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Making Changes to Irrevocable Trusts Can Create Legal Battles

Irrevocable trusts are intended to be just that. Unchangeable. So what happens when the estate owner attempts to change them once they’re in place?

As the parties in the case of billionaire sports team owner Tom Benson are finding, it creates an ugly and expensive legal quagmire. The emotional cost is painful to everyone involved, according to recent reports by The Times-Picayune.

This compelling case is an excellent talking point with your clients who might wish to set up an irrevocable trust for passing down a business or a large amount of assets.

Broken Family Trust

After actions she deemed out of character, Renee Benson wants her 87-year-old father Tom Benson permanently removed as trustee over a trust in her deceased mother’s estate. The Shirley L. Benson Testamentary Trust holds interests in San Antonio car dealerships, a bank, and real estate. A probate judge stated that Tom Benson is “at war with himself.”

In 2011, Benson placed his estate into irrevocable trusts benefiting his daughter and grandchildren. In July of 2014, Benson filed paperwork to name his daughter majority shareholder of the New Orleans Saints football team and the New Orleans Pelicans basketball team with his granddaughter Rita LeBlanc, as his successor in running the teams.

He has since apparently changed his mind, according to The Times-Picayune . In January, Benson announced he would leave control of his empire to his current wife of ten years. He fired his heirs from their posts with the teams and his other business interests and ordered them barred from team offices and the Mercedes-Benz Super Dome. He attempted to remove all Saints and Pelicans stock from trust funds he had set up for his future heirs, but the trustee of those accounts blocked him from following through on the withdrawal. He also withdrew $25 million from accounts inside a bank that is held within the trust originally set up for his daughter, Renee.

Benson reportedly wants to take back stock in the sports teams and related assets in exchange for $550 million in promissory notes, real estate, and $94 million in forgiven debt, The Times-Picayune said. The probate judge described the estate as bound up in a “Gordian knot of irrevocable trusts” and expressed doubts that Benson or his lawyers will be able to untangle the legal agreements he made in order make the proposed changes.

Federal Case

When Renee Benson challenged her father’s actions, the case became a federal court issue because the assets are located in several states. A court-appointed replacement trustee said the value of the assets Benson wishes to exchange must be proven of equal value (something that is hard to do with professional sports teams) and has put a halt on those exchanges pending further information.

Unfit or Not

Benson’s daughter and grandchildren have asked the court to declare him unfit to manage his fortune, The Times-Picayune reported. A team of three doctors completed tests and interviews for evaluation on March 13 and submitted their reports on April 1. One doctor was chosen by Benson, one by his heirs, and the third chosen by both sides. The hearing discussing the results is set to take place on June 1.

Though declaring a family member incompetent is not simple or painless, sometimes it might be necessary. The results of Benson’s medical evaluation are sealed to preserve his privacy, and even after the case is decided, the public may never know all of the contents of the report.

Renee Benson has put up another challenge, asking the case be moved out of federal court and back to the San Antonio probate judge. A hearing on May 21 will determine if this change is appropriate.

How Will It Play Out?

Tom Benson’s case is an amazing one. It is being played out in federal, state and the court of public opinion. It involves staggering wealth, a second wife and all the dynamics of a blended family. Unless Benson and his family find common ground, it will cost both sides millions of dollars in litigation and can create bitterness.

There are interesting legal issues of how to change your mind through complex irrevocable trusts. These trusts have gifting, asset protection, income tax and estate tax issues. While irrevocable trusts may be adjusted as time goes on, it is rare to see someone like Benson try to undo everything. There will be a lot to learn from this case. We will do our best to keep you updated.

We hope this information was useful to you and helps your clients and their families. If you have a specific case or a question, don’t hesitate to call our office.