What Can We Learn From a Billionaire’s Wife’s Trust Mistake?

Laura Overdeck filed for divorce from her billionaire, hedge-fund-manager, husband, John Overdeck, in March of 2022. She recently filed another lawsuit against the law firm, Seward & Kissel, and one of its partners claiming that they committed malpractice and fraud (yikes!) by not informing her that documents she signed in 2018, which moved marital assets to Wyoming trusts, also ended her claim on those assets if either party filed for divorce.

The couple were married for over 21 years without a pre or postnuptial agreement regarding their $7.3 billion fortune. They did, however, set up quite a few irrevocable trusts in New Jersey in an attempt to reduce their federal estate and gift taxes to benefit their three shared children and each other.

Believing that the law firm represented her and her interest, Laura is alleging that the attorneys didn’t advise her as to the consequences of the transfer to the Wyoming trusts in that her husband would have “sole control” of determining how much their three children could inherit and leave the door open for him to distribute marital assets to children he may have separately, in the future. Oy Vey!!

The Lesson in Trusts

So, what can we learn from this (allegedly) irrevocable trust debacle?

We can learn all about decanting an irrevocable trust. Similar to a wine decanting where we pour the wine from one container into another to let the wine breathe, we can also decant an irrevocable trust and let the sucker breathe. Just kidding! But we can pour over the trust terms from one trust vehicle to another and this is really how we can change some of the terms of an irrevocable trust.

Typically, folks set up irrevocable trusts to attempt to avoid estate taxes. However, if they live long enough, they often want to change the terms of their irrevocable trusts to take advantage of new rules or move to states with friendlier tax laws and lax regulations. Decanting is governed by state law and the modifications typically don’t allow the grantor to change the original intent of the trust.

Decanting in Florida

So, back to Laura’s case and how it would play out in the Sunshine State. The Florida decanting statute is a codification of Florida common law dating back to 1940 where a trustee must have the power to invade the principle and income in order to decant the trust. So, assuming the initial trust provided the trustee the appropriate powers, in Florida, the beneficiaries may be removed, but not added to the trust. The fact that the new trusts included a provision for future children may be an issue. Finally, there’s a notice requirement where the Trustee must provide notice to the beneficiaries and it’s unclear if the parties provided the proper notice.

The Takeaway

So, there you have it. We learn that when it comes to irrevocable trusts, there may be a way to make changes if you have the right wine and cheese pairing (lol) and that it’s very important to have an attorney that you KNOW is representing you, represent you. Can I get a witness??

There may be a way for the trust to be modified to give the trustees the powers required. Or it could be that decanting may not accomplish “everything”, but may still be worthwhile depending on the other desired changes. Finally, a judicial modification or termination may be the best course of action to change an irrevocable trust.

All “interested persons” may enter into a nonjudicial settlement agreement to resolve issues such as interpretation of the terms, discretion of the trustee, resignation or appointment of a trustee, etc. However, the agreement may not be used to produce a result not authorized by other provisions of the Florida trust code.