Most of us are shocked and saddened to learn of the deaths of beloved Hollywood actors, too often cut short in the prime of life.? But other than perhaps seeing eye-popping statistics evidencing how much money some of these actors are worth at the time of death, we rarely take time to reflect on the reality that the situation provides those of us with more modest means to actually learn from the mistakes of these beloved icons.? Take, for example, the estate planning (term used loosely) for the following Hollywood icons:
James Gandolfini, famous for his role as Tony Soprano on HBO series The Sopranos, who died suddenly at the age of 51 with an estate estimated at $70 million. In a New York Daily News interview, attorney William Zabel referred to Gandolfini’s will as a “catastrophe” in part, because approximately 80 percent of his estate was left unprotected against estate taxes.? After some specific bequests to various friends and relatives, Gandolfini divided the remainder of his estate between his wife (20 percent), his two sisters (30 percent each) and his daughter (20 percent).? By directing only 20 percent of his estate to his wife, Gandolfini missed out on potentially unlimited estate tax gift deductions to a spouse.
Earlier this year, the critically acclaimed actor, Philip Seymour Hoffman died at the age of 46.? Hoffman had created a will and a trust in 2004 which provided for his oldest child, giving the remainder of his estimated $35 million estate to his longtime girlfriend with whom he also had children.? Unfortunately, because Hoffman and his girlfriend never officially married, he too missed out on potentially unlimited estate tax gift deductions to a spouse and his estate taxes between federal and state may well be over 40 percent of his total worth.
Paul Walker, famous for his role in the Fast & Furious movies, who died at the age of 40, was worth an estimated $25 million.? Walker, it seems, attempted to protect his assets and provide for his daughter through establishment of a will and a trust.? Walker, however, did not fully fund the trust during his lifetime, so the remainder of his estate passes to the trust by virtue of a pour-over will, which has the same effect and result as if he had funded the trust, but the will must be filed for probate, making the will, and his private affairs public.? Had he fully funded the trust, he would have left nothing in his estate to pass, and he would have avoided the probate process.
So what lessons can be learned from these Hollywood tragedies?? For starters, it is imperative to have estate planning, including wills, trusts and other documents appropriate for your circumstances.? And, it is equally as imperative to have estate planning documents updated and reviewed as circumstances change. The circumstances described above would have been far worse without any estate planning.? At a minimum, estate plans should be updated at least annually so as to avoid the mistakes of letting estate planning wither and become outdated when life circumstances change, such as having children, getting divorced, getting married, family and friends passing, acquisition or sale of substantial assets, and change in income and/or earning potential.
While many of us may not need to worry about estate taxes as Colorado does not have inheritance tax and the federal exemption was increased as of January 14, 2014 to $5.34 million, it is still important to develop an estate plan that directs the maximum of the estate to the desired beneficiaries and to devise a plan to avoid unnecessary costs, hassles, and delays.
These unfortunate deaths also teach us that it is never too early to plan.? Even single people who never married and have no children still need to consider what will happen to their estate when they pass and yes, there may be consequences and distributions never intended.? A simple will and/or trust can, at a minimum, ensure what little one might possess still goes where one desires.
SMART TIP:? Estate planning is for everyone regardless how much or how little you may be worth.? The cost of not planning ahead can be painful.? To ensure that you and your family are properly prepared and protected, we encourage you to consult with an attorney, estate planner, financial planner, and other professionals to establish your estate plan now.