While the savvy comedian evidently pulled the once-public trusts back into the shadows before he died, what we know about the assets might produce a little better than tragedy.
The small comfort for Robin Williams’ grieving heirs is that despite rumors, his real estate plan is tighter than anything younger and less wealthy stars like Philip Seymour Hoffman put together.
There’s at least $30 million in real estate on the market in addition to whatever pile of cash 40 years in show business and two divorces left behind. There’s got to be some cash value in those old insurance policies even if the death benefit doesn’t pay.
And as the family fights for privacy, all the media really has to chase is echoes in the forms of trusts that no longer mean much.
Still, the Williams lawyers needed to do a lot of fancy footwork over the years to keep the overall plan from failing. Did they pull it off?
Privacy wins the closing round
First, by now you’ve probably heard that Williams’ publicist has disavowed the trusts that came to light in 2010 as not reflecting his current estate plan at the time of his death.
The real trusts are still secret. The ones people are talking about now are at best shells if they even still exist at all.
It’s not really surprising that the trustees didn’t waste a lot of time covering the star’s tracks after their existence became a matter of public record.
After all, even irrevocable trusts can be decanted into new vehicles if confidentiality is breached or any number of other reasons. The assets are transferred and the old trust is dissolved, leaving a false trail behind.
So while the kids have gone through a social media wringer in the last week, at least the details of how their dad really provided for them are for their eyes only.
That said, the lawyers could easily have built the trusts well enough to avoid public disclosure in the first place.
The problem – and the trusts themselves -- emerged when Williams’ high-powered entertainment lawyer Gerard Margolis died back in 2008.
Margolis also happened to be the co-trustee on the older of the two trusts set up for the kids. His death left them both with only one trustee and no formal process in place to fill the hole in the line of succession.
Because the family wanted to be sure two people would be watching the trusts at all times, the sole remaining trustee had to petition the court to get a colleague appointed and then confirm the way the reins would pass from there.
It solved the immediate problem, but also turned the trusts into a matter of public record.
We now know how Williams planned to distribute a few of his assets. We know when his heirs would get their principal payments, roughly where the money would come from and we even know quite a few of the personal family details as of 2010.
With the kids currently being harassed online by strangers, that’s a profoundly bad thing.
Every trust needs to take at least basic measures to shield itself for courtroom and public scrutiny. That means avoiding formal petitions whenever possible.
If the documents had given the trustees the power to appoint a replacement in an emergency or assigned a trust protector to manage succession, there would have been no need to file the public appeal in the first place.
While there’s some risk in giving trustees more leeway to adapt to unforeseen circumstances on their own, having multiple trustees and an internal process for replacing them if they don’t work out helps to curb the potential for abuse.
And if the Williams trusts had worked that way, we probably wouldn’t know anything about them today.
Decanting doesn’t solve everything
Once the trustee situation resolved, they were probably quick to create new trusts that could still travel under the radar and reflect Williams’ current situation and wishes.
The star created each of the old trusts right after a divorce, using the first one in particular to hold life insurance as security in the event he died before paying off his alimony obligations. These are primarily irrevocable life insurance trusts, or ILITs.
In 2011, he married again. By this point, the kids are all grown and would nominally be in line for lump distributions from the assets put in trust for them.
But this assumes that Williams transferred more than life insurance when he set up the trusts and that the policies themselves were handled properly.
Since his death is likely to be ruled a suicide, any life insurance purchased in the last few years probably won’t pay a death benefit. That’s probably not an issue here because it would have been easier for the Williams trustees to simply reassign beneficiaries while they were decanting the trust assets than it would have been to buy new coverage.
Otherwise, timing and policy choices could have become serious problems. A policy purchased after August 2012 or so may be worth only whatever cash value it’s managed to accrue.
And while a good attorney would have made sure the trusts also held some liquid assets to pay the premiums, that money probably wouldn’t add up to a huge amount either.
So those looking for best practices here might want to consider short-term estate funding issues if an anticipated death benefit fails to come through.
Many ILITs, for example, are created to pay estate tax on a house, art collection, business or other substantial property that would otherwise have to be sold off to pay the IRS.
In these scenarios, the death benefit keeps the assets in the family. Losing the death benefit only compounds the tragedy of a suicide or other policy-voiding event.
What about the widow?
I haven’t seen any discussion of what provisions Williams might have made for his surviving spouse, who might truly need a death benefit if the star’s earning power is gone and the previous divorce ate up too many of the liquid assets.
With Williams, the San Francisco house and Napa Valley ranch are already in a separate trust so they’re presumably out of the estate tax equations and don’t need any kind of ILIT backup.
The ranch is up for sale at an asking price of maybe $30 million. When it sells, the family should be named as beneficiaries, so they’re going to be financially okay.
Even for some reason one of the hardest working funny men on the planet died with no other liquid assets, void insurance policies and busted trusts, he was evidently serious about his posterity.
He had serious legal power on his side. In the end, they probably triumphed over what would have been disaster after disaster. That’s what it’s all about..