Celebrity Estate Planning
By Christopher J. Godfrey, Esq.
Celebrity estate plans, and the missteps found within them, get our attention. James Gandolfini of Sopranos fame was no exception. His will is available on the internet, as are those by Michael Jackson and Whitney Houston. Comparing them is an opportunity to see how much estate plans can differ.
People are often upset to find out that wills are public. However, a will does not have to disclose very much. It was interesting how Jackson’s will did not generate anywhere near as much press as Gandolfini’s. Why was that? Most states have laws that a will must be deposited with the courts when someone dies, even if there is no need for a probate. This gives all possible heirs and creditors (along with anyone else) a chance to examine it.
Even when there is a revocable living trust there should be a will. When someone dies, the trust only controls property titled in the trust name or made payable to the
trust on death. A trust-based plan should include a “pour over will,” a will that leaves anything not in the trust to the trust.
Michael Jackson had a revocable living trust, the will that made it to the internet was a pour over will. It was short, only five pages long. The only thing an outsider
can learn from the will is that Michael Jackson had a living trust, property not in the trust would go to the trust, and the name of the trustee. Any private, family,
information (who Michael Jackson left things to, how much he left them) would be in the trust, which is not at all public.
James Gandolfini did not have a revocable living trust. His will (17 pages) had the instructions about who got what and how much they got, open to public scrutiny.
Mr. Gandolfini made both specific gifts (his assistant Patricia received $200,000), and named residuary beneficiaries, people who would divide by percentage
what remained after the specific gifts (for example his wife Deborah received 20% of the residuary). It is important to understand that specific gifts are always
paid first, and residuary beneficiaries only get what’s left. If there is nothing left, they get nothing.
Gandolfini’s will also provided that estate taxes should be paid from the residuary. This means that his wife (and the other residuary beneficiaries) paid the tax from their share, with no help from specific beneficiaries! Was this his choice after counseling with his attorney, or is it what he got because it was on the attorney’s word processor? We may never know.
Whitney Houston's Will Wasn’t Perfect
When singer Whitney Houston’s will was filed in an Atlanta probate court, it too provided some helpful insights into estate planning. As expected, it named her child as her sole beneficiary, but there were surprises too.
Like James Gandolfini she relied upon a will instead of a living trust. For an artist who had signed the largest recording contract in history, this was not very thorough estate planning. Nor was it very private. Information about its contents was all over the internet.
Older is not always better
We learned also learned that Whitney’s will was almost 20 years old. How realistic was it to think that nothing in her life, the law or her experience changed during that time? She was not alone, the national average for length of time between updating estate plans is a whopping 19.2 years!
She did make one change to her will though. She added a codicil to change the executor of her will from her lawyer to her mother, which was a good move. But even so the probate court ended up assigning someone different to the task of controlling her estate at her death.
Whitney deserves credit for thinking ahead and for providing for her child. But she missed some opportunities too. She left her assets to her minor child in a testamentary trust, which is created during the probate process. She was wise enough not to allow her child to get it all when she turned 18; we have all heard about how “sudden money” changes lives, and usually not for the better. Whitney’s instructions said to pay it out in installments of 10% at age 21, another 17% at age 25 and the rest at age 30.
While this strategy takes account of a child’s maturity and growth, it deprives them of the opportunity of keeping those assets shielded from creditors and predators. Rather it requires it be paid out at specific ages. This is an opportunity many people miss. A person ought to ask themselves: “At what age is it okay for an inheritance to be lost in a lawsuit? At what age is it okay for an inheritance to be used to pay creditors, or to be lost in a divorce settlement?” If left in an appropriate trust these assets may never be lost to such unfortunate events. These protections are available to families of much more modest means than the Houstons, Jacksons or Gandolfinis.
The importance of Updating
Lastly Whitney didn’t update her estate plan after her divorce. Her old will suggests that Whitney might have wanted her ex-husband to serve as the child’s guardian after her death. Most people familiar with the situation doubt that this was her intent after the divorce. And yet that could have happened.
These are lessons for everyone. If we own property and have loved ones we should also have an estate plan. Otherwise someone else’s plan will be used. Most people would benefit from living trusts, beyond just simple wills. But whether we have a will-based or a trust-based plan, it’s important to keep our estate plan up to date. Without regular updating, most estate plans will not work the way we expect them to work. This is especially true after big life events such as divorce, new children, buying or selling a home, or starting a new business.