How could someone who earned $650 million over 17 years be broke?
That’s the question the actor Johnny Depp recently put to a team of forensic accountants and his new business manager, according to a Vanity Fair article (“How Did Johnny Depp Find Himself in a Financial Crisis?,” August 2017). The team determined that Depp’s business managers of 17 years were guilty of mismanagement, breech of fiduciary duty, and disbursing funds without Depp’s knowledge, and filed a lawsuit seeking $25 million.
The business managers, who had never been sued before, fired back with a lawsuit of their own. A partial list of why Depp went broke, according them, was that Depp owned:
- 14 residences, including a chateau in France;
- a 156-foot yacht which was expensive to maintain;
- 12 storage facilities filled with memorabilia, such as collectible guitars and art;
- $30,000 worth of exotic wines flown to him monthly; and
- he employed 40 full-time employees, costing $300,000 per month.
As an example of his extravagant lifestyle, Depp spent $5 million for a memorial service for his idol, journalist Hunter S. Thompson. A 153-foot cannon was built at Thompson’s home to blast his ashes.
The business managers sought damages of $560,000 and a statement by a court declaring that “Depp caused his own financial waste.”
Adding guidance to an inheritance
Although Johnny Depp may be an extreme example of financial management failure, it is stories such as these the cause some wealthy parents to wonder about the financial capacity of their own heirs. Even responsible adults have been known to have moments of weakness when faced with a large inheritance.
That’s why so many are turning to trust-based inheritances. When the trust is administered by a professional trustee, such as us, the beneficiaries get financial management according to the terms of the trust, along with investment management of the trust assets. There’s no guarantee that a trust will last for a lifetime, but it does improve the odds for lifetime financial security.
By the way, Depp paid 10% of his income to his business managers and his lawyer, some $65 million over 17 years. Our fee for trusteeship is well below that percentage. Ask us for details.
Other trust advantages
Trusts to grow on. Trusts can provide professional management for assets set aside for young beneficiaries. The management can continue, if desired, even after a beneficiary reaches age 18 or 21.
Continuing help for a disabled individual. With proper planning (qualified legal guidance is a must), a trust can provide extra support and some of life’s comforts without disqualifying a disabled person from receiving government assistance.
Marital bequest to a noncitizen spouse. Anything that a married person leaves directly to his or her spouse will qualify for the estate-tax marital deduction—unless that spouse is not a U.S. citizen. In that event, a special marital trust is required to preserve the marital deduction.
Gaining the marital deduction without disinheriting children. Individuals with children from a prior marriage may qualify assets for the marital deduction by means of a trust that pays lifetime income to the surviving spouse, then passes its assets to the children.