Acclaimed star of the Fast & Furious series, Paul Walker, died in a tragic car crash at age 40. His estate was thereafter opened in the Santa Barbara County Superior Court and it was revealed that his assets were valued at approximately $25 million. Further investigation revealed that planning mistakes were made as the result of fast and furious estate planning and which would inevitably result in unnecessary costs and inefficiency in administering the estate.
Lessons to Avoid Fast and Furious Estate Planning from the Paul Walker Estate
With large celebrity estates like that of Paul Walker, there are often a few lessons to be learned in retrospect, and I’ve narrowed it down to 5 Lessons that are especially appropriate for younger adults with children.
1. Create a Living Trust for Estate Assets
I credit Paul Walker for having created a Living Trust. Although it is not known why he did so at the young age of 28, I speculate that his manager or financial advisor encouraged him to do so. As I’ve talked about in prior articles, a revocable living trust is generally highly effective for many purposes which include avoiding probate, planning for disability and creating asset protection for beneficiaries. Essentially, the revocable living trust creates a way to title your assets, outside of your own name, in order to allow them to be held and pass to beneficiaries upon death without probate. Probate is a court driven process for re-titling assets and settling creditor claims that can be very time consuming and very expensive in terms or attorney’s fees.
2. Fully Fund Revocable Living Trust
In order for your revocable living trust in Florida, and most other states, to help you avoid probate, it must be properly “funded”. Funding your Living Trust means taking the steps necessary to change the title on various assets so they are recognized as being held in the Trust and not individually. There are certain types of assets such as real estate and bank accounts that can be re-titled directly, and other assets such as IRAs that may require a change in beneficiary designations if the circumstances dictate. All of these “titling” actions are known as funding your revocable living trust.
Unfortunately, Paul Walker’s Living Trust was never funded and this meant that the entire estate including all assets would need to be submitted to the probate court in Santa Barbara County. The failure to fund the Trust will result in substantial probate attorney’s fees for Mr. Walker’s estate as well as significant delays in administering the assets.
3. Name Guardians for Minor Children
Parents are “natural guardians” of their own minor children, so if one parent passes away, the other will naturally assume guardianship unless they are unqualified for some reason. In Mr. Walker’s case, he properly appointed his mother as the guardian of his daughter “Meadow”; however, because Meadow’s mother is still alive, Paul’s mother never assumed guardianship. Still, it is important to decide who will be responsible for minor children in the event both parents die.
4. Don’t Wait to Complete Estate Planning.
Paul Walker gets extra points for doing estate planning at the young age of 28. He was likely prompted by the pending birth of his daughter as is often the case. Mr. Walker’s situation exemplifies the fact that it is important not to put off planning, and it is fortunate that his wishes were expressed which were to leave his estate to his daughter.
5. Make Sure to Regularly Update Estate Plan
It was 12 years from the time that Paul Walker created his original estate planning documents, at age 28, and they were never updated. To make matters worse, the Trust Funding, mentioned above, was never completed or reviewed despite many years of opportunity to do so. We don’t know how much his estate grew during that 12 year period but the growth rate over those years was likely substantial. The other thing we don’t know if any Federal Estate Tax planning was done; although, it doesn’t appear as such.
By my estimate, roughly 1/2 of this estate will go toward Federal Estate Taxes and there were steps that could have been implemented such as setting up a Wealth Replacement Trust (ILIT) or using a Charitable Remainder Trusts to substantially reduce Federal Estate Taxes while providing for his daughter Meadow. Those and many other reasons are why regular estate planning checkups are important.
The “take away” here is that estate planning is not only for the elderly but also for the young. So, avoid “Fast and Furious Estate Planning” and take care of those you love the most!