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Sadly, we lost another big star in 2022.
Now we are "saying goodbye to a Goodfella: a little bit of estate planning, mafia-style."
Ray Liotta died on May 26, 2022, while on a movie set for a new film he was making. He died in his sleep, at the age of 67. In the estate planning world, that is very young.
Who is Ray Liotta?
Ray Liotta is known for lots of famous movie roles. Two of his best are "Shoeless Joe Jackson" in the movie Field of Dreams and portraying the famous mobster Henry Hill in the movie Goodfellas. Liotta appeared alongside Robert De Niro and Joe Pesci in the award-winning Mafia tale, based on true events. Rather than focus on Ray's estate, let's take a look at some estate planning for our favorite mobsters, the "Good fellas" themselves. Although their money came to them illegally, they were the type of "high-income earners" that we specialize in at our Firm. Their families had high net worth, even though it was all stolen!
Starting with the man of the hour, Henry Hill, whom Ray Liotta famously portrayed in the film.
We know that Henry Hill was married and had two children (as portrayed in the movie anyway). Whenever we're looking at estate planning for a married couple with a family, we look at several factors. First, we need to put in place what we call our "big three". The Big Three includes the last will and testament, to handle disbursements of assets after death. In the Mafia, death can come at any time. Next, a power of attorney nominating someone to make financial decisions for you if you can't do so for yourself, and a health care proxy naming someone to make health care decisions for you if you can't do so yourself. On top of the big three, we tend to recommend some type of trust whenever we've got children under 18.
The last thing we want is 18-year-old kids inheriting substantial assets. It's a recipe for disaster. So instead we put their inheritance into a trust and we name someone else, called a "trustee", to be in control of that trust until the kids reach certain ages. We may give them a third of their trust at age 18, the second part when they're 21, and the remaining amount when they're 25. But during that time, the trustee can use funds for the kids' benefit, at the trustee's discretion. The trustee is the one pulling the strings and deciding when and how the money can be used, up until final disbursement. That way we don't worry about an 18-year-old kid wasting all of their inheritance on cars and clothes and not saving for college.
We also look at the estate tax situation for the client.
In this case, we know that money earned being a gangster was probably not reported on these guys' tax returns. But if we assume that they were doing their taxes on the up and up and assume Henry Hill and his wife Karen were residents of Massachusetts (and not New York like they are in the movie) they would be subject to estate taxes on any assets they own, because they are likely over the Massachusetts threshold. If their total assets, including their home and life insurance death benefits, ran over $1 million, we run the risk of losing the estate tax exemption that the government allows, unless we do some trust planning. For married couples, we can utilize what's called a Credit Shelter Trust, which essentially preserves each spouse's estate tax deduction so that we can minimize the exposure to state or federal estate taxes. Most people don't even realize they're subject to estate taxes so they don't do the proper planning, and when they pass on, their family gets the bill. With some pre-planning, we can avoid that.
Next is one of Henry's Best Buddies Jimmy Conway.
Jimmy was portrayed by Robert De Niro in the film. He was a single guy and the biggest benefactor of what came known as the Lufthansa heist; they robbed shipments coming into the airport from Lufthansa airlines. Although the money was supposed to be split up among the different gangsters that took part in the robbery, Jimmy went around and killed most of them, thereby increasing his share. Jimmy wasn't married and he had no children. We can assume, again if he was doing his taxes the right way, that he would have over $1 million in assets and would be looking at some substantial estate taxes. For an unmarried person we can't use a Credit Shelter Trust to cut estate taxes as we could use for a married couple, and we have to look at other ways to reduce estate taxes.
There are several estate planning trusts that we can use for single people.
The trusts we could use would be a Qualified Personal Residence Trust (QPRT), or a Grantor Retained Annuity Trust (GRAT). Both of these trusts are complicated to draft and require expert-level knowledge to put in place. But the short answer, when it comes to the benefit of these trusts, is that we can remove assets from Jimmy's taxable estate and substantially lower his exposure to estate taxes from the state and federal governments. By moving certain assets into these trusts, we can remove them from his taxable estate and knock his estate tax number way down. Because he wasn't married and had no children, he could leave his assets to any other beneficiaries of his choosing. Or he could even leave some money to charity rather than see the federal government get it.
Next is Tommy, who was played by Joe Pesci.
