Sumner Redstone is a media mogul and billionaire. He is 93 years old, purported to suffer from dementia, and an acting trustee of a trust containing 80% of the voting stock in CBS Corp. and Viacom. In other words, despite his apparent mental decline, he still has control of billions of dollars. He is also at the center of yet another complex and costly legal battle, set to go to trial next week. The first legal battle revolved around the removal of Manuela Herzer, Redstone’s longtime companion, from both his healthcare directive and will.
The current battle is centered around Redstone’s abrupt removal of Philippe Dauman and another trustee last month. They are contesting their removal on the basis that Mr. Redstone lacks the mental capacity to remove them from the trust, and that he did so only because he was unduly influenced by his daughter, Shari Redstone.
Persons in this state are often subject to undue influence and abuse. Their diminished mental capacity makes them easier to manipulate, vulnerable, and often frightened. In legal terms, what Mr. Dauman is alleging is financial elder abuse.
A typical trust document will state that a trustee will remain trustee until death or incapacity. A well written trust will specifically define how incapacity is to be determined. For example, is one medical evaluation enough? Do other trustees decide if one has lost capacity? Does a court decide?
In Sumner Redstone’s case, his trust document does not appear to have been specific enough. According to a court filing attained by the NY Times, Redstone’s lawyers report his trust lays out the following guidelines to determine incapacity:
- A trustee is adjudged incompetent by a court
- Upon delivery signed by 3 doctors stating that based on medical evidence, he is unable to manage his affairs in a competent matter
It was as if Redstone’s trust attorney foresaw his impending dementia and made it near impossible for Redstone to ever be removed.
The first criteria, saying a court must judge him incompetent essentially spells out litigation, high costs, and complications. The second criteria is difficult, if not impossible to come by. This one means Redstone would have to agree to see three different doctors which would be a difficult task in and of itself, as most with declining mental health will refuse doctor visits. Additionally those doctors have to provide “medical evidence” of his incompetence. Again, another high bar to meet. I can already see attorneys arguing over what is valid medical evidence and what is not.
A more reasonable clause to include in his trust would be that incapacity is determined by majority vote of the trustees. With seven trustees serving on his trust, this would be a logical choice, and far more easily accomplished. If one wishes to ensure they can never be removed as trustee, a safer bet is for the trust to simply state that a trustee, if deemed incompetent by a majority of the other trustees, cannot remove fellow trustees. Many trusts will also specify that such a clause will only go into effect after a trustee reaches a specified age, such as 75.
With over 5.4 million Americans currently suffering from Alzheimer’s or dementia, and that number expected to triple as the baby boom generation ages, addressing incapacity in your estate plan is crucial. Failure to do so leads to potential lawsuits, emotional stress for family members, and higher legal costs.
For questions about Trusts or Estate Planning, call our SF East Bay Trust and Estate Lawyers at 925-322-1795 for a consultation.