A new look at the starlet’s estate planning is providing advisors a key lesson in better servicing clients.
Marilyn Monroe died in 1962 at the age of 36, leaving her personal effects to acting coach Lee Strasberg and indirectly to his third wife -- who Marilyn never knew but who inherited those valuable goodies when Strasberg passed.
But take note, advisors: Had Monroe had the right advise, she'd have opted for a testamentary trust instead, says Peter Townsend, the principal of Townsends Business & Corporate Lawyers.
“In hindsight,” he says, “Monroe may have been better served to place her assets in a testamentary trust so she could have provided for Strasberg during his life as a beneficiary of the trust, and also have had some say as to whom would be the trustee and subsequent beneficiaries of her estate.”
“Not considering debts owed on your property, not providing for dependants and not considering a trust for estate planning are some mistakes made in wills by the rich and famous,” warns Townsend.
Entertainer Sammy Davis Junior reportedly left his estate to his wife and was generous in giving gifts to his friends. But when he died in 1990, he also left behind debts and a massive tax bill.
The legacy of the Davis estate serves as an example that tax is due and payable before distribution of an estate, and also that a beneficiary inheriting property could also be unintentionally liable for debts owing on that property.
For example, leaving one child the family home and another the holiday home may, on the face of it, be an equal distribution. Unfortunately, the holiday home would likely be liable for capital gains tax, so the second child would also ‘inherit’ the tax bill, thus making the distribution unequal.
This also applies to mortgages on property. Unless the will specifies that debts are to be paid out before the distribution of assets, beneficiaries who inherit a mortgaged property also inherit the debt.
Wealthy US businesswoman Leona Helmsley left $12 million in trust for the care of her dog, Trouble, but nothing for two of her grandchildren. A subsequent claim on the estate resulted in Trouble’s trust fund being reduced to $2 million and a settlement of the rest of the trust to her two grandchildren.
Leaving someone out of a will or leaving them only a small amount does not necessarily preclude that person from making a claim on an estate. The division of Helmsley’s estate is indicative of what a court could also do if a dependant was not adequately provided for in an estate.
Among other things, the court takes into account the size of the estate, the degree of dependence of the applicant and the moral obligations of the deceased to the applicant when deciding a claim.
It is important to document and communicate the reasons for decisions in allocating property in the will to at least give the Court some guidance of intentions.
