Estate Planning, Living Trusts, Real Life Lessons

Someone Finally Did Things Right! Lessons from Robin Williams’s Estate Plan

downloadLast week we tragically lost an entertainer who played a major role in the lives of many. Usually when a celebrity dies I read about how their estate plans went awry and how they did everything wrong, but today I am pleased to report that I am able to discuss one celebrity who may have done things right. Early reports, citing TMZ (seriously, where do they dig this stuff up and how ridiculous is it that I am citing it?), indicate that Robin Williams may have used a revocable trust as his primary vehicle to transfer his assets at death.

There are a number of reasons a revocable trust may be the perfect estate planning tool, but primary among them is privacy: a revocable trust is a private document that normally will be unavailable to the public, an important consideration for a public figure. In contrast, consider the cases of Phillip Seymour Hoffman and James Gandolfini, among others, whose wills and dispositions from their large estates were on public display. A will is a public document, filed with the court in a probate proceeding, and as such is available to the public; a trust is not automatically subject to probate or court jurisdiction. If a client-say a celebrity, an athlete, or even a resident of a small town full of nosy neighbors—ever has a need for privacy, the revocable trust is the preferred instrument.

A revocable trust can also reduce (but not eliminate) the possibility of intra-family drama surrounding the estate plan. A revocable trust avoids a probate proceeding, without which no notice to family members and heirs is necessary. Only the named beneficiaries need to get notice of the distribution from a trust, unlike in probate where all defined heirs, along with named beneficiaries, are required to receive notice. This means that a child or someone else who intentionally may have been excluded as a beneficiary will receive notice and will be an interested party in a court-supervised probate proceeding. It is still possible to bring action to determine the validity of a trust, or to contest distributions from a trust, but a party who might wish to press such claims may never even receive notice that the trust exists.

Just because Robin Williams appeared to have used a revocable trust instead of a will as his primary estate planning vehicle doesn’t mean his estate plan was perfect, but it does mean he was able to ensure that the division of his assets will remain private. One caveat: revocable trusts are only helpful if you have actually transferred your assets to the trust. Funding the trust is crucial and you should always work with a qualified estate planning attorney to coordinate the details.



Living Trusts

Protecting Your Children’s Inheritance–The Value Of Trusts

Children-PlayingA substantial part of my practice is dedicated to helping families with young children complete their essential legal planning. Today, families are more concerned than ever before about protecting inheritances and making sure that what they leave behind will be there for their children when their children need it most.

Seems like the Wall Street Journal agrees with me. On June 3, 2009, the WSJ printed an article taken from a new book, “The Wall Street Journal’s Financial Guidebook for New Parents” by Stacey L. Bradford. Here’s an excerpt from that article:

Do you anticipate leaving your children more than a modest sum of money?
A trust may not be worth the effort if you think you’ll only be leaving a child (or children) $100,000 or less. On the other hand, if you’re leaving life insurance money to cover four years of school and you own a home, there’s a good chance a trust would make sense for you.

Do you want to have some say in how your children’s money is spent?
A trust allows you to restrict spending to basic support, including food, clothing, education and health care. This is something that can’t be done with a custodial account. If the custodian is a soft touch, he could end up lavishing your child with designer jeans and a fancy car, leaving very little left for the college years. Even worse, if the custodian is also the guardian, he could start writing himself large “support” checks to help cover his other expenses.

Would you prefer that your children not inherit the money when they turn 18 or 21?
If you think giving a high-school senior a large sum of cash is a recipe for disaster, then you should consider a trust. The ability to delay inheritance was the main draw for drafting a trust for Laurie and Greg Wetzel, a New York City couple in their mid-30s with three small children. Should something happen to both of them, they decided, their kids will each receive half of their inheritance at age 30, and the remaining amount when they reach 35.“Your 20s are such a transitional time that we don’t want our children to have significant financial decisions to make,” Ms. Wetzel says.

Do you want the money to be used for a college education?
If you specifically bought life insurance so that there would be enough money to help fund college in the event of your death, then you’ll definitely want to delay the age at which your kids inherit your money. Otherwise, your child could think a red Ferrari is a better investment than a crimson Harvard diploma.

Would you like your children to have recourse if their money is mismanaged?
One more benefit of a trust that you don’t get with a custodial account is that a trust is a legal contract; the trustee has an obligation to follow your directions and act in a reasonable and prudent manner. If the beneficiary feels the trustee spent the money frivolously, he can demand an accounting, and can sue for reimbursement if the trustee acted improperly with the funds. It may be pretty tough to prove illegal or improper actions with a trust, but just the threat of a possible lawsuit can keep someone in line.

This advice is “spot on” from the Wall Street Journal. However, I disagree with the WSJ author’s comment that parents need not worry about signing “standard” forms. I think that’s lazy lawyering, terrible client service, and could result in a client’s false sense of security and, ultimately, a failed estate plan. When we design an estate plan for a client, that plan is customized to the client’s specific circumstances and goals. I would recommend that clients demand the same from any estate planning attorney they visit and walk (no, run!) away if that attorney is unable or unwilling to honor that request.