There are often lessons to be learned from the estate plans of celebrities, such as Whitney Houston, Robin Williams and Paul Walker. The late Paul Walker, star of the “Fast and Furious” movie franchise, left behind an estate rumored to be worth approximately $25 million. Paul named his father as executor of his will and estate. Before Paul’s death, his daughter, Meadow, was living with him, but she now lives with her mother, Rebecca Soteros. However, according to Paul’s will, Paul’s mother, Cheryl is named guardian of Meadow. In Texas, as in other states, naming guardians for your minor children in the event of your death or incapacity is absolutely critical, because it lets the probate court know who you would like to serve as the guardian if you can no longer do so. Cheryl ultimately withdrew her petition to be appointed guardian of Meadow, but the events raise some interesting questions and give rise to a teachable moment as to how the $25 million estate could have been managed.
There are two aspects to consider when appointing a guardian for a person. The guardian of the person is the person appointed to make personal, medical, and welfare decisions for the Ward (the person for whom a guardian is appointed). The guardian of the estate is appointed to make the financial decisions for a Ward. In this particular case, the distinction could be significant. Since Rebecca is Meadow’s mother, it is likely that she would ultimately be appointed as guardian of the person, unless the court is persuaded that it is in the best interest of Meadow for another person to be appointed as guardian of the person, or if Rebecca is otherwise ineligible to be the guardian of Meadow’s person. Unless there is some other planning in place, the guardian of the estate will manage any assets held for the benefit of the Ward. Fortunately, as discussed below, there was a trust created during Paul’s life that will most likely hold most or all of his assets, and he presumably named as trustee the person he wanted to manage those assets when he died.
The decision as to who will ultimately become the guardian of Meadow’s person and estate will vary from state to state. For instance, if this case took place in Texas, the results could be very different than under California law. If a testator (the person making a will) wants to ensure that a certain person is responsible for managing the assets in his estate after he dies, often the best approach is to create a testamentary trust in which his beneficiary (the person who will inherit assets) is the beneficiary and the desired person is named as the trustee. In Texas, as in many states, the assets in the trust will be subject to the control of the trustee rather than the guardian of the Ward. This would avoid any uncertainty in determining who will have control of the assets. It would also prevent the court from having to create a trust for a minor that would require more scrutiny and closer court supervision. This ensures that the testator’s assets are managed in a way that does not conflict with his wishes and can give broad discretionary authority to the trustee in managing and distributing the assets. Additionally, in Texas, a court-created trust will often terminate when the minor reaches age 18. In this case, this could have resulted in an 18-year old having full control of a large sum of money at an age at which she is not experienced enough to manage it effectively. By using trust planning, Paul ensured that he is able to control how and when the distributions are made to his daughter, and he can mandate that the trust last for her lifetime (or even longer) rather than terminating when she reaches a certain age. Moreover, the assets in the trust may be protected from his daughter’s creditors and in a community property state such as Texas, the assets would be her separate property in the event she divorces later in life.
The lesson to be learned here, whether you’re doing your estate planning in Houston, Texas or in any other state, is that it is usually best to leave assets in trust for minors as opposed to leaving them outright. You should seek the advice of a competent estate planning attorney to decide the best way to dispose of your assets upon your death.