Paul Walker taught us about the importance of an Estate Plan
ON November 30th 2013, fans of the Fast and Furious series around the world were shocked to hear that Paul Walker had passed away in a car accident. At the time of his death, Walker was 40 years old, survived by his parents and a 15-year-old daughter and had an estate valued at over $25 Million.
Unlike many actors who pass away in Hollywood, Walker was smart enough to realize the importance of a Living Trust. An article printed on Forbes.com listed five estate-planning lessons to be learned from Paul Walker’s Estate.
1. Leave assets in a Trust
Having a Will is not the answer; it’s only a start. A Revocable Living Trust is probably the best tool for most families and individuals. Paul Walker understood the importance of a Trust and left his assets in his Living Trust. Having a Trust can help avoid the costly, time-consuming and very public probate process, provided that the Trust is drafted correctly.
The Trust will likely ensure that his young daughter is provided for throughout her life. You would not want a 15-year-old girl receiving a disbursement for $25 million in one lump sum. A properly drafted Trust would ensure that his daughter would receive disbursements throughout her life to pay for school, food, rent, health, college and fun.
2. Don’t wait to do your estate planning
Paul Walker created his estate plan in 2001 when he was 28 years old. It was around the time when the first Fast and Furious movie debuted. His daughter was approximately 2-3 years, old and Walker likely understood the importance on an estate plan to ensure that his family was taken care of, in case something were to happen to him.
As an attorney I meet young couples with children who have not yet considered setting up an estate plan. It’s usually because they view an estate plan as a tool used by older individuals or seniors who are closer to the end of their lives. Unfortunately, this is a sad misunderstanding of the important uses of an estate plan. Ask yourselves these questions:
1) What happens to your assets (home, bank account etc.) if you pass away?
a. The usual answer is, “my spouse will get everything”. What happens if your spouse passes away? What if you both die at the same time?
2) Who will take care of your children?
a. The usual answer is “their grandparents”. What happens if the grandparents pass away?
3) Who will make financial decisions on your behalf if you are incapacitated?
4) Who will make healthcare decisions on your behalf if you are incapacitated?
These are just a few of the questions addressed in a properly drafted estate plan.
3. Name guardians for minor children
Paul Walker’s daughter (Meadow) is a minor and that is why he named his own mother, as her legal guardian in his will. Although, Meadow’s mom is still alive and responsible for her care, Walker’s mom can take over the role if something were to happen to Meadow’s mom.
4. Fully fund your trust
Although Paul Walker did the right thing by creating his Trust at an early age, he failed in a key aspect. As Walker’s net worth grew, and as he acquired more properties throughout the years, it was his responsibility to ensure that all those assets were transferred into his Living Trust. Walker failed to put all his assets into his Trust. The fact that he did not fully fund the Trust requires his estate to go through a very public probate process to get the assets transferred to the Trust and disbursed by the language of the Trust.
You don’t have to have millions of dollars to make sure that you have funded your Trust properly. Every time you add more life insurance, make sure that you name your Trust as a secondary beneficiary. If you open another bank account, make sure that you transfer it into your Trust. If you buy a house, take title in the name of your Trust.
5. Keep estate plans updated
As Walker’s net worth grew, so did his tax liability. Walker created his original Trust almost 12 years prior to his death. In that period he amassed an estate valued at $25 million. Due to the fact that Walker did not keep his estate plan updated, and did plan for certain tax scenarios, his estate will likely owe close $5 million to the government by the time everything is finalized. With proper planning, most of that property could have been saved and passed on to his family, instead of government.
In order to ensure that your property passes on to your family instead of the government, make is a point to update your Trust every 2-3 years. Sometimes significant life altering events can trigger the need to update the Trust. Events such as: birth of child, divorce, grand children, acquisition of properties, will require updating the trust.