If you live or work in the Estate Planning universe, you have heard of Richard Blum, billionaire investment banker and late husband of Dianne Feinstein, the Senior United States Senator from California (“Dianne”). Anyone who follows the news needn’t look far to catch a headline regarding Dianne. Recent articles indicate that her daughter, Katherine Feinstein (“Katherine”), acting as Attorney-in-Fact for Dianne, has initiated a third lawsuit in as many months against the Trustees of the Marital Trust established by Diane’s late husband accusing them of elder abuse, among other things. The first part of this three-part series explored the issues raised by the first lawsuit Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part I. The second part delved into the issues raised by the second lawsuit Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part II and this third part will explore the issues raised by the third, and perhaps most detrimental, lawsuit.
Richard and Dianne were married in 1980 and lived together in the community property state of California until Richard’s death in February 2022. During their marriage, Richard created the Richard C. Blum Revocable Trust dated January 9, 1996, as amended (hereinafter “RCB Trust”). Michael Klein, along with Verett Mims, and Marc Scholvinck became co-Trustees of the RCB Trust upon Richard’s death.
The RCB Trust directs the co-Trustees to hold the assets received from a joint property trust created by Richard and Diane during their lives in a marital trust (“RCB Marital Trust”) for the benefit of Dianne during her lifetime. Upon Dianne’s death, the assets in the RBC Marital Trust will pass to Richard’s daughters, Annette Blum, Heidi Blum, and Eileen Blum Bourgade. In addition to the property received from the joint property trust, RCB Trust directs the Trustees to fund RCB Marital Trust with $5 million in cash and marketable securities. The terms of the RCB Marital Trust require the Trustees to provide Dianne with the entire net income in quarterly installments. If the net income is less than $1.5 million in any year and if the trust has sufficient liquidity, then the Trustees are to distribute principal in an amount that when added to the income provides Dianne with $1.5 million annually.
According to the lawsuit, notwithstanding Richard’s death over a year ago, the Trustees have failed to fund the Marital Trust, failed to make income distributions to Dianne, and ignored Dianne’s requests for information, thereby breaching their duties to administer the trust and to provide information to the beneficiary. The third lawsuit alleges that one Trustee “in an act of hostility and retribution” attempted to interfere with another trust that names Dianne as a beneficiary but of which he is not Trustee. The lawsuit also alleges that the co-Trustees have attempted to disparage Dianne in the press through their counsel who claimed that she was “engaging in some kind of misguided attempt to gain control over trust assets to which she is not entitled.” Harsh words, especially on behalf of co-Trustees who seem to be shirking their duties.
Additionally, the August lawsuit indicates that certain gifts were to be made from the RCB Marital Trust in a specific order and that the RCB Marital Trust contained provisions regarding the order in which the specific gifts were to abate. The August lawsuit indicates that the Trustees have made gifts out of order to the detriment of Dianne thereby breaching their duties of loyalty and impartiality. The lawsuit further alleges that the co-Trustees sold Richard’s interest in the Claremont Hotel in Berkeley, California for $163 million, but failed to inform Dianne of the sale or fund the RCB Marital Trust. Finally, the lawsuit alleges that these various acts or omissions constitute elder abuse given Dianne’s age and that the acts have effectively deprived her of property rights given to her by the RCB Marital Trust. The third lawsuit filed on August 8, 2023, contains 8 counts, several damning allegations, and can be found here: In the matter of: The Richard C. Blum Revocable Trust.
The allegations correctly assert that the California Probate Code entitles Dianne to information regarding the assets and administration of the RCB Trust and that the co-Trustees’ failure to comply with her requests breaches their fiduciary duties. There are so many alleged breaches in this lawsuit, it’s hard to pick the most important lesson. Those interested in the details should read the entirety of the August lawsuit. On paper, Richard Blum did everything right. He left detailed instructions regarding what should occur after his death. He involved an attorney, he updated his plan regularly, and despite all of this, his trust still ended up in litigation. His failing, if one can call it a failing, was choosing the wrong individuals to serve as co-Trustees. If all the allegations contained in these lawsuits are true, or if even most of them are true, then Richard made a mistake in choosing the individuals that he chose to serve as fiduciaries.
These three lawsuits read together paint a bleak picture of the co-Trustees’ behavior, if true. Trustees have a duty to administer the trust expeditiously in accordance with the terms of the Trust and it appears that the co-Trustees of the RCB Trust and RCB Marital Trust have failed to do either. Additionally, if they have made gifts to other beneficiaries before making gifts to Dianne as required by the terms of the Trust, then they have also breached their duties of loyalty and impartiality. Finally, they have breached the duty to provide information to Dianne. Of course, these lawsuits paint the co-Trustees in the worst possible light, but if the allegations are true, then those Trustees could face serious repercussions, including removal, surcharge, and disgorgement of fees. Again, it’s unfortunate that Dianne had to travel down this path to fight for the gifts her husband of 42 years intended for her to have. This case demonstrates that even the best-laid plans can go awry. If you want to save your Estate from a fate such as this, now’s a great time to reach out to a qualified Trusts and Estates practitioner.
Tereina Stidd, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
- Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part III - September 12, 2023
- Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part II - September 5, 2023
- Exploring the Many Issues Surrounding the Estate and Trust of Richard Blum – Part I - August 29, 2023