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


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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Angels Made Manifest

Why is it that mankind with all their intelligence, all of their years of knowledge, catastrophes, and other so called barrier breaking manifestations, we really have yet to perceive the world through these humane beings eyes. Anything warm blooded I feel an natural affinity to. Some may argue they may or may not have a conscious soul, but it is to understand how man so easily dismisses these god given creatures. Search your scripture, where does it say for man to offer sacrifice with serpents? Can we so easily execute on a daily basis this food some call nourishment and almost two-thirds of us will never know the ritual of slaughter. How is it that civilized man should dismiss life so effortlessly when for the most part these creatures wouldn't hurt a fly. As for "civilized," as long as we have the capability to see no suffering should exist when it is within means. I am thankful that the San Francisco SPCA doesn't "put-down" its residents. Don't we owe it to ourselves to at least once a year get our hands dirty? Shouldn't we know the misery and cruelty involved in this task? An emotional 'O' zone layer is over the planet and all the innocence, the simple joys, my gloriousnicities, evaporate into deep dark cold gray space. It is with a little of the aforementioned that I say, "thank you Ms. Helmsley" on behalf of the like's of Old Drum, Grey Friar's "Bobby," and Peg of My Heart's "Michael" and all of the creatures capable of "unconditional love".

The Queen of Mean

She would be rolling in her grave if she knew how the trustees were disbursing grants. A corporate trustee and a more narrowly defined charitable mission statement in the trust indenture would have worked here. She should have also selected a better name for her dog! Nothing good ever comes from Trouble.

Donor Intent

I would like to think that the donor knew the mission statement could be overruled by the trust document. Mission statements at many non-profits change over time. If we approach donors clearly, a binding trust document and an accompanying mission statement could be a way for a donor to advise a foundation board without tying its hands.

Donor Intent

If the judge must choose between a "mission statement" and a trust document as to which one governs, it seems that there is no other answer than the trust document. Otherwise, what force does a trust document have if it may be over- ruled by a "mere" mission statement? What am I missing?

Donor Intent

One of the most interesting phrases in this article appears near the end where it says "...given the amount involved..." Someone once said "whenever they say 'its not about the money', take it from me; it's always about the money." Donor intent is the most sacred thing in charitable giving. If society continues to make changes and interpretations to suit itself, donors are going to find other ways to accomplishing what they desire. Today there more and more examples of "interpretations" being made that are favorable to the people spending the money today at the expense of the original donor. You can see this in the discussions over under-water endowments, the drafting of the UPMIFA laws, the Princeton case (although the family hung tough and Princeton finally caved), etc. Be careful... the donors are watching... and donors have had enough change for a while.

Given the amount involved...

Thanks for your comment Frank. Yes, as I was preparing the article I spoke with an individual who mentioned a very large gift for the exclusive benefit of a cemetery. They were legally bound and could not deviate, so they ended up spending money on lavish items such as Rolls Royce hearses and such. "Overkill" if you will. The point I was trying to make is that it might be difficult for the trustees to spend that much money prudently for such a narrow purpose. And yes, donors are watching. Isn't gift planning all about matching the right vehicle with the goals and intent of the donor?

Donor Intent

Seems the Elephant in the room is: "Since Mission Statements are so easily ignored, what DOES (if anything) insure that the donor's INTENT in giving will be honored?" Inquiring minds wanna....

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