Re: Marital Trusts

Max,

I presume it is clear that the recent proposal transmitted by Harry's lawyer that I should be satisfied with a handout of 100k a year from the Marital Trust is too disgraceful for comment. I would like to know what further information you require for reimbursement for tax payment. We have previously transmitted a great deal of financial information in order for you to reimburse our taxes, including proof of payment and more. Exactly what more do you require, and with what justification? We see little reason that you cannot act on the information already provided. As for the claim about concern for my later years, that has been thoroughly refuted.

Noam

Noam -

Thanks for your message and your inquiry. I would like to reply in some detail, but before I do so please tell me whether you are now represented by legal counsel. If you are then I believe I'm obliged to copy your counsel on our exchanges. I would also plan on copying Rich Kahn, since my last communications about distributions to you from the trusts have been with him.

Please also bear in mind that since (according to Rich) you are preparing to bring a legal action against me, I have been in contact with my firm's malpractice insurance carrier. As my exchanges with you may also need to be reviewed with our carrier that may delay (and/or limit) my responses.

Max

I am not represented on this issue, so you can send the information to me directly, copying Richard Kahn.

Noam

Thank you for your reply. As you indicate that you are not being represented by counsel I will reply directly to you, with a copy to Rich (as you suggest). Please consider:

1. As a starting point, let me note that I think you and Rich may have misunderstood (at least initially) the terms of the settlement that Harry proposed through his attorney. Rich and I discussed this in a call about 10 days ago and I'm hoping that misunderstanding has been cleared up, but as I'm not a party to your exchanges (and Rich's exchanges) with Harry's attorney I can't be sure. I'm also not certain whether the terms of the proposed settlement have changed. All I can say for sure is that characterizing the offer as one in which distributions to you cannot exceed $100K per year is not consistent with my understanding of what has been offered.

The reason why the proposal is too outrageous to discuss has nothing to do with the technicalities of the handout that Harry is graciously offering. I'll review the background, once again.

As I've discussed before, the Marital Trust was established in Carol's name for tax purposes. The obvious intention, clearly understood by Carol and me, and of course Eric Menouya, was that it would be available to the survivor -- Carol we assumed -- and then what remains would go to the beneficiaries. The idea that we intended that Carol would control "her" funds and I would control "mine" is too ludicrous to discuss, though I understand the legalistic conjuring that can be adduced to reach this conclusion. As you note, I was not working with you at the time you and Carol drew up your wills and trusts, but what you describe is not consistent with Eric's notes (which I have), nor with the facts as I understand them. You are right that tax savings were a major driver to the planning (and the plan did in fact result in substantial savings of both estate and income taxes) but it was not drafted with the expectation that Carol would survive you.

The question of who would be the survivor is irrelevant. Carol and I assumed that she would be the survivor, but there was no reason to tell anyone, and it has no bearing at all on the fact that our intention was that the principal would be available to the survivor, then going to the children.

The decision to fund Carol's trust with both financial assets and your Cape and Lexington homes was made when she was already ill and (as far as the notes indicate) with the expectation that she would predecease you.

This is quite surprising, and I would like some clarification. Most important, I don't see how any significant decisions could have been made during those years, who could have made them, or why it was done. Obviously, I could not have done so. She had to undergo massive brain radiation as soon as the biopsy was taken, and serious cognitive and physical decline was immediate. Nor could I have been involved. I very much wanted to keep her at home, rather than the only alternative -- a nursing home. I managed to do so for two years, until the end, but it required 24-hour care, and I was in no position to think about such matters. If I had been informed -- I don't recall anything of the sort -- I couldn't have paid any attention or granted truly informed consent. So I would like to learn more about these decisions.

Secondly, I don't understand them. How could the Cape and Lexington homes fund the Trust? Did the funds from selling the Lexington house go to the Trust? How was it funded before? Would appreciate clarification on this.

Of course we knew by then that she would predecease me. It was a medical miracle that she was able to survive that long, on experimental drugs, as a last resort.

The records that I have seen do not indicate what your expectations (or Carol's) were as to how the Marital Trusts were to be made available to you after Carol was gone — for that the independent trustee of the trusts (whether me or my successor) has to rely on the terms of the trusts themselves, the information that's given by the trust beneficiaries, and the law surrounding such trusts.

I'd be interested, of course, in knowing about the records you have seen, but it would hardly be surprising if there is no explicit record of what is obvious simply to common sense. We were a married couple who cared for each other and for our children, putting a Trust in Carol's name for tax purposes. What sort of lunacy would it be to set up a Trust for one of us to have access to but not the other? So of course you are unlikely to find notes about it. If Harry forces this to litigation, all of this will have to come up, either in court or in public in some other manner.

When I appointed Harry to replace me as trustee, I took for granted that he would handle the trust as I had. His behavior since, and this latest proposal, make it very clear how wrong that assumption was. This proposal calls for him to be in complete charge, which means, as he has shown, that I can only plead for some funds by accepting conditions that he knows I will not accept. You recall, I presume, that this was true even when I faced an enormous tax bill because my IRA was being depleted for the benefit of the family.

To refresh your memory, let me repeat again what was happening with my IRA until I learned about it. There is a mandatory withdrawal. Half was being distributed to family. The other half was being used for taxes and management fees for the entire estate. In order to pay medical expenses, and to pay $50,000 a year for rent and upkeep on the house in Wellfleet that we had given to the children and that I was barely using, I had to withdraw extra funds from the IRA, with the onerous tax burden. The same when I withdrew something to live on. Under these circumstances, Harry refused to release funds from the Trust for tax relief without onerous and humiliating conditions that he knew I would not accept. Easy to predict what might happen under less extreme conditions. It was not until 2017 that I was able to overcome the accumulated burden of these actions.

In the previous paragraph you offer to "refresh my memory" and in the prior paragraph you say "You recall, I presume". Without going into detail, I have to note that my recollection of the events you describe is not consistent with yours (though it may not be entirely consistent with Harry's either — I am not sure).

Since my own recollections may be the subject of testimony in the legal proceeding that Harry has initiated, or in one that you may commence, I think it better that I not recite my own recollections here.

Note that Harry's exhibit B, beginning with section 9, is utterly false, and consciously so. All of the above has been explained to him over and over. It is not only consciously false, but is framed as a vicious and ugly attack on Valeria, implicitly accusing her of responsibility for the escalation of expenses which, as Harry knows, was caused by the actions just described once again.

For such reasons, Harry's proposal is, as I said, too outrageous to discuss.

Before responding to your letter in full, I would like to clarify a few matters. Interspersed below.

Noam

Demand documentation for every payment made. You need to be explicit that you will need to protect any future client of his or his firm from the abuse you have suffered at their hands.

Below the letter I'd like to send to Max, with your suggestions, including today's. Can you take a quick look and see whether it's OK. Only new parts are in red.

Noam

Thanks for the comments. A few more of my own, for clarification. In red.

I should add that Harry's recent behavior, including this utterly outrageous document, might make it necessary to go to litigation. The last thing I want, but he may force me into it. If necessary, I may have to make public the way the Trustees have handled the Trust since 2009, when I appointed Harry as trustee to replace me. Many serious questions. It is the last thing I want to be driven to, but there are some very ugly things in this proposal, not least the very clear implication that Valeria somehow wanted to marry an older man for the money and that she caused the increase of expenses -- easily refuted, it's easily documented that the cause was diversion of IRA funds for the benefit of the children and the exorbitant tax bills resulting. All so disgraceful I'm not going to let it stand.

Good idea. I'll add that, and then send to Max.