Last month, we discussed the problems created by Anne Heche not having an estate plan in place before her death. This month, we bring the story of Paul Newman’s estate to illustrate another common estate planning mistake. More specifically, we will talk about the mistakes Mr. Newman made toward the end of life by providing conflicting instructions.
You’ve probably seen the bottles of salad dressing and tomato sauce on your grocery store shelves. You may be familiar with the fact that 100% of the company’s profits go to charity. You might even have heard the story of how Paul Newman’s neighbor, a caterer named Martha Stewart, helped launch the brand. But you probably didn’t know that the Newman’s Own Foundation is embroiled in a breach of fiduciary lawsuit with Newman’s own family—or the implications for your own estate planning.
Even if you’re not a philanthropist or the heir to a salad dressing empire, the Newman family woes can serve as a cautionary tale for you as you are planning for your own legacy, and your family’s future.
Dispute Between Newman’s Own Foundation and Newman’s Family
Paul Newman began making his famous salad dressing to give as gifts to family and friends. Persuaded to put his image on bottles and sell the dressing in stores, Newman and his business partner (writer A.E. Hotchner) founded the Newman’s Own brand in 1982. Taking in more than $920,000 in profit in the first year, the partners decided to donate all of the company’s profits to charity. Since the company’s founding, it has given away more than $570 million to various charitable causes. The Newman’s Own foundation was created in 2005, with Paul Newman as the foundation’s sole member.
Helping others was important to Newman, and he wanted to pass his philanthropic values on to his five daughters. Throughout his later life, he entrusted them with the support of charities in a variety of areas that were important to him, including education, arts and culture, health, emergency relief, the environment, animal welfare, and scientific and human services. Several years before his death, he had his lawyer draft a lengthy letter detailing his estate plans, which included the intention to “give Paul’s children the major voice in the distribution of a large part of the funds for charity.”
A little more than a year before his death, Newman said in a video interview, “All my children get a certain amount to be able to give away every year and they will be giving away my estate as well…. Yes, they are involved. They sit on the board of the companies and the foundation.” Unfortunately, shortly after the interview, Newman was diagnosed with leukemia, which involved periods of memory problems and disorientation.
In the months before his death, Newman amended his estate plan. Two months before he died, Newman signed a “Consent of Sole Member” document, making his longtime advisers Robert Forrester and Brian Murphy the second and third members of the Newman’s Own Foundation. When he died on September 26, 2008, his daughters expected his estate would be handled as he had previously indicated. Instead, they were shocked to learn that none of them were to be seated on the board of directors of Newman’s Own Foundation and that their own charitable trusts, which they had expected to be funded upon Newman’s death, would not be funded until after the death of his widow, Joanne Woodward. In the years since Newman’s death, disbursements to Newman’s daughters and the charities they supported have been slashed by the Foundation, and the allocation of donations has changed.
Newman’s daughters Nell and Susan sued Newman’s Own Foundation. They asserted, among other things, that the reduction in allocations is contrary to Newman’s intent, that one of the directors acted improperly, and that undue influence was exerted against a vulnerable and dying Paul Newman to get him to change his estate plan. The outcome of the lawsuit is not yet known, but the daughters face an uphill battle.
Implications for Your Estate Plan
You may not have an estate of the size or complexity of Paul Newman’s. Even so, your family could be plunged into similar distress if your estate plan is not what they had been led to expect. If you have told your family that you plan for a certain distribution of your estate, or for a certain person to manage your estate, they will understandably be hurt and confused after your death when the reality turns out to be different.
To reconcile the difference between expectations and reality, your heirs may conclude that someone acted improperly to get you to change your estate plan. Whether or not that conclusion is accurate, it can lead to probate litigation and permanent rifts between people who should be working together.
The lesson from the Paul Newman case applies to everyone, regardless of the size of their estate. Very often, probate litigation matters surround people who wait till the last minute to do their planning, at which time their competency is in question or there’s a question about undue influence because of their diminished capacity. We understand that that can be difficult and uncomfortable to do. It’s tempting to just make your plan and let your loved ones sort it out after you’re gone. Unfortunately, that just shifts that discomfort onto their shoulders at a time when they need comfort and certainty.
If you are planning a change to your estate plan, your estate planning attorney can also help you plan how to communicate with your loved ones about it. To find out how, contact Estate Planning & Elder Law Services to schedule a consultation.