Reaching Across Generations

Family money is like a time warp. It doesn’t matter where you are in your own life’s course you need to do all you can to contribute to the overall family account. If you contribute effectively when you’re in your 30s, you’ll be able to withdraw more for yourself when you’re in your 70s without reducing the balance left for your grandkids. If you help your dad manage his money when he’s getting too old to do it well for himself, you’re making money available for your kids’ graduate school tuition.

Reaching across generations can be a kind of immortality. Of course, some people twist that reach into a bad thing. In February 2001, the Supreme Court of New Jersey issued its decision in The John Seward Johnson 1961 Charitable Trust. The case was one of the messiest family money disputes in the history of American law.The case was merely one link in a long chain of lawsuits, all involving a dispute among the offspringof J. Seward Johnson, son of the founder of the Johnson & Johnson Corporation. In this episode,the beneficiaries of one of Johnson’s several trusts challenged the legal status of one of his granddaughters. Fellow family members claimed that the girl in question wasn’t really Johnson’s granddaughter
and therefore wasn’t entitled to a share of a $350 million trust fund.Johnson’s son, Seward Jr., divorced his first wife in
1965. During the divorce proceeding, Seward Jr.acknowledged in writing that he was the father of a child named Jenia Anne Johnson who was known by her nickname “Cookie.” Specifically, Seward Jr. submitted a statement that read:To Whom It May Concern: The Undersigned, John Seward Johnson, Jr.,...hereby unequivocally acknowledges paternity of Jennie Anne Josephine Johnson...born of Barbara E. Johnson at Princeton, New Jersey, on January 11, 1961. Later, Seward Jr. claimed that he had agreed to acknowledge the daughter quickly, without paternity tests, in order to expedite the divorce. That prob

ably seemed like the easiest way to make a bad situation better. But Seward Jr. was part of one of the wealthiest families in America so any decision he made about family structure was going to impact hundreds of millions of dollars of family money. There wouldn’t be any easy out. On December 20, 1961, Seward Sr. created an irrevocable charitable trust (the 1961 trust), naming four of his six children and 11 grandchildren as the trust’s measuring lives. Cookie was named as one of those grandchildren.

In a trust, a measuring life refers to the lives of individuals named by the founder whose deaths terminate the trust.

With hundreds of millions in family money to manage, Seward Sr. had decided to use a series of charitable trusts as the means of moving the money to his children and grandchildren. Under the tax laws in place at the time, this was the best way to minimize the amount his family would have to pay the government. The 1961 trust was funded with 4,600 shares of Johnson & Johnson common stock. Its terms directed the trustees to pay all net trust income to “educational, religious or charitable organizations” until January 10, 1997, or the deaths of Seward Sr.’s four named children and 11 named grandchildren whichever came first. After that, the trustees, in their “absolute and uncontroled discretion,”

would distribute the trust’s proceeds to Seward Sr.’s four children Seward Jr., Mary Lea Johnson Ryan, Elaine Johnson Wold and Diana Melville Johnson Stokes and “their spouses, and their issue, or any one or more of them.” After Seward Jr. began divorce proceedings against Barbara but before the court entered the final divorce decree Seward Sr. created another charitable trust on December 31, 1963 (the 1963 trust). The language of the 1963 trust generally tracked the
language of the 1961 trust, except that the 1963 trust expressly excluded Cookie. The more time that passed from Seward Jr.’s divorce, the less committed he seemed to treating Cookie as his daughter. At one point, he described
her and her younger brother as “children of other men.” But he never went as far as legally disavowing Cookie, either. He seemed content to let her status hang in murky uncertainty. But this murkiness couldn’t continue forever. In the
mid-1990s, as the 1961 trust’s expiration date approached, the trustees sought instruction from the New Jersey court on several subjects, including:
• the interpretation of the term “issue” and who comprised that group; and
• whether the trustees’ understanding of the class of beneficiaries was correct.

Thirty-five years had passed. The “children” described in the 1961 trust were elderly or had died.
The “grandchildren” were adults, some in middleage, with children of their own. The value of the

trust was then estimated at $350 million. Seward Jr. couldn’t keep his equivocation about Cookie’s status in limbo with this much money at stake. At an early conference on how the 1961 trust would be handled, Seward Jr., his second wife and their two children challenged Cookie’s inclusion as a member of the class of eligible beneficiaries. Cookie’s cousins, Eric Ryan and Hillary Ryan (children of Seward Jr.’s deceased sister Mary Lea) made a similar challenge. Despite the challenge, the trial court held that Cookie’s status as a child of Seward Jr. had been conclusively and legally established in 1965. The
court further determined that she was an eligible beneficiary under the 1961 trust. The Ryans and Seward Jr. appealed. The appeals court ruled that Seward Jr. was barred from contesting Cookie’s legitimacy. In effect, the court told him that he couldn’t renege on the legal acknowledgment he’d made in the 1960s. But the question remained open about whether the Ryans the cousins, who had never acknowledged Cookie’s legitimacy could question it now. The New Jersey Supreme Court agreed to make a ruling on this point.

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