May 1996 Hot Topics

Tycoon's Defective Will -- Who Gets His Billions?

Billionaire's Estate

It seems that anyone, no matter how rich, can manage to screw-up even the most elaborately planned estate. Take Larry Hillblom, for example, who died recently in the crash of a seaplane near his tropical island retreat. He was among the world's most successful entrepreneurs. He built a $3 billion aviation empire with the Redwood City, California based DHL worldwide express, at one time the world's largest air courier service.

Described as a genius at finding ways to make money, Hillblom left behind what is probably the biggest estate nightmare on the planet. His estate plan was clear: close to $1 billion would go to the University of California. So why is UC's share at stake in a legal battle in a U.S. courtroom on the tiny Pacific Island of Saipan? Because lawyers for several children allegedly fathered by Hillblom in the Philippines claim that the entire estate rightfully belongs to them!

Hillblom, described as hating the IRS, made it clear that the IRS should not receive a penny from his death. He located his estate in Saipan, which has the lowest income tax rate of any American possession ( the tax is merely 5% of what is paid in the U.S.).


Hillblom's Secret Life

But Hillblom evidently had a secret life. He has been described as a pedophile who frequented Philippine bars and go-go clubs, and kept mama-sans on his payroll to save virgins for him. It is the children of these women who are claiming a right to his estate. A lawyer for one of the children recently rejected an offer of $2 million cash and $20,000 per month for 60 years to settle the boy's claim, even though he now lives on $125 per month.


The "Mistake" in His Will

Although Hillblom never practiced law, he attended UC-Berkeley's Boalt Hall Law School. His DHL director was a lawyer, and another lawyer worked for him and lived for a time on his Saipan compound. Evidently, Hillblom was not up-to-date on probate law and, apparently, he failed to consult with the other lawyers who worked for him when he drafted his will. Described as curious and imperfect, his will left $300,000 to his two brothers, nothing to his mother, and the bulk to a charitable trust benefiting UC.

If standard language addressing out-of-wedlock children had been included, Hillblom's estate would not have been tied up in a legal battle in Saipan. Instead, the victor in the Hillblom estate sweepstakes could be decided by a bit of human skin from a mole removed from Hillblom's face, preserved in a ball of paraffin at Davies Medical Center since 1993 -- the only remaining sample of Hillblom's DNA. If there is enough to settle whether he fathered any of these children, then those children will pay about half of the estate in inheritance taxes (to his dreaded IRS) and keep the rest.


Use of a Disinheritance Clause

Hillblom's careless oversight in his will may result in the distribution of his wealth to his illegitimate children and to the American government, despite his intentions. While this may be a case of receiving one's "just dessert," Hillblom might have been able to avoid this result by including a general disinheritance clause in his will, such as the following:

[Note: This is for educational purposes only. Check with an attorney in your state regarding your state's requirements.]

I intentionally and with full knowledge of the consequences do not provide in my will for my child or children conceived, born, or adopted by me before or after execution of my will, or who became my child or children through a step or foster relationship before or after execution of this instrument. I intend that this disinheritance specifically defeat the application of any statutory heirship interest.

Unless expressly disinherited in the will, a testator's children may be able to claim intestate shares as pretermitted heirs. A pretermitted heir is a child or other descendent omitted by a testator. The purpose of a disinheritance clause is to prevent those claims.

Many individuals are embarrassed about children, especially if they have had no contact with them over the years. They may try to keep parenthood a secret. and not realize that stepchildren, foster children or out-of-wedlock children have inheritance rights. However, if you do not wish to provide for a child, your explicit statement of that fact must appear in your will. You should also include provisions in your will providing for a child born or adopted after the date of the will to effectively and precisely carry out your wishes. Furthermore, you should periodically review your will to make sure that it provides for changes in family relationships.


California Law (Your state might be different)

Although a disinheritance clause is not an absolute requirement under California law, prudence dictates that if you intend to disinherit a child, you should explicitly state it in your will. The declaration should affirm that you intend not to provide for any child or grandchild not named in the will, including natural, adoptive, step-, and foster children whose names are not known when the will is executed. Anything less clear will invite litigation. In one California Supreme Court case, a general disinheritance of "any person not mentioned" in the will was not sufficient to show the testator's intent to disinherit her grandson. However, in another California case, a disinheritance clause using the term "heir" was held sufficient to accomplish the disinheritance. Thus, you should clearly name the individual or class of individuals to be disinherited. To disinherit a named person, use language such as:

[Note: This is for educational purposes only. Check with an attorney in your state regarding your state's requirements.]

I intentionally and with full knowledge of the consequences disinherit, and omit any provision in my will for, the following person: __name__. Further, I intend that this disinheritance specifically defeat the application of any statutory heirship interest.

Some disinheritance clauses give a nominal devise, such as one dollar, to persons that the testator intends to otherwise disinherit. However, this is unlikely to add anything to the validity of the disinheritance or the testator's intent.

You should not state the reason for the disinheritance, unless you want the child to take under your will if the circumstances change. If the circumstances do change, the statement may invite litigation as to what you would have done before your death if you knew that the circumstances had changed.

For further information on estate planning, see Estate Planning ; and Use of Revocable and Irrevocable Trusts.




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**NOTE: The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.**