This is part three of a three-part series
There are so many things to consider when you begin planning your estate. You want to make sure that what you leave behind will be going to the people you want it to go to, in the amount that you have specified. You want things to run smoothly after you’re gone, and to know that you have provided for the people you love.
This is certainly the intention that most people have when they begin writing a will or setting up trust funds – both of which are extremely important elements of the estate planning process. But it’s also important to think carefully about the possible pitfalls of the plans you’re making. It’s easy to make a mistake that could cost your loved ones almost everything you intended them to have.
Spare Your Family An Expensive Mistake
One high profile example of this kind of mistake came to light after 51 year old Sopranos star, James Gandolfini died of a sudden heart attack while vacationing in Rome with his wife. Gandolfini had a will, which is admittedly a step ahead of several other celebrity estate debacles we have discussed in this series, but beyond that, had failed to structure his $70 million estate in a way that would keep it from being subject to massive federal and state taxes. As a result, by specifying that 80 percent of his sizable estate would be left to his sisters and infant daughter, he left that portion of his estate available to be hit with a brutal 55 percent estate tax.
This could have been avoided in part by placing the money in a marital trust, which would have allowed his wife access to that part of the estate without taxation during her lifetime, and then be placed in a trust passed to the inheritors that she chose.
Instead, almost half of Gandolfini’s estate worth – an estimated $30 million – wound up being paid in taxes rather than going to support his family.
Research Your Estate Planning Options
Another example of what can happen when you not only fail to keep your will and estate wishes legally up to date became apparent after the shocking death of respected and gifted actor, Philip Seymour Hoffman in 2014.
When Hoffman’s will was filed, it was found that the will was last updated ten years prior to the actor’s death – and before the birth of two of his three children, daughters Tallulah and Willa, who are not listed in the will at all.
Hoffman’s will did leave the entirety of his estate to the mother of their three children, but because the couple were not married, the estate came with a huge estate tax bill. This was all due to Hoffman’s decision not to set up trust funds for his children, fearing that leaving them access to so much money might lead them to a life of wealthy laziness. But the actor failed to consider the possibility of setting up trusts that contained stipulations about how much, at what age and under what conditions his children could access the funds provided for them.
Start Asking Questions Now, So There Are No Surprises Later
These two heartbreaking examples of poor estate planning both could have been avoided if the time had been taken to research the options that are available for individuals trying to provide in a responsible way for the family members they could be leaving behind. There are several ways to customize your intentions when planning your estate, and by not just creating a will, but also ensuring that it is legally updated every year or two, you could be saving your loved ones not only heartache and hassle, but a hefty estate tax as well.