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More Lessons from an Estate Plan

The weekend edition of the Wall Street Journal on August 3-4, 2013, included an interesting article by Kelly Greene entitled “Lessons for the Rest of Us from an Actor’s Estate Plan”. The article points out some of the potential problems faced by actor James Gandolfini’s estate where the plan leaves the estate open to a significant tax burden, treats the deceased’s children differently and includes a trust which would likely give its beneficiary a very large sum of money at a young age.

The article misses the main lesson, though, which is simply to keep your plan up to date. No doubt the actor did not expect to die suddenly at a relatively young age. He thought he had time to take care of things and, in fact, had taken some steps in that direction. The reality is that he ran out of time before he was finished with the plan and the questioning of the plan in place is moot. The article is quite right in pointing out that the daughter’s trust, leaving her a large sum of money at age 21, could have been better drafted to protect her until such time as she had gained financial maturity. The suggestion of using a legacy letter or other similar device to explain to loved ones what the intent of the deceased was in making their estate plan was also useful.

Oddly however, the article focuses on a life insurance trust for the benefit of the older child and the fact that the actor’s young daughter did not have such a trust. The article suggests that there should have been documents to explain this discrepancy. Going back to the main lesson of the situation – the actor was not done with his estate plan and did not expect to run out of time to do it. Further, for a life insurance trust that would be large enough to have any significance given the size of the estate (over $70 million), there could have been an application made immediately after the daughter’s birth that had not been finalized at the time of the actor’s death before the child was eight months old. Between the amount of insurance and the actor’s own health history, it might be no surprise that insurance had not been issued.

The article also talks to discrepancies in the way children are treated as beneficiaries, perpetuating the myth that all have equal needs or that it is somehow unfair to do anything but divide an inheritance equally. The best estate plans make provisions for everyone but not necessarily in equal amounts or approaches. Of course, it is best for the estate plan to include an explanation and a wise step to prevent unnecessary litigation or society’s favorite – hurt feelings. Think about the not unusual case where a family includes a special needs child. Provision for that child will be different and quite likely more than what other “normal” children would receive or need. Take it further and see cases where one child receives their share in a trust to prevent waste, purchase of drugs, or attacks by creditors while another child could receive her share outright. There are myriad good reasons to treat beneficiaries differently, the primary reason being that all are different and have different needs. 

1 Comment to More Lessons from an Estate Plan:

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immobilienmakler münchen on Tuesday, March 11, 2014 8:41 AM
It is very helpful information about the real estate planing. First time I've seen this kind of information.
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