What Can We Learn From the Master Salesman, Stephen C. Hilbert? Insights into Trusts and Liability Protection

Stephen C. Hilbert: A Case Study in Financial Strategies

Stephen C. Hilbert turned Conseco Inc. from a tiny company into a fortune 500 insurance company through acquisitions. After earning over $172M, the company debts along with his lavish lifestyle (chartering a private jet for friends to St. Martin for his sixth wife’s birthday party) left him owing far more than he had, $200M in unpaid loans.

Mr. Hilbert then began transferring his assets into trusts for the benefit of his then-wife and children. His creditors persisted and filed lawsuits against Hilbert, his wife as well as the kids (!), arguing that the trusts were a sham to evade his debt. One of his arguments to the Court was that the trust was needed because his former-stripper-wife (no judgment here) was an astute businesswoman who needed financing to sell purses, clothing and accessories. The story ends with a huge legal bill, a settlement out of Court among the parties and a lesson for us all.

What Can We Learn from Stephen C. Hilbert?

We can learn about the spendthrift provision in revocable living trusts. The spendthrift clause is intended to protect against the “imprudence, extravagance, and inability to manage financial affairs” of a beneficiary. Essentially, it prevents beneficiaries from squandering their anticipated inheritance and stops them from promising their future trust funds to third parties. However, the clause is mostly famous for providing beneficiaries protection from creditors and lawsuits. For beneficiaries who work in high liability professions, the spendthrift clause gives a layer of protection between their inheritance and civil judgments.

Understanding the Spendthrift Clause

• It prevents beneficiaries from squandering their anticipated inheritance.
• Provides protection from creditors and lawsuits.
• Offers a layer of protection for beneficiaries in high liability professions.

However, the spendthrift provision is not valid if there is an enforceable support order against the beneficiary (e.g., a child support order) or if the beneficiary owes money to the federal or state government. Additionally, once the beneficiary receives the distribution from the trust, those funds are fair game for creditors.

Liability Protection Laws: Insights from Florida Statute 689.071(8)

Florida Statute 689.071(8) provides liability protection via a land trust. If a tenant suffers an injury and wants to sue the land trust owner, they would be suing the land trust trustee, not the beneficiary. In some states, the beneficiary of a land trust can be sued directly and face liability but not in Florida.

In conclusion, Stephen C. Hilbert’s story serves as a reminder of the importance of proper financial planning and understanding legal provisions such as spendthrift clauses and liability protection laws. While trusts can offer some creditor protection, it’s crucial to avoid situations that lead to creditor claims altogether.