The Woolworth Misfortune: How Not to Provide for Heirs History Teaches Us a Good Lesson     Unfortunately, we will never know whether our estate plan "works".  We'll be dead.  However, there is a lesson learned by looking at other estate plans, and what actually happened as a result of the estate planning done.  We may prepare our estate plan to give what we have, to whom we want, when we want, and the way we want; however, we should also consider what it will mean to the person receiving our inheritance.  The story of Barbara Hutton, heir to the Woolworth fortune, is a good example of a simple estate plan gone wrong.     Barbara Hutton, granddaughter of F. W. Woolworth and niece of E. F. Hutton, was the heir of the $40 Million Woolworth fortune. When Barbara Hutton died in 1979 (46 years and 7 husbands after inheriting the estate), this $40 Million fortune had been reduced to a mere $3,000. Learning from the "Woolworth Mistake" might help us better prepare our children and grandchildren for stable futures - both financially and emotionally.         Barbara Hutton, circa 1968. When Barbara Hutton was 10 years old she inherited some $25 Million. The money stayed in trust to be managed by her stockbroker father, Frank Hutton (E. F. Hutton's brother), until Barbara turned 21. When Barbara turned 21, the $25 Million fortune had ballooned to some $40 Million (which is roughly equal to $500 Million today), thanks in part to Frank's astute decision to sell out early enough in 1929 to miss the crash in October. After receiving the $40 million inheritance in 1933, Barbara gave her father $5 million as a thank you gift for his management services. Then, she embarked on the sad, lonely life of a socialite both envied and exploited for her money. Barbara's vast inheritance made headlines around the world. Suitors quickly lined up for the attentions of the "million-dollar baby" - even before she hit the magic age of 21. When she was just nine, Barbara's butler offered her some sage words of caution: "Someday, you may be the richest girl in the world, but all that means is that somebody will want to marry you for your money." Ultimately, Barbara married 7 times (the only husband who collected no alimony was actor Cary Grant). Each of her other husbands, after spending her money lavishly, managed to walk away with a substantial part of her fortune after the divorce. When Barbara died in 1979, at the age of 66, her share of the Woolworth fortune had dwindled to a mere $3,000.     What could F. W. Woolworth have done differently to spare his granddaughter the misery of such relentless exploitation? And, what could she herself have done to protect her assets from gold-digging husbands who charmed their way into her life, convincing her that they loved her and not simply her money? What lessons can we draw from her miserable life of spousal abuse, drug addiction, and outrageous spending (she once spent $98,000 in one day)? How can clients avoid the same mistakes F. W. Woolworth made when he set up his estate to allow his granddaughter to receive $40 million in cash and securities on the day she turned 21?     An unsigned will made Barbara Hutton rich. Shortly before his death, F. W. Woolworth called in his attorney and wrote a will that would have distributed his estate among his wife, daughters, grandchildren, friends, and charities. By the terms of the new will, Barbara would have attained merely average wealth. But F. W. Woolworth failed to sign the will - either due to forgetfulness or a change of heart. When he died, the entire fortune passed to his wife, Jennie Woolworth, a hopeless incompetent who, permanently hospitalized, tied up the money for the duration of her life. When Jennie finally died, the money was split three ways: two-thirds to Frank and Jennie's two surviving daughters, and one-third to Barbara (the only child of their third daughter, Edna, who had committed suicide when Barbara was four). Because Barbara was then a minor, her share of the inheritance went into trust. But once she turned 21, the court had no choice but to turn the entire fortune over to her.     The right kind of trust would have solved everything. Had F. W. Woolworth designed the right kind of trust, Barbara Hutton might have led an entirely different life. The beauty of a trust is that the trustmaker can specify just about anything he or she wants. F. W. Woolworth could have provided for a certain percentage of the assets to be paid out at certain intervals (e.g., 25% at age 25, 25% at age 30, and so on). Or he might have specified that a certain amount be paid out upon the happening of some event. A popular trust known as an "incentive trust" specifies that a certain amount be paid out once the child achieves a certain level of education, or earns a certain amount of income on her own, or upon marriage. The point is to keep wealthy heirs from losing their motivation to be productive members of society. With a "spendthrift trust", the assets remain in trust and continue to be managed by a trustee. This type of trust is often used for children who may never be responsible enough to handle all the money at once. The trustee of the "spendthrift trust" pays for the beneficiary's expenses and may distribute additional income at his or her discretion. With the bulk of the assets tied up in trust, they are protected from spendthrift heirs who have a propensity for charming con men who want to marry them for their money, and are protected from the creditors of these spendthrift heirs. The term "spendthrift" implies an irresponsible beneficiary, but these trusts are also used to protect assets from outside assaults, such as frivolous lawsuits. What about a pre-nuptial agreement? Barbara Hutton could always have executed a pre-nuptial agreement to protect her fortune in case of divorce. Given her weakness for charming men and her spontaneous decisions to marry, however, she didn't exactly seem to be the "pre-nup" type.     It's hard to know how much of Barbara Hutton's tragic life was caused by her early inheritance. Maybe it was her sad family life - her cold father and nonexistent mother, or her immaturity, or her inexperience. The lesson that we should learn is this: It was not the amount of money that Barbara Hutton inherited, but the fact that she received the inheritance (no matter what the dollar amount) at such an early age.     We may not have the money that F.W. Woolworth had. But we all want to protect our loved ones as much as possible. Barbara Hutton's story, and the estate planning lesson we learned, can be useful to help spare our children and grandchildren the irreversible damage caused by getting an inheritance at too early an age.       The question is ... are our loved ones ready for the financial responsibility of being our beneficiaries?          CALL US at 800-501-3220 or Email Us to find out how to protect your loved ones.         Return to the list of Estate Planning topics. Printer Friendly Version