The estate of William Barron Hilton, who was the son and successor of hotelier Conrad Hilton, filed a petition in Tax Court last month challenging a $1.16 billion estate tax deficiency, plus interest, stemming from a will dispute over trusts that Hilton made to Conrad N. Hilton Foundation and Ducks Unlimited.
Barron bequeathed $2.9 billion to the family foundation and $1 million to Ducks Unlimited. His estate argues that the IRS wrongly denied charitable contribution deductions for these inheritances.
The IRS, however, states that the deficiency notice is necessary because if Barron's heirs are successful in their claims against the estate, it would void nearly $3 billion in deductions.
Case History
In 2007, Barron told his family that he was making a significant change to his will (citing the public abuse of his niece Paris Hilton as one of the reasons for his decision and his concerns about what might make unearned wealth distort values”) and that instead of leaving his multibillion-dollar fortune to his family, he decided to leave most of his wealth to the family foundation.
In July 2010, Barron publicly reaffirmed his intention to leave most of his fortune to the foundation “to leave the world a better place than he found it”.
Barron died in 2019, leaving 97% of his fortune to the family foundation (the other 3% was reportedly divided among family members).
Measures to avoid disputes
Barron took precautions to avoid disputes regarding his estate plan. Some of these steps included obtaining approval from the California Probate Court and a private letter ruling from the Internal Revenue Service regarding the disallowance of his interest in a marital trust with his ex-wife (to allow his children to have earlier access to the residue of the trust), obtaining waivers from each of his eight children confirming that the waiver of his interest in the marital trust would not be challenged or set aside, advising each of to his children in writing regarding his intention to leave most of his estate. to the family foundation and publicly announcing his intention to donate the vast majority of his estate to the foundation and not including any disputing clauses in both his will and trust.
A dispute arises
Despite numerous precautions and non-contest clauses, some of his children, who were none too thrilled with their father's decision regarding the fate of their inheritance (or lack thereof), subsequently filed claims against the foundation.
After the children's claims were all rejected by the trustee of their father's trust, the William Barron Hilton Trust (whose remaining assets were to be distributed to the family foundation upon Barron's death, according to the terms of the trust), the children sued the trustee trusted. The Los Angeles Superior Court dismissed their claims, except for two of Barron's children's claims against the administrator.
The estate submits that the remaining challenges relate to the marital trust or alleged conduct that preceded the marital trust in the 1980s and 1990s. Because none of the remaining claims relate to Barron's will, the estate asks the court to determine that there is no deficiency in the federal estate tax.