In many cases celebrities are a great source of estate planning lessons, and actor James Gandolfini, who died from a heart attack on June 19 at the age of 51, is no exception. In fact, I was surprised to learn that the actor, who is best known for portraying mob boss Tony Soprano in HBO’s hit series The Sopranos, left a very public 17-page Last Will and Testament that anyone can read. Why was I surprised? Because in Episode 44 of The Sopranos, the fictional Tony Soprano is advised by his fictional CPA to create a Revocable Living Trust to keep his estate plan away from “prying eyes.” Apparently in James Gandolfini’s case, art didn’t imitate life.
So, in reading the 17-page Last Will and Testament of James Gandolfini, which the actor signed on December 19, 2012, only a mere six months before his death, and also reading between the lines, below are six important estate planning lessons, both good and bad, that we can learn from James Gandolfini’s estate plan.
Estate Planning Lesson #1 – Revocable Living Trusts Give You Privacy and Avoid Probate
Tony Soprano’s fictional CPA was right – while a Last Will and Testament has to be filed with the local probate court, a Revocable Living Trust is a private document that doesn’t get filed with any court. Why is this important? Because probate court records are public documents, and so this means that anyone can go down to the courthouse and read your will. In James Gandolfini’s case, within hours of his will being filed with the New York Surrogate’s Court on July 2, 2013, a copy of it was readily available online, for free. Now everyone knows who is getting what from James Gandolfini’s estate: What Does James Gandolfini’s Will Say? On the other hand, a Revocable Living Trust would have allowed this information to remain a private matter that would only need to be revealed to the beneficiaries and Trustees who are named in the trust agreement. Aside from this, a properly funded Revocable Living Trust will avoid the very public probate process altogether.
Estate Planning Lesson #2 – Beneficiaries Need Lifetime Trusts
A significant portion of James Gandolfini’s estate (20% to be exact) is being left to his 9 month old daughter, Liliana Ruth Gandolfini. Under the terms of the actor’s will, Liliana will receive her inheritance outright at the young age of 21. While it is not known how much the infant will be inheriting, it is estimated that James Gandolfini was worth $70 million at the time of his death. Thus, it is likely that Liliana will be sitting on a big pile of money when she turns 21. Do you think it’s a good idea to give a 21-year-old a big pile of money? I don’t either. A better approach would be to set up a lifetime trust for the benefit of the minor beneficiary which contains checks and balances and allows the beneficiary to become a Co-Trustee at one age (but not at 21, perhaps at 25 or 30), and the sole Trustee at a later age (again, not at 21, but perhaps at 30 or 35). This will protect the beneficiary’s inheritance through young adulthood and will give them the chance to gradually learn the ropes of trusteeship as a Co-Trustee while serving together with a responsible adult Co-Trustee or corporate Co-Trustee.
Estate Planning Lesson #3 – Foreign Real Estate and Forced Heirship Require a Foreign Estate Plan
James Gandolfini’s will leaves his house and land located in Italy in a testamentary trust for the benefit of his son, Michael, age 13, and his infant daughter, Liliana. It really surprised me to see this listed in James Gandolfini’s will which was made in New York City and is governed by New York law. When I have clients who own real estate located in a foreign country, I advise them to consult with an attorney or other legal representative who practices law in the foreign country since many European and other countries have "forced heirship" laws that will supersede the terms of a Last Will and Testament. In addition, it is quite possible that a will drafted properly under U.S. laws will not be valid in a foreign country, and at the very least the U.S. will will have to be translated into a foreign language before it can be recognized in the foreign county, and this can be an expensive process. The better approach would be to have a Last Will and Testament drafted in a foreign language by an attorney or other legal representative who is familiar with the laws of the foreign country and then sign the will in accordance with the formalities required by the foreign country’s laws.
Estate Planning Lesson #4 – Wills Need to Be Updated
James Gandolfini signed his Last Will and Testament on December 19, 2012, which was only a few months after his daughter, Liliana, was born. He died six months to the day later. Updating his will after the birth of his daughter was a very smart move on James Gandolfini’s part, since prior to the birth of Liliana he only had one child, Michael, who was born during his first marriage. The new will allowed the actor to specifically include Liliana as a beneficiary of his Italian property and his residuary estate. While it is not known what his prior will said, it is quite possible that it would have excluded Liliana. I see this in my estate planning practice when a couple only has one child and they insist that they won’t have any more children. In this case the estate plan is written to include the only child and exclude any others (this is what happened in Anna Nicole Smith’s case). The better approach is to include children born after the will or Revocable Living Trust is signed because then the will or trust won’t have to be updated if additional children are in fact born after the document is signed.
Estate Planning Lesson #5 – Irrevocable Life Insurance Trusts (“ILITs”) Rule
In an affidavit that was filed in the probate court along with James Gandolfini’s Last Will and Testament, it was revealed that the actor had set up an Irrevocable Life Insurance Trust (or “ILIT” for short) for the benefit of his son, Michael, at the time he divorced his first wife, Marcella Wudarski Gandolfini, in 2002. The affidavit also stated that the ILIT owns a life insurance policy on James Gandolfini’s life in the amount of $7 million. This was a very smart move on the actor’s part since the life insurance proceeds will pass into the trust for the benefit of his son outside of his estate, meaning free from estate taxes. New York’s estate tax exemption is only $1 million and the federal estate tax exemption is only $5.25 million, so this one move saved James Gandolfini’s estate millions of dollars in New York estate taxes as well as federal estate taxes. (Of course, had the actor decided to leave the ILIT to his son and the rest of his estate to his wife, then his estate would not have owed any estate taxes due to the ILIT planning coupled with the unlimited marital deduction. However, it was his choice to include other family members, and so his advisors most likely came up with a plan to minimize the estate tax bill.) In addition, the terms of the ILIT are private (see Lesson #1 above), meaning that while we know his son, Michael, is the beneficiary of the ILIT and his sister, Leta Gandolfini, is the Trustee of the ILIT, we have no idea what the Trustee can do with the $7 million or at what age Michael will take control of the money.
Estate Planning Lesson #6 – Consider Multiple Executors and Trustees For Checks and Balances
James Gandolfini named his wife, Deborah Lin, his sister, Leta Gandolfini, and his attorney and friend, Roger Hager, as Co-Executors of his will and Co-Trustees of the testamentary trusts created under the will. This was another smart move on the actor’s part since he had children from different marriages and was on his second marriage. Naming Co-Executors and Co-Trustees provides checks and balances to insure that the best interests of all of his beneficiaries will be considered instead of that of just his son or just his wife and daughter. This also means that there will be no surprises for his ex-wife, Marcella Wudarski Gandolfini, who will be looking out for her son as his natural guardian. You can probably imagine the problems and court battles that could have resulted if James Gandolfini named his second wife as the sole Executor and Trustee.