Legal battle over Dianne Feinstein beach home sheds light on real estate trust disputes

The question over whether 90-year-old Dianne Feinstein should retire isn’t the only controversial issue swirling around the U.S. senator from California.

The legal battle over the estate of Feinstein’s late billionaire financier Richard Blum sheds light on common disputes among blended families, the San Francisco Chronicle reported.

Two lawsuits filed by Feinstein’s daughter Katherine in June and July involve two trusts set up by the couple to hold a portion of their vast assets, including real estate holdings and bank accounts.

Estate disputes are common when stepchildren are involved, and disagreements over real estate frequently crop up, the outlet reported. In this case, the trusts were designed so that if Blum — who married Feinstein in 1980 — died first, Feinstein would receive income from the trust assets during her lifetime, and the remaining assets would go primarily to Blum’s daughters from his previous marriage.

The lawsuit highlights the divergent interests of the surviving spouse and the step children. Feinstein, experts say, has an interest in generating as much income as possible, while the step children want to have the trust’s principal have as much value as possible and, if possible, appreciate.

After Dianne Feinstein and Blum served as co-trustees of the property trust, Blum’s lawyer Mark Klein and Katherine Feinstein have now taken over. 

In one lawsuit Katherine Feinstein claims Dianne Feinstein wants to sell a beach house, while the stepdaughters want to keep using it. 

Katherine Feinstein claims holding on to the home is “unproductive and cannot be made productive without significant expenditure,” the outlet reported, and that the best thing to do is to sell the property.

At the heart of the issue is the sale of the 3,500-square-foot home will generate immediate income for Feinstein, while the stepdaughters presumably believe the home will continue to appreciate in value, the outlet said.

Trusts are meant to keep such conflicts out of public view, as they don’t have to pass through probate and, therefore, are not subject to will challenges.

However, experts note that squabbles over trusts can spill out into public view, such as the Feinstein affair, if certain safeguards aren’t followed.

The first is to take care in selecting trustees.

“Trustees have a lot of power. That’s number one,” Steve Hartnett, director of education with the American Academy of Estate Planning Attorneys, told the outlet.

In addition, like in many areas of life, communication up front is important if not essential.

“The clients I have seen with really successful administration of their estate plans are clients who make decisions with parents, spouses and children at the table,” estate planning attorney Chelsea Suttmann told the outlet. “Maybe everyone wasn’t 100 percent ecstatic about how it played out, but if they have an idea about the lay of the land” before a parent dies, they are less likely to end up in court.”

— Ted Glanzer