July 13, 2017

Estate Planning: Seven Kingdoms Edition – Episode Two

In the last episode, we learned how many of our favorite characters in Game of Thrones would have benefited from estate planning. Now we continue the story after the death of King Robert Baratheon.

Eddard “Ned” Stark

Just before his death, King Robert names Ned ‘Protector of the Realm,’ to function as ruler until his alleged son, Joffrey, comes of age.  In a desperate attempt to keep Joffrey from inheriting the throne, Ned declares Stannis Baratheon, Robert’s brother, as the “rightful heir,” and crowns him as king.  Sadly, Ned’s plan fails.  He is taken into custody for refusing to acknowledge Joffrey’s claim to the throne and found guilty of treason.  Ned reluctantly accepts Joffrey as the rightful King, in an effort to save his life, but is ultimately beheaded.  Ned left behind a wife and five children, four of whom were minors.

Let’s assume the laws of community property are observed in the Seven Kingdoms and that Ned prepared a will prior to his execution.  Half of all community property passes to Catelyn Stark, his loving wife, through a general power-of-appointment “GPA” marital trust created under Ned’s will.  Catelyn, named sole beneficiary of the trust, has an income interest for life and may distribute the assets as she so desires.

The estate planning alternate ending:  Ned and Catelyn Stark’s daughter, Sansa, being held against her will in King’s Landing with King Joffrey (to whom she is to betrothed), is freed upon a hefty ransom from her Father’s estate, and is reunited with her mother.  Sansa avoids further torture and an even more horrific state of affairs with the merciless Ramsey “Bolton” Snow.  Having her strength, dignity, and pride, she successfully launches a search to find her estranged younger sister, Arya Stark.  The two join forces to conquer Danerys Targaryen – and her dragons – to ascend the throne together.

Tywin Lannister

Tywin Lannister, known as the richest person in the Seven Kingdoms, had three children, three grandchildren, and a wife who predeceased him.  Tywin wishes to pass the majority of his estate and most valuable asset, the almighty castle known as “Casterly Rock,” to his eldest son, Jamie; leaving only a meager amount to his youngest son, Tyrion, whom he detests (for it was giving birth to Tyrion, that claimed the life of Tywin’s wife).  In an effort to eradicate Tyrion in any way possible, Tywin has him arrested for the murder of his grandson, Joffrey, hoping that he is sentenced to death.  With the help of his brother Jamie, Tyrion manages to escape the wrath of his father and takes revenge.  Confronted for the last time, Tyrion asks Tywin to acknowledge him as his son, but is again denied.  Heartbroken and enraged, Tyrion delivers one final blow to his ungrateful father – a fatal crossbow blow.

As the richest person in the Seven Kingdoms, Tywin’s estate is subject to estate tax.  Let’s assume the taxable estate value is $15 million, yielding an estate tax (at today’s rates), of $3.8 million after applicable credits.  If most of the assets are illiquid and difficult to sell quickly, the Lannister family may not have the funds available to pay the estate tax, possibly forcing them into bankruptcy.  Tywin could have avoided this potential problem by establishing an Irrevocable Life Insurance Trust “ILIT” during his lifetime, to hold a policy for at least the amount of the estimated estate tax.  The life insurance proceeds, excludable from his estate, would have provided the necessary funds to cover the taxes, leaving Tywin’s heirs – including Tyrion – with less of a mess and more of his fortune.

The estate planning alternate ending:  Tyrion is exonerated of any crimes against his nephew Joffrey, and reunites with his brother, Jamie.  After administration of their father’s estate, the two decide to form a partnership together.  Jamie agrees to transfer Casterly Rock into the newly formed partnership, requesting that Tyrion contribute most of his inheritance into the partnership, as well.  The brothers conclude that Tyrion will manage and occupy the property, and Jamie will equalize his brother’s interest in the partnership by making gifts of his ownership interest, over time, to Tyrion.  Jamie makes an initial gift equal to the amount of his lifetime exemption, and yearly gifts equal to the annual exclusion amounts each year.  Tyrion lives out the rest of his days in peace at Casterly Rock – which now boasts the greatest libraries and finest wines in all the lands, of course.

No one really knows what the seventh season has in store for the people of the Seven Kingdoms, but we do know that key characters benefit from trusted advisors who help them better navigate their complex world. For estate planning, Maddox Thomson can help. As for the Game of Thrones, we shall find out soon.

Get estate administration tips here in our third and final Estate Planning:  Seven Kingdoms Edition – Episode Three.