Taxes

After Sen. Feinstein’s Death, Family’s Fight Over Assets Likely To Intensify

In her last days, Feinstein’s daughter and step-daughters battled in court over the Senator’s access to assets left by her very rich late husband, Richard C. Blum. It got nasty, with accusations of elder abuse. There are lessons here for all blended families–even those of more modest means.

When Richard C. Blum died at 86 on February 27, 2022, there was considerable interest in—and later fighting about—the large estate he left behind. After all, Blum was very rich and married to a powerful woman, Sen. Dianne Feinstein (D-California).

And when Feinstein, wealthy in her own right, died on September 29, 2023, questions about who might be entitled to assets certainly didn’t diminish. In fact, it’s likely that the bitter dispute over shared and marital assets could intensify.

Conflict is often the case in blended families like those of Blum and Feinstein.

Background

Feinstein was married three times. Her first marriage to Jack Berman was short—just three years—but resulted in the birth of Feinstein’s only child, Katherine Feinstein Mariano. Feinstein married again in 1962, this time to Bertram Feinstein, who died of cancer in 1978. Feinstein’s last marriage was to Blum in 1980.

Blum had also been married before he met Feinstein. He was married to Andrea Schwartz for nearly 20 years before their 1977 divorce. Blum and Schwartz had three children: Annette Blum, Heidi Blum Riley, and Eileen Blum.

Often, the stereotype is of a wealthy businessman marrying a much younger, less powerful woman. That wasn’t the case here. Feinstein was two years older than Blum, and by the time they were married, had already been named the Mayor of San Francisco (she initially served as acting Mayor for just over a week in 1978 following the assassination of then-Mayor George Moscone before her tenure as San Francisco’s first female mayor).

Before Blum met Feinstein, he opened his company, Blum Capital Partners, LLP, in 1975. Despite his primarily private persona, that move was mainly due to a spectacle, with his big break coming at Sutro & Co., where he spearheaded efforts to buy and sell Ringling Bros. and Barnum & Bailey Circus for a considerable profit. Today, Blum Capital says the firm specializes in corporate private equity transactions, claiming that it has “invested more than $10 billion of equity capital and demonstrated a proven ability to play a constructive, active role in unlocking value from our portfolio companies through the implementation of financial, operational, and governance initiatives.

Blum was clearly very rich, though he never appeared on Forbes’ list of billionaires.

Feinstein wasn’t quite that rich—but she had grown her own portfolio while she simultaneously climbed the political ladder. She became a Senator in 1992. A 2023 Senate disclosure reported that her net worth included a blind trust, the “Dianne Feinstein 1991 Trust” worth $5-25 million, and deposit accounts in her own name, as well as jointly-held real estate.

Both Blum and Feinstein had clearly—and in the case of Feinstein, publicly—experienced declines in health in the past few years. Blum was diagnosed with lung cancer in 2016, and the following year, Feinstein had a pacemaker installed. Her health didn’t improve. After a bout with shingles that resulted in hospitalization, she contracted encephalitis. That same year, she granted her daughter, Katherine, power of attorney over her affairs.

That’s also when the conflicts were made public.

The dispute, which is playing out in separate court cases, focuses on trusts created before Blum’s death. While Blum did have a will dated November 17, 2021, according to court filings, there are no assets in the estate. A 2022 petition for probate filed by the law firm representing the trustees notes, “All assets of decedent are held in one or more trusts created by decedent during his lifetime.”

The Beach House

At the center of one of the court cases is a Stinson Beach property said to be worth millions. The house, which was built in 1981, was owned by both Feinstein and Blum in a joint property trust. After Blum died, his interest in the trust was intended to benefit Feinstein and then would pass to his children.

Tasha Dickinson, a Florida bar board-certified wills, trusts and estates lawyer at Day Pitney LLP, called the arrangement “a recipe for disaster.” When different family members benefit depending on the actions taken by the trustees, you create a power struggle. Dickinson explains that in a typical scenario when children from a prior marriage will benefit only after their parent’s spouse dies, the children typically don’t want distributions to be made to the step-parent. “You are,” she says, “trying to marry a family together,” when often the better alternative is not to tie them together outside of their parents’ marriage.

