Making your estate plan a private affair

I recently read a New York Times article that was critical of the estate plan of the recently deceased James Gandolfini.  In particular, the article expressed surprise that Mr. Gandolfini had not used a common estate planning device called a “pour over will” that would have made his estate plan private.  These types of wills leave an estate to an already established trust, called a “revocable trust.”  The trust, in turn, details where the decedent’s estate goes after his or her death.  A will is a public document, available for anyone to see.  A trust document is not publicly available; its contents are knowable only by the grantor (the person who makes the trust), the trustee (the person designated by the grantor to manage the trust), and the beneficiaries (the people who eventually recieve the assets of the trust).

You can immedately see the advantages of a pour over will.  You don’t have to be a Hollywood star to want a little privacy, even in the afterlife.  There are other, less obvious advantages to a pour over will as well.  If the testator is disinheriting a person, and doesn’t want the disinherited person to know anything of the estate plan, the pour over will accomplishes  this goal.  Revocable trusts can be easily changed if the testator changes his or her mind, whereas will changes require formal witnesses, notaries, etc.   Because most of the assets are already in the revocable trust at the time of death, probating a pour-over will is generally faster and less expensive than probating a “regular” will.  If a person owns a real property in another state, placing that property in a revocable trust may avoid ancillary probate proceedings in that state, definitely a time and money saver.

Typically, a grantor funds a revocable trust during his or lifetime by re-titling assets owned by the grantor into the name of the trust.  These assets are considered property of the grantor for purposes of income and estate taxes, so there are not typically any gift or estate tax savings associated with funding a revocable trust.  The pour over will then transfers any remaining assets to the revocable trust upon the testator’s death.  For testators with minor children, the pour over will also names a legal guardian for the minor children, an important component of any estate plan.

Whether a revocable trust and pour over will is the right estate plan for a particular person will depend on the value of the estate, the types of assets in the estate, and the person’s overall wishes.  As with any estate plan, a tax attorney or certified public accountant should be consulted to ensure that there are no unintended tax consequences.

 Melanie Levan is a shareholder of Posternock Apell, PC.  She concentrates her practice in trust and estates, commercial real estate, land use, and business law