How an Elderly Heiress Lost Her $300 Million Fortune
Bill Dedman is author of the runaway best-selling book, soon to be a movie, Empty Mansions. It tells the story of a secretive heiress named Huguette Clark, and the spending of her enormous fortune during the end of her amazing life. Dedman, a Pulitzer-Prize winning investigative reporter, unravels the tale of her remarkable family, from the father, W.A. Clark, the copper king, founder of Las Vegas, to his daughter Huguette, the generous artist who held a ticket on the Titanic and was still living in New York City on 9/11. In the last decades of Clark’s life, much of her $300 million fortune was spent and her valuable belongings sold. The story is full of intrigue, deception and, ultimately, tragedy — when she finally died at 104 years old, Clark’s end-of-life wishes were challenged by relatives, and many of Clark’s millions went to lawyers instead funding a charity.
While few of us have to worry about leaving behind millions when we die, Clark’s story isn’t really that different from any elderly person worried about what will happen to a lifetime’s savings when they are gone. Her story offers dramatic, clear lessons for anyone worried about elderly relatives and the company they keep. So as part of our series on elder fraud, I asked Dedman to talk a little bit more about Clark’s fortune, why things went so wrong and how the fighting could have been prevented.
Q. What was the first sign that Huguette Clark might be a victim of fraud? What happened to all that money?
A. We thought at first that Huguette Clark must be a victim, with caregivers stealing from her, or at least taking advantage of the vulnerability that she brought on herself by being a recluse. Here was a woman with more than $300 million, heiress to a copper mining fortune, who lived her last 20 years in a hospital, though in good health, before she died at age 104. A Stradivarius violin — the best of her three Strads — had been sold, secretly, for $6 million. Was the secrecy intended to protect her privacy, as her attorney said, or was it intended to keep her from knowing that her prized possessions were being sold? A country house in Connecticut was for sale for $25 million. A Renoir painting had been sold for $23 million.
And there was more smoke. Her accountant was a felon and registered sex offender. Her private registered nurse received more than $31 million in gifts over 20 years. Her attorney and accountant were beneficiaries in the will. One of Huguette’s own bankers confided to me, “The whole story is utterly mysterious but equally frightening. It has all the markings of a massive fraud. Poor Miss Clark sounds like one in a long list of rich, isolated old ladies taken advantage of by supposedly trustworthy advisers.”
As it turned out, the evidence seems clear that Huguette was not being stolen from. She was cashing out assets to keep up her generosity to her nurse and others. One can think that those gifts were entirely inappropriate, but they were not the product of fraud.
But Huguette did suffer from another common misfortune: not having her wishes carried out after her death. She was clear that she did not want her distant relatives to inherit any of her money — after all, her father’s fortune had been equally divided among his five surviving children from two marriages, so Huguette’s half-siblings had already gotten their share of the Clark copper fortune dug out of the hills of Montana and Arizona. When 19 relatives came forward to challenge Huguette’s will, the resulting battle whittled away a lot of her fortune, so that some of her wishes for charity and generosity to friends couldn’t be carried out. The relatives, even though they couldn’t prove that Huguette was incompetent or had been misled, received $35 million from the estate, and tens of millions more went to lawyers.
Huguette wasn’t a victim of fraud, but of terrible estate planning.
If you could play God and re-write her situation a bit, what would you have her do differently? Is there a good way to prevent family and other would-be heirs from fighting after your death?
Estate attorneys have offered several suggestions and lessons learned from Huguette’s situation. I’m not an attorney, but I’ll summarize the advice that they have shared:
- Signing a will or a trust is not the same as making a full estate plan. And estate plans have to be flexible, changing as circumstances change. Huguette’s father had provided for her in his will, but that didn’t anticipate a situation where she would end up alone. Huguette’s will, for nearly 50 years, left everything to her mother, who had already died.
- Leaving a fortune to a new charitable foundation can be useless if there’s a battle. Huguette wanted to leave her largest asset, a home and 23 acres overlooking the Pacific in Santa Barbara, Calif., to a new charitable foundation. But that foundation wouldn’t be created until the will was accepted by the court. Therefore that foundation had no voice or representation during the court battle, and during the settlement negotiations — it didn’t exist yet. It would have made more sense to create the foundation or fund a trust while Huguette lived, to have a periodic update of trustees, to start good management while you’re still alive.
- If you plan to cut out your closest relatives from your estate, there are measures one can take to make your will more bulletproof. Document your wishes and share them with relatives. One can leave relatives a small sum, adding a no-contest clause that makes it difficult for them to fight the will.
- Even if you love your attorney and accountant, don’t put them in the will. All credibility of Huguette’s will was undercut by naming her financial advisers as beneficiaries. And you want advisers who are willing to give you uncomfortable advice, who are even willing to get fired from their positions for telling you what you don’t want to hear, who are not conflicted because they stand to benefit.
Everyone ultimately has to trust someone at the end of life — most likely, a lawyer. Was there anything about Huguette’s legal advice that might have been a tipoff things would go badly?
Huguette’s attorney’s specialty was property tax law, not estate planning. She had been handed down from law firm to law firm, and clearly had moved down from top-flight lawyers to ones who were in unfamiliar territory. An expert would have known, for example, not to just grab a busy nurse off the hall to witness the will signing ceremony. An expert would have had a doctor document that Huguette had the capacity to sign a will.
And an expert would have anticipated the issues with gift taxes. Huguette’s accountant said he hadn’t heard of the generation-skipping transfer tax, which combined with the gift tax to make it very costly for her to give so much to her much younger nurse. Huguette died owing $82 million to the IRS, with the penalties and interest rising $9,000 per day. Huguette’s primary wish, to establish a foundation for the arts at the California home, may be carried out — the foundation has a board now and is waiting to receive the property — but the tax bill could leave that foundation penniless, or could force it to sell the house.
Have you changed anything about your own family’s financial planning after telling Ms. Clark’s story?
My mother is in her 80s, and one thing we changed immediately was to give both my brother and myself the ability to look at her banking information online so we could see whether any unusual activity shows up on her credit card or her checking account.
The large gifts in Huguette’s case raise an interesting question for me. I was less outraged than some that Huguette had given $31 million to her nurse. Yes, it’s an enormous sum, so large as to be ridiculous, but the evidence is firm that they got along well as friends and that Huguette insisted on giving her the money. If you know of another registered nurse with seven houses and driving a Bentley, I’d like to hear of it. But Huguette could afford it.
Let’s imagine that my mother were to die someday with a net worth of $300,000. She’s had a caregiver for 20 years who started as a housekeeper and runs errands and helps her with her medicines. Let’s say that my brother and I discover that over 20 years our mother has given this caregiver, say, $30,000 in gifts. That’s one-tenth of her remaining net worth, the same proportion as Huguette gave to her nurse. Will my brother and I be outraged? No. We’ll think it was a bargain. Yet, if we discover that we’ve been disinherited and a great deal more money is to go to this caregiver — that’s when we’ll be outraged, right? Yet it’s our mother’s money, and she can do what she wants with it — if that decision is made competently.
These are tough decisions. The best advice seems to be to get competent, independent counsel. Huguette, the recluse, might not have ventured out to do that, but the rest of us, though we have less money, have less of an excuse.
Image: John L. Wiley from emptymansionsbook.com
More from Credit.com
- A Simple Guide to Estate Planning
- The Retirement Terms You Need to Know
- 6 Horror Stories of Scammers Targeting the Elderly
This article originally appeared on Credit.com.
Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter. More by Bob Sullivan