Court Rules Helmsley Trustees Not Bound by Donor’s Instructions

The trustees of the Leona M. and Harry B. Helmsley Charitable Trust do not have to limit the distribution of their grants to charities focused on the care and welfare of dogs, a New York judge ruled last month.

The ruling is significant because it allows the foundation’s trustees to go against Ms. Helmsley’s wishes that the bulk of her estate be directed toward that purpose.

Ms. Helmsley’s foundation has been closely watched, since it could receive as much $5-billion from her estate, making it one of the wealthiest grant makers in the country, according to documents filed with the Surrogate’s Court, in New York.

The court’s ruling in the case clears the way for the foundation to begin making grants, and foundation officials say it might start distributing money as early as this month.

The ruling has a further reach, however. It could set a precedent for charitable bequests, since it is likely to raise serious questions for many philanthropists about how tightly trustees of estates are legally bound to dole out donors’ bequest money to the causes they designated.

The ruling also raises questions for charities that might have been expecting money from Ms. Helmsley’s foundation.

Shifting Missions

Ms. Helmsley, who died in August 2007, had directed in a mission statement she signed in 2004 that her foundation support the care and welfare of dogs.

The statement revoked a similar document she signed in 2003 that said she wanted her foundation to support not only the care of dogs, but also “medical and health-care services for indigent people, with emphasis on providing care to children.”

But the judge, Troy K. Webber, found that the document that set up the trust does not require the trustees to refer to the mission statement, and that it grants them “sole discretion” to give money to any charity they choose.

The trust document “makes clear that the trustees’ discretion to apply trust funds for charitable purposes is not limited by any mission statement,” the judge wrote in his decision.

The estate is still in the process of being settled. Ms. Helmsley’s assets include property, cash, stocks, and bonds. Given the current volatility of the financial markets, the value of the estate could change.

However, after more than a year of silence on the subject, the trustees are now moving toward distributing some grant money.

Howard J. Rubenstein, a spokesman for the estate, said in a news release that the trustees plan to announce the first charitable grants this month.

Grants will probably be made to groups that focus on health care, medical research, human services, and education, he said. The release made no mention of dogs, and Mr. Rubenstein’s office declined to provide any further information.

An analysis by The New York Times last summer estimated that the estate was worth almost 10 times the amount of assets of all 7,381 animal-related nonprofit groups that reported to the Internal Revenue Service in 2005.

Limits on Donor Control

Some philanthropy experts viewed the judge’s ruling as a statement that the deceased don’t enjoy unbridled control of their bequests, and that society has a right to reallocate funds when carrying out a donor’s intentions is impractical.

“If the trustees make defensible transparent decisions about how that money is allocated to the public good, I think ultimately we will look back on this and say, yes, it is right that a court should be able to invalidate the extremes of donor intent,” says Tim Ogden, editor in chief of Philanthropy Action, a journal for donors.

Other experts say the judge was not making a statement, but merely interpreting the facts.

If Ms. Helmsley intended for all of the money to go to animal charities, she should not have provided such wide discretion to the trustees, argues Ray D. Madoff, a professor at Boston College Law School. “Given that she gave that broad discretion, they have very broad powers,” Ms. Madoff says.

No animal charities were named in Ms. Helmsley’s will as beneficiaries of the trust, but some animal groups have expressed dismay at the ruling.

The Humane Society of the United States will “work hard” to make sure the trustees don’t forget Ms. Helmsley’s wishes to support the care and welfare of dogs, Wayne Pacelle, the organization’s president, wrote on the group’s Web site. He added, “We’ll consider all avenues, in the courts and otherwise, to honor the intention of Mrs. Helmsley.”

In an interview, Mr. Pacelle said his organization hasn’t made any decisions yet about whether to challenge the ruling in court.

“We hope that it doesn’t come to that and that the trustees honor Ms. Helmsley’s wishes, which were explicit,” said Mr. Pacelle.

Some philanthropy experts argued that animal organizations may have grounds for a lawsuit if an unreasonably low amount of the estate goes to animal-welfare organizations.

“It would be a real tragedy if none of the money ended up going to providing care for dogs,” said Frederic J. Fransen, a consultant who helps donors structure gifts and administer philanthropic programs.

“I presume the trustees will make their own assessment of what amount can be properly used by animal organizations. If not, that would certainly be a violation of donor intent,” he said.

Martin Morse Wooster, a historian and the author of The Great Philanthropists and the Problem of “Donor Intent,” said that while Ms. Helmsley may have been “sloppy” in the execution of her trust, it is clear from the changes to her mission statement that she intended for virtually all of her estate to go to animal-related causes.

And, Mr. Wooster believes, it would be possible to spend the entire trust in that realm if the mission were interpreted broadly.

The trustees could, for example, make grants for medical research that would benefit dogs, but also potentially humans.

“I don’t think the trust should be used for anything that’s not animal-related,” Mr. Wooster said. “If you’re a champion of donor intent, you have to honor the wishes of all donors, and that’s where she was coming from.”