When Matthew Perry, the beloved star of Friends, passed away, the world mourned the loss of a comedic icon. However, as details of his estate began to emerge, a curious puzzle presented itself: despite his reported net worth of $120 million, his bank account held (only) $1.5 million. Admittedly, this seems like a whopping sum to most of us, but for a man who earned millions of dollars for just one episode of the show, this amount appears…off somehow. Shouldn’t he have had much more money than that? The answer lies in the details of estate planning and using trusts as part of your plan.
In this article, we’ll look at Perry’s estate plan and pull out some valuable lessons. These lessons pertain to all of us, not just the rich and famous. To find out how trusts can benefit you, read on.
What is a Trust?
A trust is simply a legal arrangement where a person (sometimes called a “settlor”) transfers assets to someone ( a “trustee”) who manages those assets for the benefit of someone else (the “beneficiaries”). Many types of trusts can be used for many different purposes, including estate planning, asset protection, and providing for loved ones.
The trustees appointed to manage a trust play a crucial role in fulfilling the settlor’s wishes. Choosing the right trustees is essential for the effective management of a trust. Trustees should be trustworthy, financially responsible, and knowledgeable about estate planning. They should also be willing to devote the time and effort required to manage the trust’s assets.
In Perry’s case, it appears he had established a trust during his lifetime. This trust, which seems to be named the Alvy Singer Living Trust – Woody Allen’s character in Annie Hall – presumably holds a significant portion of his wealth. In Perry’s case, the trustees were likely responsible for managing his investments, paying bills, and distributing money to the beneficiaries.
Why would Perry have chosen to establish a trust? There are many benefits, which I’ll break down in greater detail now.
The Power and Benefits of Trusts
There are many advantages to using a trust for estate planning. Here are some of the most common.
Protection from creditors and lawsuits. If a beneficiary faced financial difficulties, their creditors would generally not have access to assets held in a trust.
Ongoing support during life, incapacity, and after death. Trusts can provide for loved ones in a more flexible way than a will. A will is a legal document that outlines how your assets will be distributed after your death. However, a trust can be structured to provide support during your life and for your beneficiaries over time, ensuring that their needs are met throughout their lives. If you have a will, usually your assets will be transferred to your beneficiaries all at once – even if they are young or financially irresponsible.
Minimization of estate taxes. Depending on the size of an estate, there may be significant federal and state estate taxes. By using a trust, it can be possible to reduce or eliminate these taxes.
Court avoidance. There’s a court process called probate that takes place after someone dies, and it can be expensive, lengthy, and conflict-laden. If you have a will or no estate plan, court is mandatory. If you have a trust, however, the court process may be avoided. This results in less expense, less time, and a decreased probability of conflict. It’s also a public proceeding, and court filings contain personal and financial information you may not want others to see.
Conflict avoidance. The court process is set up to give all heirs and creditors a claim to your assets. They are invited to file a claim, and they get to see information about your assets.
Greater control over what happens to your assets and your family. When you have to go to court, it means that someone other than you – a judge, who’s a complete stranger to you and your family – will make all final decisions about your money, property, and family. But with a trust, you get to make those decisions and exercise control over the outcomes.
Preserving assets when there’s a substance abuse issue. It’s no secret that Perry struggled with substance abuse for much of his life, and it’s possible that because of that, he was advised to create a trust to hold his assets. This was a wise decision. Substance abuse can have a significant impact on financial stability, and it is possible that Perry sought to protect his assets from loss, either by his own actions or potential creditors and legal issues related to his addiction. You can do the same for a friend or relative if you want to support them and also know they struggle to manage their finances responsibly.
These advantages apply to you, too! You do not need to be wealthy to want a trust. You do not have to be charitable or famous to take advantage of the benefits. You simply need to be educated about the benefits and how they apply to you. Read on and I’ll show you how to book a call with me to get the education you need.
I’ve alluded to one more advantage that warrants a full section of discussion: privacy.
The Appeal of Privacy
Remember when I mentioned above that the court process is public? And I also mentioned that a trust can help you and your family avoid court, and the very public process that it is? If you were wondering, “If it’s true Matthew Perry had a trust, then how come it’s public knowledge that he had $1.5 million in his bank account?” then kudos! You caught on to something important.
Matthew Perry also had a will, and wills go through probate. Any assets that are not placed into a trust must be dealt with via your will and thus, are subject to the court process. Remember how I also said above that court filings must contain your personal and financial information? That’s how we know about Matthew Perry’s bank account. The funds in his bank account were ostensibly not placed into his trust, and so, are subject to the public probate process. If you want, you can go look up the court records and read his will – or any will – for yourself.
His will mentioned that he had a trust, which is also common. What it doesn’t mention is the terms of the trust, who the beneficiaries are, what his other assets are, and who gets what. Our public knowledge is limited to what’s in his will. And if his bank account had been placed into his trust, it would have been kept private, too.
In short, assets placed into a trust are kept private, as is your personal and financial information. Assets left out of a trust are public knowledge. So, when you create a trust, it’s crucial that you don’t just draft and sign the document and call it a day. You must take the next step and correctly place your assets into the trust. If you don’t do that, you lose all the benefits the trust offers.
How We Help You Protect What Matters Most
As more details about Perry’s estate emerge (and sadly, his death), we may gain a better understanding of his intentions and the legacy he will leave behind. While his untimely passing is a tragic loss, his estate planning offers a fascinating look at the advantages of trusts and how you can also take advantage of them.
As a estate planning law firm, we help you create a comprehensive Estate Plan that may include tools like trusts to protect your assets, maintain your privacy, and ensure your loved ones are cared for—without the headaches of court or the increased chances of conflict. By planning today, you can have peace of mind knowing your wishes will be honored, your family’s future will be safeguarded, and your legacy will be kept private.
How We Help
At The Parents Estate Planning Law Firm, we help you navigate life’s transitions while protecting your assets and loved ones. We provide ongoing support to ensure your plan evolves with your life changes and works when you and your loved ones need it most. We will help you make informed decisions about your estate, especially during major life transitions.
Click here to schedule a complimentary 15-minute call to get started, so as your Estate Planning Attorney, we can advise you about the proper planning vehicles to put in place.
