees

Leona Helmsley’s Executors’ Fees

A Wall Street Journal article ten days ago told about the dispute over the fees requested by Leona Helmsley’s executors.

She died nine years ago leaving an estate of over $4.7 billion.  Most was left to charity with about $60 million going to individuals including $2 million to her dog.  The executors requested about $100 million in fees which amounts to over $6,400 per hour based on their submissions to the Surrogate’s Court and the New York attorney general’s calculations.

I do not want to discuss the fee or the hourly rate.  What I want to talk about is why the attorney general is involved, the role of the Surrogate’s Court, the amount of time it took to settle the estate and the choice of charities she left her money to.

The attorney general is a party in interest since his office has the power to contest fees to ensure that charities aren’t receiving less because of “excessive and unreasonable expenses.”  I was disturbed by a comment in the article that said her will lacked clarity because it did not say how the executors’ fees should be calculated.  Most wills I’ve seen do not state specifics and executors either base their fees on a statutory percentage of the gross estate or an hourly rate for such type of services.  Some wills do cap the fees and others provide a fixed amount.  The article also said the executors said their efforts enhanced the estate’s value by “hundreds of millions of dollars.”  Assuming this so, are they entitled to a commission or bonus for this value creation?  They could be if there was wording permitting the fee to take into account the value of what they did, in addition to the billing method.

The Surrogate’s Court handles the probate of the estates of everyone that dies and is domiciled in their state, or who owns property in that state.  This court oversees what the executors did with a review of all accountings, filings and tax returns to determine that everything appears in order and is disclosed properly; and occasionally questions professional fees.

Nine years to settle an estate might seem to be a long time but the complexity of Ms. Helmsley’s investments and ownership of properties takes time to organize, obtain appraisals, manage, sell or convert to cash, and probably is not excessive for this type of estate.

Various charities were designated to receive bequests but the primary one was The Helmsley Charitable Fund.  It is possible to find out financial information about this fund because it is required to make public filings.  It is common for wealthy people to establish charitable foundations to be the receptacle of their funds which are then managed and administered by trustees, which in this case are the same as the executors, also not unusual.  Further, the trustees are usually entitled to “reasonable” fees which is not an issue here.

To me this is interesting, but as a lesson, as it serves to indicate that it is essential to have your affairs in order, to express clearly what you intend and mean and how the people you are entrusting to carry out your wishes will be compensated.  And to all my clients with $4 billion in assets, let’s talk…

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Kiplinger's Personal Finance

I read a lot of finance publications. Those for professionals provide pretty sophisticated analyses while those for the general public have short articles with single points that are easy to absorb. The July 2019 issue of Kiplinger's Personal Finance is a gem and I wanted to share some of that issue with you.

Jun 19, 2019

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