Robin Williams teaches us a great lesson on planning.

Robin Williams teaches us a great lesson on planning.

 

The Five Things Robin Williams Did Right

by Sean O’Bryan, Michigan Estate Planning Attorney

People were shocked to learn of the death of Michigan native, and comic legend, Robin Williams this past summer.  For many, it was as if they lost a member of their  own family.  Williams developed a special bond with people of all ages.  Part of his genius was his ability to improvise.  But when it came to getting his estate plan in order, Williams planned ahead, utilizing the advice of the professionals around him, he established and funded a very solid plan.  In this article, we will look at the 5 strategies he used to protect his wife and children, avoid probate and taxes, fund his plan, and potentially leave a multi-generational legacy. 

Background

Robin Williams died August 11, 2014 at the age of 63.  He was married at the time of his death to his third wife, Susan Schneider.  Williams left behind three children, Zach, Cody and Zelda, from two different marriages.

Williams' father was an executive with Ford Motor Company.  Although he was born in greater Chicago, Williams moved to the Detroit area when he was 12, lived on a 20 acre farm in Bloomfield Township, Michigan, and attended Detroit Country Day School, where he was on the school's soccer and wrestling teams, and became class president.  At the time of his death, many have estimated his estate to be valued in excess of $50 million dollars.

Problem With Celebrity Estates

Most people with that kind of wealth have a large circle of advisors.  The problem is that many people ignore the advise they pay for.  There is also no question that just about everyone, no matter their profession or wealth class, loves to procrastinate when it comes to planning for the day when they are no longer there.  Very few people expect to die tomorrow. The result is that many plans fail to ever get done, are outdated or poorly drafted.  

Very few people expect to die tomorrow. The result is that many plans fail to ever get done, are outdated or poorly drafted.

The celebrity examples of recent bungled estate plans include James Gandolfini, Phillip Seymour Hoffman, Casey Kasem and Mickey Rooney.  These 4 estates alone will result in millions of unnecessary estate taxes and legal costs.  What is most disappointing is the conflict these estates have caused to each of these families.  James Gandolfini left a poorly drafted will, that picked puzzling beneficiaries, and will force some $30 million of his $70 million estate to be paid over to the IRS in taxes that could have been largely avoided.  Casey Kasem was drug around the country, both alive and dead, in a legal battle that pitted his children against his last wife.  Similarly, multiple marriages and children, coupled with poorly drafted estate documents, has the family of Mickey Rooney in an expensive legal battle.  As detailed last month, Phillip Seymour Hoffman’s family will be paying huge taxes they could have avoided, and his last 2 children aren’t even mentioned in his last will.

Zach, Cody, Marsha Garces (his ex-wife), Zelda and Williams

Zach, Cody, Marsha Garces (his ex-wife), Zelda and Williams

The 5 Things Robin Williams Did Right

That brings us to Robin Williams.  Williams took the time to establish and properly fund a living trust, and his 3 children are all included. 

1.    Avoided Probate

Probate in California, where Williams last resided, is particularly long and costly.  Robin Williams' heirs will be able to avoid this process altogether.  Probate is public.  A living trust stays private. 

2.    Children Protected

Because Robin Williams' trust is private, it is hard to know exactly what is contained in it.  But various reports suggest that Robin Williams’ 3 children, Zach, Cody and Zelda, will each receive a portion of their inheritance in 3 increments, at the ages of 21, 25 and 30.  Further, a trustee has been appointed to invest and manage the money left to each child.  This trustee has been given the discretion to provide for the health, education and support of each child.

Further, a trustee has been appointed to invest and manage the money left to each child.

Now, those ages may not be sufficient for each child, and it is hard to speculate if Robin Williams’ trust gave the trustee the added authority to hold back any of these distributions if the child isn’t quite ready, or develops any dependency issues.  Likewise, a trust can protect a child’s inheritance if they end up in a troubled marriage.  

Susan Schneider (his 3rd wife) and Williams in the year before his death.

