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Blogs - Trial and Heirs
The Gore-Tex Succession Plan Stands Up To An Unusual Challenge
Monday, June 4, 2012
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Anyone who likes to go hiking, biking or camping probably knows what Gore-Tex is. The breathable, waterproof fabric made W.L. Gore and Associates into a huge success. The privately-held company hit #134 in Forbes’ most recent list of America’s largest private companies, with an estimated $3 billion in annual revenue.  

Founder Bill Gore passed away in 1986 and his widow, Genevieve Gore, died in 2005. The couple, way back in 1972, finalized a trust to pass most of their stock in the company onto the children, and ultimately their grandchildren.  They smartly planned ahead, realizing how valuable their Gore-Tex invention could become and how much growth their stock could achieve. So they funded the trust through a holding company, early on, to minimize estate taxes.

Wanting to treat their heirs equally, the Gores set up five equal shares, for their five children. They created a supplemental trust so that each of the grandchildren could receive an equal amount of stock as well.

The plan worked very well … almost perfectly.  There was only one problem. The Gores’ daughter, Susan, only had three kids, unlike her siblings who each had four.  Under the formula established by the trust, that meant her family would receive less stock than each of the families of her siblings, because Susan’s three kids would collectively receive less of the grandparents’ stock than if she had four kids.

Susan and one of the grandchildren led a campaign asking the rest of the grandchildren to change it so this wouldn’t happen.  When they didn’t agree, they asked Genevieve to change the plan.  She declined.

So Susan got creative.  She proposed adopting one of her grandchildren as her “child” and therefore, a grandchild of Bill and Genevieve Gore.  That would make it equal, right?  The problem was that Susan’s ex-husband refused to allow it.  He jokingly suggested that Susan adopt him instead.

Susan didn’t laugh.  She took the idea seriously.  In fact, she did adopt her 65-year old ex-husband, without telling the rest of the family of course.  The adoption became final in Wyoming, on July 10, 2003.  The ex-husband/now child, Jan C. Otto, promised in writing ahead of time that he wouldn’t keep any financial benefit from the trust, but only wanted to help his children get more stock.

But Otto apparently had a change of heart.  A few days after the adoption, he began to consider changing his mind.  By the end of 2004, that’s exactly what he did, deciding he’d hold onto the stock after all.  When Susan learned about this in January 2005, she considered “un-adopting” her ex-husband.  Before she got the chance, however, Genevieve Gore passed away.  Her death was the triggering event under the trust that potentially made Otto an heir, as a grandchild.  That couldn’t be changed once Genevieve was gone.

Susan started legal proceedings in Delaware to sort out the mess.  She first claimed victory over her ex-husband/son, when a judge ruled he couldn’t keep the stock.  He promised in writing not to keep any financial benefit from the arrangement, and that promise was enforced in court.  So far, so good.

Susan pressed on, fighting to ensure that Otto’s “share” of the trust would be honored and kept in her family.  Not surprisingly, the rest of the family fought back.  They argued that the court shouldn’t recognize the adoption, because the trust was set up to ensure that the stock passed onto the Gore’s grandchildren and keep the wealth in the family.  Susan argued that the State of Wyoming recognized the adoption as valid, so Otto was technically her child and a grandchild under the trust.  That made him a beneficiary of the trust, according to Susan and her legal team.

The Supreme Court of Delaware laid the matter to rest recently, once and for all.  It determined that even assuming the adoption was legal, the Gores intended to benefit those grandchildren who enjoyed a parent-child relationship with the Gores’ five children.  An adoption of a grown man (of retirement age no less) for strategic reasons did not fit within this intent.  Without an actual parent-child relationship, neither Otto nor Susan’s family was entitled to receive any additional stock from the trust.  Susan’s unusual adoption ploy failed.

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