Two high-profile estates in the news this year –– Robin Williams and Philip Seymour Hoffman –– had similar intentions but dramatically different outcomes. The difference: The prudent use of revocable trusts. With foresight and planning, trusts are relatively simple to create.
Philip Seymour Hoffman had three children with Marianne O’Donnell, a woman he treated like a spouse but never married. He apparently did not believe in marriage. He also did not believe in making his children “trust fund kids,” so he did not create revocable trusts for them. Instead, he left all of his money to Ms. O’Donnell. Because Hoffman and O’Donnell were never married, Hoffman’s $35 million estate had to pay $15 million in taxes. What’s more, by going through probate, specifics of his estate became public. A revocable trust would have kept matters private.
Robin Williams took the trust route with his estate, estimated to be approximately $50 million. He created one trust for his three children, enabling them to inherit portions at age 21, 25 and 30. The second trust held his real property and will presumably go to his wife.
Not everything was perfectly executed in Williams trusts, however. When a co-trustee died in 2008, an attorney had to petition the court for a replacement, thus making the details public. Had the original trust named someone with the power to appoint a successor trustee, the trust would have stayed private.
These lessons are simple, and apply regardless of the size of your estate:
• Consider the value of trusts to retain privacy and reduce taxes.
• Be sure to keep all estate documents updated. Failure to do so can be expensive.