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Trust Assets: Up for Grabs?

What happens when a party in an estate dispute attempts to transfer assets from a trust they once established for family members? That's the current dilemma of New Orleans Saints owner Tom Benson, whose $1.9 billion business empire is up for grabs after he froze his daughter, Renee Benson, as well as his grandchildren out of ownership of major enterprises after his death.

Now there's a genuine family feud in the making; the 87-year-old Benson has designated his third wife Gayle as heir to his fortune, triggering litigation from Texas to Louisiana. Using an unsecured promissory note, Benson tried to shift some $427 million in funds and properties away from Renee, who responded with a lawsuit contesting her father's mental competency to make business decisions.

In addition to Renee's lawsuit, the trustee and two receivers for disputed assets in Texas have filed their own actions to effectively halt the transfer ordered by Benson. While these assets may fall under Benson's general supervision, they were also secured in trusts set aside for his children and grandchildren. Aside from rules specific to each state, trusts are defined by three factors:

  1. The trustee/fiduciary
  2. The beneficiary
  3. The assets

When Benson declared in late December that he was pulling over $400 million worth of ownership shares in his sports ventures as well as car dealerships, banks, and other properties out of Renee's control in favor of his wife, trustee Bobby Rosenthal, originally appointed by Benson himself, stopped the transfer, citing the lack of any equivalent exchange.  The promissory note he offered was unsecured, amounting to an enormous IOU. Then just last week, Benson came back with another offer: a $449 million promissory note secured with collateral from his sports franchises, car dealerships, and various holdings. Rosenthal, however, again refused the proposal. His lawyer, Kevin P. Kennedy, advanced the following line of reasoning:

Mr. Benson cannot effect an exchange until the valuations have been submitted to Bobby and approved by him... Certainly, an exchange for an amount to be determined in the future cannot constitute the exchange of equivalent value.

As a trustee, Rosenthal has fiduciary duties to Renee and the two grandchildren, the trust beneficiaries, and it's ethical and sound for him to abide by the rules of the trust until an equitable settlement can be reached. In the meantime, court-appointed receivers of another of Benson's trusts are filing a suit in Bexar County, TX, with the same goal in mind.

With Benson having undergone a mental evaluation on the orders of a New Orleans judge, we'll see how the billionaire businessman's competency will influence the outcome of this estate fight.

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