The Duke, Bing, and Groucho – Lessons in Estate Planning
By looking at the lives and deaths of three famous men, you will learn an important lesson for establishing your own estate plan. In each case, a trust would have solved a number of problems.
John Wayne did not have a revocable living trust. Therefore, his $12,788,865.06 estate became a public record at the time of his death. The exact nature of his assets and to whom they passed can be reviewed at the county courthouse by anyone. Wayne’s probate took more than six years. The statutory probate fees for the attorney and the executor of the estate were in excess of $275,000 (in the early 1980s). All of this could have been avoided with careful estate planning.
Bing Crosby had been through a similar situation when his first wife, Dixie Lee Crosby, died in the 1950s. He did not have enough cash to pay the death tax, so he had to sacrifice a number of his assets to pay it. In addition, he was very upset by the publicity Dixie Lee’s death generated. Publicity about her estate meant publicity about his estate because of California’s community property laws.
When Crosby later planned his own estate, he wanted to achieve privacy. He did not want anyone to know the size of the estate or where it was going. He succeeded because he had a “private will.” Crosby had established what we now know as a revocable living trust.
A “living” trust is one that is established while you are alive and becomes irrevocable when you die. It allows your assets to be transferred to beneficiaries without going through probate.
The living trust is also “revocable.” This means that you can change your mind at any time regarding the assets transferred into the trust, the assets removed from the trust, the trustee(s) of the trust, or the beneficiaries of the trust. You can amend any portion of the trust at any time or revoke the entire trust.
Testamentary trusts, by contrast, are established by your last will and testament and don’t become effective until your death. Testamentary trusts go through probate. Both testamentary and living trusts can save death taxes, but the living trust avoids the agony and expense of probate.
A living trust can avoid the Groucho Marx problem. Groucho got caught in a conservatorship when he became senile. Conservatorships, called guardianships in some states, are proceedings whereby the state takes control of an individual’s assets via the court system because that individual is not able to manage them. These conservatorship hearings are not just for the aged, but also for those who have premature heart attacks, strokes, and other health problems that prevent them from managing their own affairs.
Conservatorship competency hearings are usually embarrassing for the entire family. A court investigator will talk to the elderly individual, the family must testify in court, and a judge makes the decision as to whether the individual is competent to manage his or her own affairs. If not, the court will appoint someone to handle them. A court-appointed manager must post a bond, which is expensive and paid for out of the individual’s assets. The manager must also report to the court how the money is being spent. These reports are done on a regular basis, prepared by accountants, and presented by attorneys. They are expensive and public. Friends, family, neighbors, and strangers have access to the details of the ill person’s financial portfolio.
You can avoid the Groucho Marx problem by establishing a living trust (along with the appropriate power of attorney) stating that when and if you get to the point where you can no longer manage your own affairs, you want your spouse, friend, or a professional to manage them for you. Make the choice yourself. Don’t wait until someone else has to make it for you.
About the Author
D. Steven Yahnian has been a member of the California Bar and a practicing Attorney since 1980. He has also been a California CPA since 1984. Mr. Yahnian also holds the CFP® designation.
Mr. Yahnian practices in the following areas of law through YAHNIAN LAW CORPORATION:
- Estate Planning & Administration
- Asset Protection Planning
- Tax Planning, Tax Debt Resolution and Tax Litigation
- Business & Corporate Law and Planning
- Real Property Law & Planning
As a CPA/CFP, Mr. Yahnian also has a separate accounting and tax return preparation practice called DSA ACCOUNTING.
Mr. Yahnian is a California State Bar Certified Specialist in the following
• Taxation Law and
• Estate Planning, Trust & Probate Law.
Mr. Yahnian received a B.S. degree in Accounting from USC, a J.D. from Loyola University of Los Angeles School of Law and an LL.M. in Taxation from New York University Law School. He also has a Certificate in Taxation from UCLA (with distinction). Mr. Yahnian also has an MS in Taxation* from UCLA (with Distinction).