Personal Wealth Law News

The San Diego Union-Tribune has been reporting for some time on the ongoing woes plaguing that city’s retirement system. A story reported on June 14, 2008 indicates that the city had hired a large law firm to look into the problems and to represent it in an investigation by the Securities and Exchange Commission. But, as it turned out, that created a conflict of interest- how could the law firm investigate the problem and at the same time defend the city in the SEC matter? Apparently, it could not, and the city sued the law firm for a very large sum of money. The case was just settled, with the law firm agreeing to return $3.25 million in fees and to forgive outstanding bills of another $1.1 million. This illustrates a couple of points: first, pension plans are important and complicated, and it’s not difficult to cause problems if you’re not sure of what you’re doing. Second, if you are a public entity and you hire someone to straighten out a problem with your pension system, that’s what they should do, not try to minimize or gloss over the problem. Even in private businesses, it makes sense to have someone, such as a law firm that knows what it’s doing, review the administration of retirement plans from time to time, to avoid lawsuits and government investigations.

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A recent dispute over a Washington will highlights the necessity for clients to frequently review their estate plans, especially when those plans include wills or trusts that bequeath significant assets to charitable organizations. The Washington case involved a decedent who left $264 million in his will to eight charities, including the Salvation Army and Greenpeace. The decedent left the Greenpeace bequest to “Greenpeace International”; however, that group was dissolved and absorbed into the related “Greenpeace Fund” during the year before the decedent’s death.  The Salvation Army disputed the executor’s plan to distribute the Greenpeace share to the Greenpeace Fund, arguing that the organization named by the decedent in his will was defunct and that its successor was not eligible to receive the gift. The dispute was finally resolved in a recent settlement agreement, with the Greenpeace Fund agreeing to take $27 million from the estate — $6 million less than it was allotted under the terms of the will.

This feud over the will’s language demonstrates the necessity of frequently reviewing estate planning documents to ensure that the charities named in them continue to qualify for 501(c)(3) tax exempt status, and that those charities continue to have the same names.  The dispute also underscores the need for charities contemplating or executing a name change or transfer of assets to publicize the change and to inform both current and potential donors.

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