As part of the initial stages of Florida Estate Planning, a family may assume that the companies and assets will remain in the family and provide for the heirs for generations to come. These assumptions are far from the truth. Florida Estate Planning is not a one size fits all nor is it bullet proof for several decades. Therefore, estate planning needs to be reviewed every few years to avoid trust litigation down the road. My blog on “Florida Estate Planning: Have You Created or Updated Your Will Lately?” sets forth several reasons for creating or updating your will or trust.
Even after the passing of the Settlor, the larger estates need to continually address estate planning conflicts, whether it is a conflict of interest in a Family Trust or caused by changes in tax code or law. Florida Estate Planning should be reviewed every few years to ensure the family property is protected from conflict of interest or an excessive tax burden to the Family Trust.
The beneficiaries of Ben Hill Griffin Jr. (“Ben Jr.”) Family Trust were not immune to legal disputes regarding mismanagement of the Family Trust or the impact of estate tax code changes several times since their father’s death in 1990.
In 1990, Ben Hill Griffin Jr. died leaving an estate valued at approximately $300 million. He was survived by his second wife, Eleanor (“Ellie”), his only son, Ben Hill Griffin III (“Ben III”), and his four married daughters named Harriet Harris, Sarah Alexander, Lucy Anne Collier, and Francie Milligan.
Ben Jr. was a hard-hitting worker and self-made millionaire who turned the 10 acres of citrus groves his father gave him in 1933 as a wedding present into one of the largest agricultural businesses in Florida. After studying agriculture at the University of Florida, Ben Jr. began his voyage of hard work and seizing opportunities to become one of the five largest growers in the state of Florida.
Ben Jr. was chairman and president of Ben Hill Griffin, Inc., a 10,000 acre citrus producer and 85,000 acre rancher and timber located in central Florida. In 1958, Ben Jr. seized the opportunity to buy a juice processing plant for $1 million if Minute Maid agreed to finance the deal and add a packinghouse. Ben Jr. was a major producer of orange juice concentrate from 1958 to 1981, which included his regional brand Orange Nip.
In 1962, there was a freeze that destroyed more than a million orange trees. Ben Jr.’s trees were relatively unscathed by the freeze allowing him to capitalize on the value of his concentrate to increase from 25 cents to 65 cents a pound, turning Ben Jr. into a millionaire.
In the 1970s, Ben Jr. was chief executive and a major stockholder of Alico, Inc., thereby owning a controlling share of the company’s stock. At that time, the company owned over 200,000 acres in Southwest Florida. During Ben Jr.’s reign, the land was primarily used for citrus, timber, and cattle ranching. He gave his son, Ben Hill Griffin, III (Ben III) no special treatment and required him to learn the business from the ground up. Ben III was sole trustee of the Family’s Trust and took over businesses in the Family Trust after his father passed in 1990.
WHAT IS THE CONSEQUENCE OF A SOLE TRUSTEE CONTROLLING TRUST AND COMPANIES IN TRUST?
When a loved one passes and one child is sole trustee and controls the Family Trust and all of the companies in the trust, there is more than likely going to be disputes over handling of the dynasty’s property. There were at least two disputes between his only son and his four daughters regarding Ben III’s alleged mismanagement and theft of the Family Trust property. Attorney’s fees were in the millions.
The first dispute was resolved in 1998 resulting in a $37.25 million settlement for the four sisters, which gave each of the sisters a $4 million payment from the trust along with $5 million each in a 20-year investment. In addition, the sisters received $1.25 million to share for reimbursement of distribution payments they should have received from the trust.
In the 2001 Family Trust dispute, the sisters and their 11 children entered into a protectorate to ensure no family member made a side deal with Ben III. The sisters alleged that Ben III stole about $4.4 million from the family trust forcing the other family members out of the dynasty’s agricultural business. Therefore, the four sisters requested that the judge rule on three major issues:
- Whether Griffin III should reimburse the trust for as much as $2.2 million in overpayment for his role in managing the family operations.
- Whether Griffin III should be removed as trustee with sole control of the trust.
- Whether Griffin III was entitled to keep a $2 million payment when he sold the family’s interest in a citrus process plant in 1999.
Arguments in the suit claimed abuse of power of Griffin III’s position as chief executive officer for each of the family’s three companies controlled by the trust – Ben Hill Griffin Inc. and Alico Inc. In addition, Ben III was chairman of BHG Inc., which was an umbrella holding company for each of the three revenue-generating businesses.
Also, the sisters alleged that Ben III created a conflict of interest with the resultant division of loyalties between those loyalties due to the beneficiaries of the trust and the natural loyalties to his personal interests entitled to as chief executive officer of the three companies.
By 2004, the beneficiaries all settled with Ben III getting 40% and the four sisters and their heirs getting 60% of the interest in Alico, Inc. Atlantic Blue Group (“Group”) was formed as part of the settlement. In February 2004, the shares of Alico stock were completed by the Group. Thereafter, Ben III resigned as chief executive officer and chairman of the board, along with four other board members. As a result, John R. Alexander (husband of Sarah Alexander) became CEO and chairman of the board, along with four other new board members.
LESSONS LEARNED: ENSURE THERE ARE CHECKS AND BALANCES IN PLACE
Like all businesses, a Family Trust needs to have a check and balance system in place to avoid potential conflicts which may deplete the Family Trust or force the beneficiaries to sell the companies and assets that were meant for future generations. Therefore, designating a sole trustee who also controls all the companies in the trust may not be beneficial for the family’s future generations. On the other hand, naming too many co-trustees may cause conflicts too.
Families who do not want their family companies dismantled or sold by beneficiaries should strongly consider estate planning instruments to address the Settlor’s intent and the future needs of beneficiaries and heirs. You should also consider hiring an experienced attorney for the representation of heirs and beneficiaries in proceedings. As part of Florida Estate Planning, it is important to realize that situations change requiring the beneficiaries to have the ability to react to changes as they arise. It is a delicate balance that needs to be addressed in the estate planning process.
The Griffin family beneficiaries and heirs dealt with and adjusted to such changes since Ben Jr.’s death. After Ellie passed on August 20, 2012, along with the recent estate tax code changes, the Griffin family beneficiaries were left to access the difficult choice of selling their controlling shares of Alico, Inc. The Group sold the controlling interest in Alico, Inc. to two New York companies in October 2013.
Contact Estate Planning Attorney Thomas Upchurch to create your dynasty and family estate planning instruments at (386) 272-7445 or email him to discuss your matter.
Florida Estate Planning Attorney Thomas Upchurch serves the entire state of Florida, serving primarily in vicinities of Central and North Florida Areas which include Daytona Beach, Port Orange,Deland, Ormond Beach, Jacksonville, Palm Coast, Orlando, Saint Augustine, and New Smyrna Beach.Areas he serves in South Florida include Miami, Ft. Lauderdale, Coral Springs, and Coral Gables and in West Florida include Tampa and Clearwater. Even if your city is not listed, Attorney Upchurch may still handle your matter.
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This blog post only reflects my personal views in my individual capacity. It does not necessarily represent the views of my law firm or my past clients, and is not sponsored or endorsed by them. The case-specific information contained in this blog post is based solely on opinion, and is provided only for educational purposes and is not intended to provide specific legal advice. No representation is made about the accuracy of the information posted on this blog site. Blog topics may or may not be updated and entries may be out-of-date at the time you view them.
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