The New York Times recently had an articleabout Sopranos star James Gandolfini who died in Rome in June. The objective of the article was to assess the Gandolfini Will which disposed of assets worth possibly as much as $10 million, including a co-op apartment in New York. Cash bequests of less than $2 million were to be made to friends and relatives, and the remainder was to go to his sisters, his wife and his baby daughter designated as percentages. His daughter’s share was to be held until his daughter turned 21 when she would receive it outright.
Gandolfini’s home in Italy was to be divided equally between his son and his baby daughter, with each receiving the property at the age of 25, but the Will left no money for upkeep and taxes. The article pointed out that Italian law controls the disposition of real estate, and Gandolfini was only able to dispose of 25% of the property, with the remainder going in equal shares to his wife and children.
He left his son the right-of-first-refusal to purchase his New York co-op (identified by street address), but the decision to purchase or not would be made by the trustee controlling his son’s inheritance until he turned 18.
Perhaps one of the lessons to be taken from the article is the importance of privacy. Wills are public documents, and once they have been filed, anyone who pays the nominal copying cost can obtain a copy. Jackie Onassis, who died in 1994 used a Will as her estate planning vehicle, and within two months of her death, Money Magazine published a summaryof the provisions of the Will. (You can read the whole Will here).
It is possible to preserve privacy by opting to have an estate plan based on a revocable living trust. The creator of the trust or “grantor” transfers title of all real estate, bank and non-retirement accounts into the name of the trust. Distribution of the trust assets are controlled by the terms of the trust, not the Will. The trust does not have to be filed with any court, and therefore its terms remain private.
Because the assets are no longer in the sole name of the grantor, they are not subject to probate.
There still is a Will, known as a “pour over” will. The short document declares that the maker of the Will has created a revocable trust, and that it controls disposition of the maker’s worldly goods. The Will also directs that any assets that were not transferred to the trust should be “poured over” to the trust; i.e. handled in the same way the trust dictates. The Will also authorizes the Executor to work with the successor trustee in paying just debts, the expenses of the last illness and burial and in making tax elections, duties generally accorded to the Executor by law.
In addition to preserving privacy, a revocable living trust containing the bulk of the grantor’s property will avoid the need for probate, the court-supervised process of transferring legal ownership of assets to the heirs. Probate is not difficult in Virginia, it does take time, usually at least a year, to conclude, and requires meticulous record keeping of all the assets, every transaction and the final disposition to the beneficiaries. The court’s interest is in ensuring that the probate estate is passed to the beneficiaries as the Will dictates, and that the executor has accounted for all income and expenditures. Many executors opt to hire assistance from attorneys and accountants, whose fees, along with court fees, explain why probate expenses are usually 3-5% of the gross estate.
A revocable trust is also a tool for incapacity planning, in that the plan is laid out for any successor trustee to follow, and the successor(s) are identified and authorized to step into the shoes of the grantor when needed. Banks and investment companies sometimes baulk at accepting a durable power of attorney, while trustee succession is an accepted practice.