As you all know by now, I’m sure, David Bowie passed away a few weeks ago after a battle with cancer. His will was recently submitted to Surrogate’s Court in Manhattan (the Clerk of Court, had it been in North Carolina) to be probated. Now that it’s a public document, the media has reported its contents for all of us to discuss at our leisure. There are two main lessons that can be learned from David Bowie’s will (and seemingly his Estate Plan as a whole).
When your will is submitted for probate (the process by which your estate’s assets and creditor claims are gathered, paid, and distributed according to the terms of your will), an estate file is opened for the probate proceeding. Estate files are part of the public record, are subject to Freedom of Information Act (FOIA) requests, and, in North Carolina, anyone can walk into the Clerk’s office and ask to review an estate file for whatever reason they want – sometimes nefarious reasons. If you wish that the disposition of your assets remains a secret, the only way to do that is to die without any assets at all, or to die without any probate assets. The first option would require you to gift or spend all of your assets prior to your death – which is not very practical, since you can’t anticipate when you will die, and you need to be able to support yourself in the mean time. The second option is to transfer your assets to a trust or title them in a (1) joint account with rights of survivorship with a loved one, (2) transfer on death (TOD) account, or a (3) payable on death (POD) account. Simple planning techniques can make a world of different when it comes to keeping your assets and wishes private.
According to credible sources, the Bowie estate is valued at over $100 million. The current federal estate and gift tax exclusion amount is $5.45 million for individuals and $10.9 million for married couples. At the time of his death, Bowie was married, and there is also a spousal exclusion of any assets passed from the decedent spouse to the surviving spouse. In his will, Bowie left half of his assets to his surviving wife, and the remaining half split equally to his children. He also left $2 million to an assistant and $1 million to a nanny. So, in the absence of any other planning, roughly $45 million of his estate will be subject to a 40% estate tax, meaning $18 million will be given to the federal government. That’s not including any additional amounts due to the New York government because of state estate taxes. North Carolina, on the other hand, does not have a state estate tax. Of the amount left to his wife, all but $5.45 million will be subject to a 40% estate tax when she passes, unless additional planning is used to reduce or avoid the estate tax.
The moral of the story is that if you want to (1) keep your affairs private, and/or (2) avoid estate taxes, a will-based estate plan alone will not cut it. Trust planning is key.