Tommy was another single guy, unmarried, and had no children, although his mother always wanted him to "settle down". Tommy took care of his elderly mother, and when looking at the danger level of his profession as a mobster, who could be "whacked" at any time, we can assume he would want to make sure his mom was taken care of in the case of his demise. In that case, we've got several options to care for mom and her long-term care.
First, we could protect her home using a Medicaid Trust so that if she needed to go into long-term care, the home would be protected from the nursing home and the government. Tommy could also leave money to her in a Supplemental Needs Trust, much like what we would use for a parent leaving money to a child with special needs. We don't want those assets to be countable when it comes to government benefits and cause an individual to lose their benefits. But if we draft the trust properly, it can be used to supplement her government benefits and not lose them. As we all know from watching the movie, Tommy does get whacked in retribution for killing a mobster from a rival family. Even though he was a tough guy and prone to violence, it was obvious that Tommy loved his mother and would want her to be taken care of.
If his mother needed long-term care while Tommy was alive, there are several planning tools he could use to help her qualify for benefits. These tools include setting up an annuity to pay for her long-term care and transferring or positioning her assets so that they would not be countable by Medicaid.
Lastly, let's take a look at the boss of the family Paul "Paulie" Cicero, played by Paul Sorvino.
If we pretend for a minute that the mafia is a legitimate business and Paulie was the president and CEO, he would want to make sure that the business was passed down to his beneficiaries if anything happened to him. If there were fellow bosses in the family, he would also want their shares to go to them while retaining his shares for his own family. The way that we deal with partners in a business venture is through what's called a "Buy-Sell Agreement". The Buy/Sell Agreement is designed to provide for what happens after the death of one of the partners. It could mean that that partner's shares of the company are spread among the surviving partners, or that the surviving partners have to buy out the deceased partner's interest. What we're trying to do is avoid a situation where someone's family doesn't get anything because all of the shares go to the other partners. We also want to make sure that the family is compensated for the value of those shares and at the same time, make sure that the surviving partners can continue to run the business. There are several variations of Buy/Sell Agreements, and you can learn more about them in my book on estate planning for business owners, called Your Business, Your Money.
Let's look at one more bonus estate planning trick from the movie.
There was a character named Johnny Roast Beef who was using the Lufthansa money to buy a brand new Cadillac. The Goodfellas were under strict orders from Jimmy not to buy anything flashy right after the robbery because it would draw suspicion. Johnny thought he was avoiding that suspicion by purchasing the Cadillac in his mother's name. Now in the movie, this did not go well for Johnny because he was killed by Jimmy shortly after, since Jimmy was afraid that the police would be on to the scam. But if for a minute we can pretend that Jimmy wasn't killed, and was driving around in a Cadillac with his mother's name on it. Well, we've got two issues: first, we've provided an asset for his mother that would count against her if she ever needed long-term care, and second, if she passed away, the Cadillac would have to go through her estate. Anthony could end up having to split the value of the car with his siblings if was forced to go through probate. We know he wouldn't want that because he paid for that Cadillac with his hard-earned stolen money. So what do we do? We can utilize what's called a car trust, for probate avoidance. We put the car into trust and mom is the primary beneficiary of the trust during her life, but if she passes away, the title would pass directly to Anthony, so that we would not create a situation where the car would have to go through probate. By that time, hopefully, the heat from the robbery would be off. At the same time, we could avoid having the car count against mom when it came to long-term care by using proper trust terms. The same can be done for any collectible or antique car that you might not want to see go to your idiot sun-in-law if you die.
So there you have it, estate planning for some of our favorite wise guys from the movie Goodfellas.
Goodfellas was an excellent movie - it's one of those films that if it happens to be on TV no matter what part of the movie you tune in on, you end up watching it the rest of the way through. Although Henry Hill does survive the movie without getting whacked (the real Henry Hill died in 2012), he does turn into a witness for the government and ends up with the witness protection program.
His funny outgoing line from the film is about how when he tried to order spaghetti while using his new identity in the Midwest somewhere. They gave him noodles with ketchup on them instead of Italian tomato sauce. Even though he didn't get killed, most Italians would agree that noodles with ketchup are punishment enough.
Even though the movie took place in New York, we put a Massachusetts twist on this because those are the rules that most of our clients are subject to.
An estate plan is a necessary tool that allows you to protect, maintain, and manage your property if you become ill or pass away. If you or a loved one needs to start planning now before it's too late, schedule a Strategic Planning Session with one of our attorneys online or by calling our office now at 978-657-7437.
