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Family Feud Consumes Millions And Leads To Court Sanctions

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MARCH 19, 2001 VOLUME 8, NUMBER 38

Discussions about repeal of the federal estate tax often focus on the notion that farms and businesses are threatened by taxing assets at the death of the family patriarch or matriarch. Opponents of repeal, on the other hand, argue that it is family and business dynamics that usually causes sale of farms and businesses. Katherine Pillot Lee Barnhart’s estate lends support to both arguments.

When Ms. Barnhart died in 1975 her estate was worth $12 million. Almost all of that value was tied up in two family ranches and several pieces of undeveloped land in Houston.

Ms. Barnhart had named her son Ronald E. Lee as executor of her estate and as trustee of two trusts she established for the benefit of her children and grandchildren. Mr. Lee began to administer the estate and the trusts shortly after his mother’s death, although there were few assets to permit payment of estate debts.

The first debt facing Mr. Lee was the federal and state estate tax liability. The IRS wanted $2.8 million in taxes, plus another $475,000 in interest by the time the tax liability was finalized. The State of Texas wanted $800,000.

Unfortunately there was no cash available to pay the tax bill. When Mr. Lee received an unsolicited offer on a 61-acre parcel of land in Houston, he sold it for a total of $19.5 million. After paying the tax bill he made the first distribution to his sister. Five years after her mother’s death, Susan Lee received $15,784 from her mother’s $12 million estate.

In all it took 13 years and two separate demands before Susan Lee decided her brother was not going to provide an accounting for his administration of the estate. She sued to remove him as trustee in late 1988.

She learned that Mr. Lee had charged fees totaling $2,836,000 to manage the trust property. He had failed to list any of the real estate for sale, and had refused several unsolicited offers as inadequate. He had spent over $700,000 in a failed effort to develop one of the parcels. He had continued to operate the family ranches at a loss rather than arrange their sale.

A jury decided Mr. Lee should be removed as trustee and reimburse the trusts $2.2 million in excessive fees, plus another $2 million in attorney’s fees, interest and other costs for the decade-long legal fight. Despite the jury’s award the trial judge reduced the judgment to less than $700,000 after finding that most of the excessive fees permitted substantial estate tax deductions, so that the estate was actually injured by a much smaller amount.

The Court of Appeals reinstated the jury award. It also added $300,000 for Susan Lee’s appellate costs, and ordered that the $1.5 million she had received for attorneys’ fees at trial should come from Mr. Lee’s own pocket. Lee v. Lee, February 8, 2001.

Was the estate tax liability of $4 million responsible for the break-up of Ms. Barnhart’s $12 million estate, or was it family infighting, greed and manipulation? Critics of the taxation of estates can point to the likelihood that Ms. Barnhart’s estate plan would likely have been more responsive to the family’s needs if estate taxes had not been an issue. Opponents of repeal can point to the fact that Ms. Barnhart’s estate was illiquid, and her chosen successor apparently unreliable, or at least unsuited to the task of managing the family’s considerable wealth.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.