Susan Schneider (his 3rd wife) and Williams in the year before his death.

3.    No Estate Tax

Williams maximized his estate tax exemption, valued in 2014 at just above $5.3 million dollars, removed his real estate from his taxable estate (see point 5 below) and allowed the balance to flow into a spousal trust using his wife’s unlimited estate tax exemption.  This is a plan that resulted in no estate tax liability for the Robin Williams estate, in sharp contrast to fellow actors Hoffman and Gandolfini, who each paid tens of millions in federal and state estate taxes.

4.    The Trust Appears Funded

Many times, people make the mistake of creating a trust, but never completing the funding.  This means the real estate deeds are never prepared or signed to move their real estate into the trust.  They also leave financial accounts in their own names rather than making arrangements with their bank or financial institutions to have accounts opened in the name of the trust.

It is probable that future grandchildren, who never met Williams, will be recipients of his work.

Additionally, Robin Williams had one of the most prolific careers in entertainment of any recent celebrity.  His estate will be receiving royalties from the continued use of his work for generations to come.  The primary trust will most likely receive these royalties, and they will be split among his heirs.  It is probable that future grandchildren, who never met Williams, will be recipients of his work.

No matter how modest your estate might be, having the right documents in place, and your financial house in order, can make a huge difference to your heirs if something happens to you.

5.    Williams Also Used a Special House Trust

Robin Williams also created an irrevocable real estate trust.  This trust he named the Domus Dulcis Domus Holding Trust, which actually translates to Home Sweet Home in Latin. Both his home in Tiburon, California, valued at $6 million, and his 653 acre ranch in Napa, valued at close to $30 million, were placed in the trust and will protect the family from estate taxes on the properties and provide them with important equity in the properties. If these properties were not held in this special irrevocable trust, a large portion of the value could be characterized as part of his personal estate and thus subject to millions in estate taxes.

Things He Could Have Done Differently 

No plan is perfect. This includes the steps Robin Williams took.  It is hard to be critical, because besides the leak of some portions of the estate plan, much remains private.  If I was making his plan, I would have done 3 additional things that are not apparent from the information we know.  

First, I would have gone beyond the age restrictions on his 3 children.  21, 25 & 30 still means that each child receives their full share of a $50 million estate by the age of 30.  I think that is too young.  I would have at least held back a portion for later in life.  

You hate to see large sum of money fuel a life of addiction, rather than be available for treatment

Second, as I indicated earlier, there is no indication that the appointed trustee has the authority to restrict any distributions if the trustee feels the child has dependency issues.  Robin Williams had a long history of depression and alcohol dependency.  These issues tend to be genetic.  I would have given the trustee some discretion to withhold inheritance if these issues arise in his 3 children.  While it could be problematic to place this power in one trustee's hands, he could have created a panel that included each child's mother.  You hate to see large sum of money fuel a life of addiction, rather than be available for treatment, or as an incentive to avoid certain behaviors.

Lastly, I would set aside a portion for charities and future generations.  It is possible this was done privately.  But for someone who was so generous with his time and support of various causes, his trust should reflect that.  The size of the estate, and the potential future royalties are too much for 4 people to have complete control over.

But these relatively minor issues shouldn't let anyone think that Robin Williams, or his advisors, didn't do an awful lot in providing the extensive plan they did. Again, when contrasted against the Hoffman, Rooney, Kasem & Gandolfini estates of the last year, Robin Williams got it mostly right.  

Bottom Line

Robin Williams’ death was certainly a tragedy that transcended generations.  People simply loved this talented comedic actor, who seemed everywhere in our popular entertainment.  The fact that his death was tied to a long battle with depression, and was at his own hands, made this loss ever harder for many people to understand.  His family was certainly devastated.  But he did one thing remarkably well - he planned for them so that when he was gone, they wouldn’t have legal battles and tax problems.  That is a gift every bit as important as the many lessons his various acting roles taught us.

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