A "Troublesome" Choice for the Helmsley Foundation?

A "Troublesome" Choice for the Helmsley Foundation?

Article posted in Compliance on 26 March 2009| 7 comments
audience: National Publication | last updated: 18 May 2011
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Summary

When New York real estate magnate Leona Helmsley died in 2007, she made it clear the majority of her estimated $5 billion estate was to be used for the care and support of dogs via the Helmsley Foundation. However, a New York Surrogate

By Marc D. Hoffman

When New York real estate magnate Leona Helmsley died in 2007, she made it clear the majority of her estimated $5 billion estate was to be used for the care and support of dogs. So said a mission statement Helmsley signed in 2004 for her foundation, revoking a 2003 statement that also included "medical and health-care services for indigent people, with emphasis on providing care to children."

Helmsley's beloved Maltese, "Trouble", who shared her latter years no doubt played a role in her decision.

Although Mrs. Helmsley’s intent seemed clear, New York Surrogate’s Court Judge Troy K. Webber found last month the Leona M. and Harry B. Helmsley Charitable Trust instrument does not require the trustees to follow any mission statement; rather, it grants the trustees “sole discretion” regarding the destination of the foundation’s grants.

And now, according to a news release from the foundation, it plans to commence making grants this month to health care, medical research, human services, and educational organizations. No grants for the benefit of dogs were mentioned, at least in this round.

Donor Intent verses Letter of the Trust

Judge Webber’s holding is not at issue here. He was simply interpreting the facts regarding which instrument governs. Ruling: Trust trumps mission statement. What is at issue is the whether the trustees, who now have complete discretion, will carry out Mrs. Helmsely’s stated wishes. At least with respect to the first round of grants, the answer is no.

It is important to note the trustees are Helmsley’s brother, two grandsons, her attorney, and a friend—not exactly disinterested or knowledgeable parties. In fact, they along with the New York Attorney General filed a lengthy motion arguing the mission statement did not limit use of the money.

It would be interesting to know if Mrs. Helmsely penned the new mission statement herself or did she do so with the assistance of her lawyer (who was also a trustee). If the latter, did she have a reasonable expectation the mission statement would govern? Was she advised that a mission statement had no legal effect?

The Revenue Act of 1917 introduced the first charitable deduction for gifts to corporations or associations organized exclusively for religious, charitable, scientific, or educational purposes; or to societies for the prevention of cruelty to children or animals. So taking care of man's and woman's best friend is certainly a reasonable purpose.

However, that having been said, given the amount involved and the narrowly redefined mission statement, perhaps the question is not as much should the trustees honor Mrs. Helmsley’s wishes but can they? For example, assuming $5 billion and a 5% distribution policy, would the trustees be able to prudently grant $250 million per year exclusively for the welfare of dogs and only dogs in perpetuity? On one hand that sounds like a large number; on the other, with an estimated 3.5 million dogs in the U.S. shelters each year, that would only be about $71 per dog per year.

In the final analysis, does the foundation's action send a dangerous message to donors who may now believe their final wishes might be ignored?

According to a New York Times article on the Helmsley Foundation, when Doris Duke, the tobacco heiress, left her money to support the arts and for the prevention of cruelty to animals or children, the trustees decided on children over animals. What a difference one word can make; however, in that case, that might have been exactly what Duke intended.

Your thoughts?


We took a look around the Web to see what others were saying and found an interesting and informative commentary on the Clarion County Community Foundation Friends blog.


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