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Lou Reed's estate shows benefits of revocable trusts

It is a sad day when a loved one dies, including when celebrities die who Minnesota residents have followed and connected with over the years. Yet, these incidents can be teachable moments for others in terms of what to do and what not to do in estate planning.

Take, for example, the estate of recently deceased musician Lou Reed, well known as a member of The Velvet Underground and as a solo artist. Reed's estate has earned over $20 million since his death last fall, according to a report filed by Reed's executor. This, along with the $10 million in other assets in Reed's estate, is being distributed to his wife and sister, with the majority going to his wife.

Information from the estate also showed that the executors asked for fees of $220,000. This was reported to be far less than the fees for executors in other estates.

What was notable about Reed's estate is that it he chose to pass it entirely through his will, instead of through a revocable trust. A trust would have kept the above information private, as the process is kept outside of probate when assets are transferred through a trust.

For celebrities, non-probate transfers are often used to avoid publicity. For others, however, non-probate transfers can be beneficial because there are typically less to pay in fees, less time and less stress when transferring assets outside of probate. Individuals can also establish more detailed instructions through a trust than with wills. Individuals can also use a pour-over will to transfer the assets in their estate into their trust at death.

Therefore, while it appears using a will was not necessarily a bad outcome for Reed, those considering their estate planning options should understand that it's not the only way, and that revocable trusts have advantages that can benefit those involved.

Source: Forbes, "Lou Reed walked on the wild side with his estate planning," Danielle and Andy Mayoras, July 10, 2014

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