Hollywood is a dreamscape where unknowns venture to become movie stars and millionaires. Few make it and unfortunately, those lucky few who are catapulted into stardom often condemn their loved ones to near-eternities of easily avoidable litigation.
More often than not, with millions of dollars raining down upon them, actors often become casualties of sloppy estate planning, creating untold stress and anxiety for their would-be heirs.
Here are five of the most epic Hollywood estate planning fails and the lessons to be learned from them. Let’s explore this boulevard of broken succession plan dreams…
1. Phillip Seymour Hoffman
Phillip Seymour Hoffman was one of Hollywood’s most beloved and versatile actors. He dazzled audiences with a variety of performances, ranging from sycophantic Brandt in “The Big Lebowski” to the glorious novelist in “Capote,” a role that earned him an Oscar for best actor. Unfortunately, like so many talented artists, the man had his demons as well, estate planning being no exception.
When Hoffman succumbed to a drug overdose in 2014, he left his entire $35 million estate to his partner and mother of his 3 children, Marianne O’Donnell. The actor had rejected his accountant’s advice to create trusts for his children. By not marrying Ms. O’Donnell, Hoffman created a $15-million tax burden, which accompanied the transfer of his estate to his beneficiary.
Had Hoffman and O’Donnell been married, the estate would have been transferred tax-free. Also, by not setting up a revocable trust, Hoffman doomed his estate proceedings to probate, which is inefficient and expensive, and worst of all, exposes sensitive family financial information to the public.
2. James Gandolfini
Nobody will ever forget Tony Soprano, the imposing Mafioso, who enthralled audiences for years on the iconic HBO show, “The Sopranos.” And when Gandolfini died of a heart attack at the age of 51, nobody would have thought the IRS would end up the biggest beneficiary of his estate, which was estimated to be worth $70 million.
Gandolfini divided the estate between multiple beneficiaries, including his friends, two sisters, his son from a previous relationship, and his most recent wife. By not setting up a marital trust, Gandolfini missed a golden opportunity to establish an unlimited estate tax deduction for gifts made to a surviving spouse. As a result, the IRS pocketed $30 million from the actor’s demise that could have gone to his heirs.
3. Marlon Brando
Marlon Brando is one of the greatest actors in the history of the craft. From “The Godfather,” and “On The Waterfront,” to “Apocalypse Now,” Brando’s credits read like a filmography of cinematic legend.
But Brando was also notoriously eccentric. He rejected an Oscar because he felt that Hollywood had mistreated Native Americans in films. This was a quality that translated into estate planning disaster. By 2009, five years after his death, Brando’s estate was already involved in more than two dozens lawsuits!
The main problem was that even though Brando had drafted a will, his ultimate intentions remained uncertain. A number of suits involved claims by current and past employees who objected that Brando had promised them particular assets, none of which were mentioned in his formal estate plan.
4. Heath Ledger
Like Hoffman, Heath Ledger was another bright star who succumbed to the demon of substance abuse. The Australian actor and director died of accidental overdose of prescription drugs in 2008, just a few months after filming his performance as the Joker in The Dark Knight.
Ledger did a terrible job providing for his legacy. He didn’t update his will following the birth of his daughter, Matilda Rose. When he died in his New York apartment at age 28, all of his assets went to his parents and three sisters, in accordance with U.S. law. This left Matilda and her mother without any claim on his estate.
However, since Ledger was an Australian citizen, his daughter’s guardians have filed for probate in the West Australian Supreme Court. Their goal is for a judge to carve out some of Ledger’s fortune, which was mostly held in Australian trusts, and is likely to be worth up to $20 million.
This transference has led to significant family infighting, before the elder Ledger made a promise to financially support his granddaughter.
5. Paul Walker
The star of “The Fast of The Furious” series was once one of Hollywood’s hottest actors, capable of making female fans swoon with a single steely blue glance. And when he died in a tragic racing accident in 2013, the whole calamity seemed tragically apropos.
But, it can be argued the succession strategy was equally tragic. The actor erroneously used a pour-over will to transfer his $25-million estate into a trust for his teenaged daughter. The pour-over structure automatically made the wealth-transfer a public affair. Also, Walker failed to update his will for twelve years, so his current intentions might have been inaccurately reflected.
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An interesting article, I would like comment on the family consequences in some of these structuring disasters. But all lawyers accountants and financial services types seem to set store by structure and strategy but still stuff up the operation when the patient dies on the table.