Instead, the arrangement created an adversarial situation. Katherine took steps during her mother’s lifetime to sell the house on behalf of her mother, claiming that her mother no longer planned to use the beach house and didn’t want to pay for half of its upkeep. But the trustees allegedly balked, a move that Katherine claimed was purposeful. Additionally, keeping assets tied up—in real estate, for example—makes it less likely that distributions to lifetime beneficiaries can be made.

Separating assets in the beginning might have been a less divisive move. For example, rather than create a joint trust, Blum could have chosen to give Feinstein a discrete bucket of assets, with the rest to the kids.


Marital Trust

The tone surrounding the marital trust for Feinstein’s benefit is even more contentious. In that case, Katherine has accused the trustees of purposefully withholding payments to Feinstein during her lifetime because they “intend to benefit Richard Blum’s [biological] daughters, who stand to inherit millions of dollars that should go to Senator Feinstein if the Trustees never make the required distributions to her.”

The sum of $5 million was to be set aside in the marital trust for Feinstein’s benefit, in addition to $1.5 million payments to be paid to her annually. Additionally, Katherine says that Blum intended for Feinstein’s medical expenses to be reimbursed from trust assets.

Katherine referred to the failure to fund the trust or make payments as “financial elder abuse.” She has asked the court to fund the trust and to remove the trustees. She has also asked for monetary damages.

The trustees vehemently disagree with Katherine’s characterization, arguing, among other things, that Blum’s estate did not have the liquidity to fund the trust immediately. They also claim that the complexity of Blum’s holdings meant they needed to take their time with assets—first, the taxes needed to be paid. They also claim that they were balancing the decedent’s intent to provide for his wife with her own assets and income, which they suggest were sufficient to pay her bills.

The trustees are Michael Klein, Marc Scholvinck, and Verett Mims, Blum’s friends and business associates. Legal observers, including Dickinson, wonder if that might have been a mistake. “Fiduciary selection is probably one of the most important topics in estate planning for anybody,” she says. “Where the money goes is one thing, but who is going to be in charge of making distributions is a really important aspect.”

That’s because trustees often have to consider multiple interests. In this case, there might have been a duty to the lifetime beneficiary (Feinstein), but there is also a duty to the remainder beneficiaries (Blum’s children). When assets are finite, the scale is continually being adjusted—what you give to one side necessarily takes away from the other. And, a person you think may be capable of making those decisions as an independent trustee—meaning one who doesn’t benefit financially from the trust—”may not be so independent after all,” says Dickinson.

When asked about the dispute, John A. Hartog of Hartog, Baer & Zabronsky, the firm representing Katherine Feinstein, simply responded, “No comment.” Attorneys for the trustees and beneficiaries did not respond to a request for comment.

A judge has ordered that the cases be resolved by private mediation, set to take place next month.

Avoidance

While not all of us have millions or billions to fight over, the underlying issues transcend money. “People are people,” says Dickinson.

So, what can families do to try to head off these kinds of battles? Dickinson offers three pieces of advice:



Plan meticulously. Planning should include not only the distribution of your assets but who will carry out those details. That means, she says, thinking big picture, including whether assets should pass to heirs together or separately, and considering the practical aspects of beneficiaries being forced to work together. Often, she explains, “rifts between family members are so great, they don’t always make the best decisions.”

Set expectations early. “You can’t always choose when you’re going to die,” she says, “so it’s important to set expectations early.” That’s true not only with respect to assets but also your choice of fiduciaries.

Remember that communication is key. “Did they [Feinstein and Blum] ever have conversations about the beach house?” Dickinson wonders, suggesting that the answer is no.

Public Eye

Following Feinstein’s death, the litigation is not likely to abate—if anything, Dickinson speculates that the problems will intensify.

The disputes have made the couple’s lives even more public, a fact that surprises Dickinson. “It’s shocking that it has spilled over into the public,” she said, noting that it’s often the case that these matters are settled behind closed doors.

In 1990, Blum described his life to the New York Times, saying, “No. 1, we get to see on a regular basis everything she’s ever done and I’ve ever done distorted in the newspapers. No. 2, we get to share 17 years of our tax returns on an intimate basis with 30 million people. And three, I get to pay to watch all this happen.”

Over 30 years later, millions of people are watching (and reading) again.

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