Todd Cordell, Senior Vice President, Trust Director, The Bank of Tampa
Developing an estate plan is an important piece of a comprehensive financial plan. Estate plans are instructions for what happens to a person’s assets when they pass away. They can also provide instructions on how a person’s assets should be used for their benefit, or others, while they are living, but incapacitated. Constructing a complete estate plan takes time and expertise. It can be an exhausting exercise, as thinking about one’s own mortality can be a difficult subject. When complete, the experience can be rewarding and can provide a sense of relief.
Estate plans are not exciting until something goes wrong. This is especially true when it comes to celebrities. Those outside of the industry may only hear about an estate plan from celebrity estate plans gone awry, and unfortunately, there is no shortage of examples. Michael Jackson, Heath Ledger and James Gandolfini are only a few of the celebrity estate plans that ran into trouble. When problems arise, there are disruptions and delays that can lead to additional costs. Incomplete estate plans can also result in unintended heirs or beneficiaries. When a celebrity is involved the delays, costs and potential for unintended heirs increase due to the wealth at stake.
Naming a Corporate Trustee and conducting a pre-acceptance review may have identified the issues that occurred in more recent and famous estate plans gone wrong:
- Michael Jackson – He had a will and a trust, but he never funded the trust. His entire estate then went through probate. Part of the pre-acceptance review conducted by bank trust departments and trust companies includes a review of assets. Along with providing a copy of a trust, a statement of assets that is titled in the name of the trust should be part of the review. In Michael Jackson’s case, he and his advisors would not have been able to produce a statement of assets titled in the name of his trust. The lack of a statement of assets is the identifier that the trust may not be funded. The issue could have been corrected during Michael Jackson’s lifetime, as opposed to being discovered after he passed.
- Heath Ledger and James Gandolfini – Both had estate plans, but they were outdated. In Heath Ledger’s case, he created his will before his daughter was born. There were no updates to his will prior to his passing and the result was that his daughter did not directly inherit any part of his estate. Periodic reviews of Heath Ledger’s estate plan could have identified that his daughter was not named, and changes could have been made before he passed. James Gandolfini’s estate plan was never updated to take advantage of changes to the tax laws resulting in one-half of his estate being paid to the IRS. Periodic reviews of an estate plan is necessary to preserve the goals of the plan. When a Corporate Trustee is named as a Successor Trustee, it generally will keep copies of the documents on file. Those files can be periodically reviewed when certain life events take place or when changes to trust and tax laws occur. If circumstances, such as the birth of a child or changes to the tax laws occur, the estate plan can be adjusted during the owner’s lifetime and possibly avoiding unintended results later.
Unfortunately, there isn’t one simple solution to prevent all estate planning problems. There are, however, estate plan reviews that can help identify or eliminate common issues. Nominating a Corporate Trustee (bank trust department or trust company) to act as the Executor and/or Successor Trustee is one way to get a comprehensive review of an estate plan, and it brings with it several benefits including expertise and experience, access to various resources for tax preparation, investments and trust account systems and the duty to be objective. One less obvious benefit is the pre-acceptance process used by bank trust departments and trust companies. Banks and trust companies prefer to review estate plans that have named them as an Executor and/or Successor Trustee. The review is necessary to help identify any potential language or instructions that may not be clear and difficult to administer. If there is an issue, the bank will request that language be amended to provide more clarification. In addition, if one has a good relationship with their trust team, periodic reviews of the estate plan can be conducted. The ongoing review can help identify portions of an estate plan that need to be updated due to changes in circumstances or changes to law. Establishing a relationship with the Corporate Trustee provides clients with an extra set of eyes, ears and expertise potentially resulting in the identification issues in their estate plan.
About the Author
Todd W. Cordell serves as trust director at The Bank of Tampa. With a career spanning nearly 29 years, Todd has extensive knowledge in wealth management and trust. The majority of Todd’s career has been in community bank environments where he focused on building relationships with clients and internal banking partners. He most recently served as senior vice president/senior trust officer for Bank of America, N.A./Merrill Lynch in Chicago. Todd obtained his Juris Doctorate from DePaul University College of Law.