Benihana Restaurant Blended Family Saga: Stepmother vs. Stepkids

Today’s post continues our series on real-life family business succession dramas. Like the last two posts, we turn again to the food industry for a meaty succession story. Let’s learn lessons from the blended family saga of the Benihana Restaurant chain, truly a case where the truth is stranger than fiction.

This gets messy. Let’s follow the money. Benihana founder Rocky Aoki set up a trust for his six children, retaining a special power of appointment (“SPOA”) to designate how the trust would pass at his death.

Later, Rocky married his third wife Keiko, causing his kids to worry that their inheritance could get diluted. Two of them, Kana and Kevin, met with Rocky’s lawyers about their concerns.

The next day, Rocky met with kids Kana and Kevin and his lawyers, and Rocky signed an irrevocable “Release” limiting the SPOA so that only Rocky’s descendants could inherit the trust. Apparently, no one emphasized to Rocky that it was irrevocable or explained that he could no longer give any of the trust to new wife Keiko.

Almost a year later, Rocky hired a new lawyer and signed a codicil allocating 25% of the trust to new wife Keiko outright. Rocky’s previous lawyers opined that the codicil was invalid because it violated the Release. Rocky later testified he would have never signed the Release had he known it was irrevocable.

Four years later, Rocky signed a new 2007 Will allocating 25% of the trust to wife Keiko outright and 75% to a trust for Keiko’s benefit. According to the Mashed.com article, “Why the Benihana Founder Sued His Own Kids,” just prior to that, Rocky filed suit against four of his seven children for trying to “wrest control” of the company away from him, asserting: “I want to help my kids, but I want my children to crawl, to walk, then run on their own. Then I help them. But they can’t even crawl. They just collect money and do nothing. What else they want? Can’t wait till I’m dead?”

Rocky died a year later, and the 2007 Will (cutting out his kids) was admitted to probate. Rocky’s kids challenged the Will, asserting it violated the Release.

The New York trial court denied the claim of Rocky’s kids, but on appeal, the New York Court of Appeals reversed, finding that Rocky had an opportunity to read the Release and ask questions. Accordingly, the court held that the Release was valid, and the trust passed to Rocky’s kids instead of to wife Keiko.

Let’s unpack a few lessons from this case:

• First, to the lawyers: Rocky’s original lawyers were playing with fire, trying to dance around all kinds of conflicts of interest dealing with Rocky’s kids. In representing a blended family, be ultra careful to avoid conflicts of interest.
• Children acting in secrecy to avoid sharing an inheritance with a stepparent is a recipe for a disaster. Although it’s a delicate conversation, the better course is a facilitated family meeting process with open communication.
• Disinheriting kids in favor of a new spouse is ripe for a claim of undue influence. Take extra precautions to preserve evidence that would defeat such an assertion.
• Before signing anything, read it and understand what you’re signing.

More than half of Americans are part of a blended family. Recognizing the numerous issues this statistic presents, I gave a speech identifying 18 sensitive fact situations in estate planning for the blended family. Click here to check out “I Do, Round Two: Second Marriage Estate Planning.” The Blum Firm is committed to helping blended families create thoughtful estate plans, reducing the risk of family friction.

Marvin gives appreciation to Charles A. Redd for his education on the subject as part of his Cannon Financial Institute, Inc. seminars.