Beyond The Will
Learning From Famous Mistakes: Part 5 – The Overly Simplistic “Estate Plan”
February 13, 2020
Pop culture periodicals have been telling us for years that celebrities are “just like us” – they go grocery shopping, they drive their kids to school, they walk their dogs. This holds just as true in the Probate world as in the tasks of everyday life. This multi-part series will examine several famous mistakes that celebrities have made in their Wills and Trusts and will offer tips as to how we can avoid making those same mistakes.
Part 5. The Overly Simplistic “Estate Plan”
We have previously discussed the failure to make an estate plan, the failure to update an estate plan, the failure to memorialize certain promises in an estate plan, and a (likely) impermissible attempt to make certain updates to an estate plan. In this fifth and final installment of “Learning from Famous Mistakes” (don’t worry, I’ll still keep you updated periodically about celebrity blunders in the Probate world), we’ll talk about yet another estate-planning pitfall that both the A-list and the rest of us should avoid: the overly simplistic “estate plan.”
Take Jim Morrison, for example. The famed Doors frontman died in 1971, at the tragically young age of 27, from a likely heroin overdose. He left a simple Will, which named his companion (and, at least according to some of the evidence, his common-law wife) Pamela Courson as the sole beneficiary, with assets passing to his brother and sister only if Ms. Courson failed to survive him by three months. She did make the three-month mark, but then passed away herself in 1974, without a Will, such that the laws of intestacy took over (again, see Part 1 of this series!) and all of Mr. Morrison’s assets passed through to Ms. Courson’s parents. Of course, litigation ensued, and even if it hadn’t – would this disposition really match up with Mr. Morrison’s intent? Did he intend that, within three years of his death, his girlfriend’s parents would have control of his assets and his legacy? Probably not.
Let’s also consider the costly errors made by Philip Seymour Hoffman and James Gandolfini. Each of these acclaimed actors left significant estates but only simple Wills, not only leaving them subject to public-record probate proceedings but also creating substantial estate tax bills that could have been avoided, at least in part, by more sophisticated estate planning including the use of trusts. Did Mr. Hoffman intend to leave $12 million of his hard-earned money to the taxing authorities? Did Mr. Gandolfini intend to leave approximately 80% of his $70 million estate unsheltered? Again, in both instances, probably not.
What could a carefully-drafted trust have done for our famous friends, and what can it just as easily do for those of us with somewhat less-substantial portfolios? Among the benefits are:
- Privacy. Unlike a simple Will, which must be probated and which most typically is available to the public, Trusts often are not filed in any Court proceeding.
- Timing and Cost. Unlike a simple Will, which must pass through probate with attendant increases in time and cost of administration, a lifetime-funded Trust can make assets available to your beneficiaries without delay or added cost.
- Control. Unlike a simple Will, which gives assets outright to the named beneficiaries after which time they may do with those assets as they please, a Trust can:
- Establish certain timeframes for periodic distributions; for example, giving each of your children a certain percentage of their respective inheritance as they reach certain ages.
- Create lifetime interests and contingent dispositions; for example, leaving assets in trust to benefit your spouse during his/her lifetime, and providing for distribution to your chosen beneficiaries (individuals or charities) after his/her death.
- Tax Savings. Unlike a simple Will, which provides no tax advantages, a carefully-drawn Trust can include various mechanisms to minimize any estate or inheritance tax that may otherwise be owed at your death and/or at the death of your surviving spouse.
The bottom line is that, for almost all of us, a simple Will is usually not enough. For all of these reasons and more, good advice from a knowledgeable estate planner will pay off, in more ways than one.
Until next time!
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