This blog was written by Danna Fichtenbaum
Headlines were abuzz last week detailing claims issued in Connecticut state court by two of the daughters (the “Daughters”) of Paul Newman – actor and creator of the Newman’s Own food brand – that Newman’s philanthropic endeavour, Newman’s Own Foundation (the “Foundation”), is failing to fulfil the now-deceased Newman’s charitable intentions.
The Foundation benefits from the sale of products under Newman’s brand, Newman’s Own. The Daughters allege that, prior to his death in 2008, the rights to Newman’s name, image and likeness were granted to the Foundation on the condition that money be allocated annually to each of his “Daughters’ Foundations” to distribute to charities of their choosing. The Daughters’ position is that the annual allocation is required to be $400,000 to each of their foundations.
Following a 50% reduction in the financial allocation in 2020, the Daughters alleged a breach of fiduciary duty by those controlling the Foundation. They claim that Newman’s intentions were ignored, contradicted and/or disregarded. Additionally, they allege that Newman’s successors were appointed, and his estate plan was changed, at a time when Newman’s memory was failing. The successors (one of whom was removed as CEO in 2019 following misconduct allegations) were afforded by Newman’s appointment the power to appoint the Foundation’s board, which in turn controls the Foundation’s charitable donations.
The daughters are seeking $1.6 million in damages to be donated to charities of their choice, as well as a judgment requiring the Foundation to comply with what they say were Newman’s intentions.
The Foundation’s position is that the daughters’ claims are meritless, stating that “perpetual funding allotments” are not feasible. Whether or not this is an appropriate position for the Foundation to take turns on whether the Newman’s estate-planning documents provide them with sufficient discretion to make that decision.
The Newman litigation raises a number of important issues, including the importance of clarity in estate planning.
Though the writer was unable to obtain the pleadings at issue, reports on this matter suggest that one of the matters in dispute is the extent to which the trustees had discretion regarding the quantum of the charitable donations. This serves as a good reminder of the importance of clarity in drafting of estate-planning documents. The presence or absence of a simple phrase can make the difference between clarity regarding discretion and costly, uncertain debate.
Although Newman’s daughters claim their father intended for them to have greater input regarding the Foundation’s charitable endeavours, such a claim is only as good as the terms of the estate plan.
In Ontario, it is not the last “wish” of the testator, but instead their last “will”, that is binding on those tasked with administering their estate. When a will contradicts the deceased’s assumed (or even stated) wishes, it will prevail, even at the cost of family harmony, supposed shared dreams or realistic expectations on the part of the disappointed family/friends/beneficiaries/charitable recipients (absent sufficient evidence of incapacity or undue influence, both of which are exceedingly difficult to prove).
Proper and comprehensive estate-planning, in which the testator’s intentions, and the consequences thereof, are fully considered and explained, is the best way to ensure one’s true wishes are carried out.
Going hand-in-hand with the importance of proper planning is the necessity of appointing a knowledgeable, trustworthy and effective trustee to execute the estate plan. While a lack of effective administration does not necessarily eliminate the benefits flowing from proper planning, it can certainly dilute them.
We cannot now know with certainty the extent to which (if at all) Newman’s true intentions differed from those currently governing the administration of his estate/the Foundation. Hopefully, he received proper advice and his true intentions were, in fact, put into place.
Finally, it is also important to keep in mind the cost associated with estate disputes, as well as the court’s inclination to make those “responsible” for the dispute bear the cost of resolving it. In the event that estate-planning is lacking, and the cause of the confusion originates with the testator, it may be that the estate will bear the financial burden of resolution.