One key estate and trust lessons is in store in light of the late Robin Williams' trust documents ending up all over the Internet: Privacy is everything.
News of Mr. Williams' death at age 63 hit the web Monday evening. It didn't take long for details of his personal life, particularly the trust documents he had set up for his three children — Zachary, 31; Zelda, 25 and Cody, 22 — to wind up in numerous tabloids and gossip websites.
Indeed, the documents suggest that Mr. Williams had wanted to provide for his children, even as adults, and do so responsibly. Staggered distributions were to be made to the beneficiaries: One-third of the principal of the beneficiary's separate trust would go to the child at age 21, one-half at 25 and the remainder of the principal at age 30, according to the documents. Prior to age 21, the beneficiaries were eligible for discretionary income payments until age 21 for their “health, education, support and maintenance,” per the trust paperwork.
Mr. Williams' publicist, Mara Buxbaum, noted that these are two old irrevocable insurance trusts that are not part of the actor's current estate or estate plan.
Nevertheless, the glaring issue here is that trust documents are supposed to be private. The advantage that trusts have over a will is that a will goes through probate court, where it's in the public domain.
So how did private trust documents wind up being fodder for the tabloids?
A peek at the links above shows that Joel Faden, a trustee of both trusts, petitioned the Superior Court of the State of California in Los Angeles to appoint a successor as co-trustee after Gerald Margolis, the individual who was originally designated, had passed away in 2008. As noted in the documents for the petition, “The trust instrument is silent on the occurrence of the death of a co-trustee and the failure of such trustee to designate his or her successor.”
The courts — and the public disclosure of the trusts — could have been avoided with a little more planning. Enter the use of trust protectors: an attorney, accountant or even a trusted friend who has the power to appoint or remove a trustee.
“A trust protector can step in and name a successor, or a successor co-trustee in this case, so that you wouldn't need to petition the court,” said Charles Douglas, editor of the National Association of Estate Planners and Council's Journal of Estate and Tax Planning.
Trust protectors are becoming more popular in the estate planning context as clients become more aware of the benefits of decanting a trust — a strategy that often involves moving it to another state with more favorable tax rates, he added.
Decanting the trust can also be used to avoid the courts when making updates to a trust, noted Bernie Kent, chairman of Schechter Investment Advisors. This involves distributing the assets from one trust into another with better terms.
Be aware, though: Not all states permit trust protectors, and not all states have decanting statutes.
Another way to keep a trust out of the newspapers: blind trusts. Generally, trusts are named for the people who are setting them up. True to their name, blind trusts give trustees — ideally, not a family member — full discretion over the assets within. The biggest benefit: It's very hard for the public to trace the trust back to the person who owns it. They're a favorite tool for moneyed politicians who don't necessarily want all of their investment and estate planning details to escape into the ether.
“It's blind in that it's more hidden,” said Mr. Douglas. “Celebrities are big on blind trusts. It adds to that layer of privacy.”
Finally, if a trust is already in court, then the privacy afforded to the people involved may depend on the jurisdiction. “It's not necessary for the trust documents to be a part of the record,” Mr. Kent said. “Some courts keep the whole proceeding confidential, and you can petition — if they permit it — to have the whole thing confidential or to keep the trust documents out of the public eye.”