Most of us, or at least those of us who were old enough to watch grown-up TV in the 1970s, remember Rob Reiner as Michael Stivic, the liberal son-in-law of Archie Bunker on “All In The Family.”
It’s easy to forget that after leaving the show he became a renowned movie director, with credits including “The Princess Bride,” “A Few Good Men,” “When Harry Met Sally,” and too many more to mention. But even after becoming such a prolific and well-respected director, people still mostly remembered him from “All In The Family.” He once complained that “if I won the Nobel Prize, people would say ‘Meathead wins Nobel Prize.’”
So the news last December was shocking. When he missed a massage appointment, the massage therapist called his daughter, who went to the house and found him, and his wife Michelle, stabbed to death. Police arrested one of his sons, who had had numerous issues with substance abuse, and charged him with murder.
At this point the news media usually forgets about a case like this until the trial starts. However, in this case there is an interesting issue going on in the meantime.
The accused son, Nick Reiner, has filed a lawsuit, complaining that the trustee of a trust that his parents established for him, is refusing to pay out the money he was supposed to receive when he reached age 30. Apparently, this trust is worth about $1.5 million, and half of it was supposed to be paid out several years ago when he reached that age, but the trustee is holding up payment. Nick wants that money so he can hire a top-notch attorney to defend him in the criminal case, instead of having to rely on a public defender.
At this point many of you are jumping ahead of the story and assuming that you know why. You have probably heard that there is something called a “slayer statute” that most states have (and yes, California, where the murder happened, is among them), and that these statutes prevent anyone from inheriting from someone they killed. And you are jumping to the perfectly rational conclusion that this is why the trustee is refusing to pay out the money.
But you are wrong.
Because the trust in question was an irrevocable trust, not the regular, revocable kind which many people use every day. Most of these slayer statutes, including the one in Alaska, cover a lot of different possibilities. They cover money coming from a probate estate. They cover direct beneficiary designations, such as you normally see on accounts, IRAs, and life insurance. They even cover joint accounts. And yes, they do cover trusts. That is, revocable trusts. Not irrevocable trusts.
When you put money into an irrevocable trust for someone, that becomes legally their money, even if they don’t necessarily have the right to control it. And these statutes do not cover this kind of irrevocable trust because, once given, it is no longer the victim’s money; it is the heir’s money.
Will Nick Reiner get the pay-out? Quite possibly. At this point the trustee is arguing that because of his substance abuse problems, Nick is not reasonably able to manage the money himself. However, that is a problematical argument, because if he is not capable, then the trustee has a responsibility to manage the money for Nick’s benefit. And obviously, nothing would benefit him right now, more than having a good defense attorney.
Why would the Reiners have set up an irrevocable trust for their son? Most likely, for estate tax reasons. Any estate worth more than $15 million is subject to a 40% estate tax, and there is no doubt that Rob Reiner had a lot more than that. After all, aside from having been on the most popular show in television for nine years, and having directed a lot of big-budget films, his father was Carl Reiner, a popular entertainment figure, who no doubt left a decent sized estate to him.
One of the strategies that people with large estates will sometimes use is to make lifetime gifts that are less than the exempt amount. If you give the heirs up to the exempt amount of $15 million, it counts against your exemption for estate tax. However, the money continues to grow in the irrevocable trust, and the growth doesn’t count against the estate tax. So that is a legitimate tax strategy for somebody like Rob Reiner, even if it wouldn’t matter for the vast majority of us.
But it may have had some very unintended consequences in this case.
Kenneth Kirk is an Anchorage estate planning attorney. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. But as always, “as you wish.”
