Lessons in Estate Planning from Rain Man
Rain Man, starring Tom Cruise and Dustin Hoffman, was a critical and commercial success,
winning four Academy Awards and two Golden Globes while becoming the highest-grossing film
of 1988. A drama about odd-couple brothers and personal transformation told through a road
trip motif, Rain Man also raises some estate planning issues in an entertaining way.
Because it is a Hollywood movie, many of the legal issues are glossed over. Regardless, an
important subtext of the film is how an estate plan can affect family dynamics - and the difficult
decisions parents face when planning for children who have very different personalities and
needs.
Two Brothers and an Inheritance
Charlie Babbitt (Cruise), the estranged son of a millionaire, is dismayed to learn that his late
father left him only a '49 Buick Roadmaster and some rose bushes. The rest of his father's $3
million estate is left in a trust for the benefit of a mystery person.
That person turns out to be Raymond Babbitt (Hoffman), Charlie's long-lost, autistic-savant
brother who is institutionalized at a facility for people with developmental disabilities. The trustee
of the trust, Dr. Bruner, is the director of the facility and Raymond's doctor.
Charlie attempts to convince Dr. Bruner that he is entitled to half the money in the trust. When
that strategy fails, Charlie takes Raymond out of the facility without permission in an effort to
use him as a bargaining chip.
On a weeklong road trip from Cincinnati to Charlie's home in Los Angeles, Charlie bonds with
his quirky brother and has a change of heart. Upon arriving in Los Angeles, Charlie finds that he
is more interested in caring for Raymond than getting the money and gives up his fight for the
inheritance.
Estate Planning Issues and Lessons
For parents, ensuring that children are provided for in an estate plan is top of mind, but estate
planning is not one-size-fits-all. What makes sense for one child may not be suitable for
another.
Sanford Babbitt, the father of Charlie and Raymond, never appears in the movie, but his actions
loom large.
We know that Charlie spent time in jail and that Sanford and Charlie had a falling out. Reading
between the lines, it seems that Sanford viewed Charlie as too immature to handle a large
inheritance. Charlie's kidnapping of Raymond would seem to prove him correct.
What to do when a child cannot be trusted with an inheritance is a common issue that parents
face. It can lead to disinheritance or, in Charlie's case, a small or insignificant gift.
While Sanford probably could not have predicted that Charlie would find Raymond and hold him
for ransom, he could reasonably have anticipated that Charlie would search for the money and
that trouble would follow. He might have prevented this by sharing his plans with Charlie before
he died. Instead, the news came as a total shock to Charlie and may have pushed him to act
irrationally.
Sanford and Raymond Babbitt
Another of Sanford's actions that echoes from beyond the grave - and one that appears much
more reasonable in retrospect than how he handled things with Charlie - is his decision to place
money in a trust with a trustee, ensuring that Raymond would be taken care of for life while not
giving Raymond direct access to the funds.
It is not directly stated in Rain Man that the money left to Raymond is held in a special needs
trust. In real life, this is probably how the plan would be set up. A special needs trust can hold
assets for a beneficiary without disqualifying them from receiving means-tested government
benefits.
The Babbitt Brothers
Raymond, like Charlie, could not handle a large inheritance, although not for the same reasons
as Charlie. If a child does not have a disability but a parent wants to provide for them in a
specific way with terms attached, they can instruct a trustee to make distributions only when
those terms are met, such as reaching a certain age, remaining employed, staying out of jail, or
getting sober.
For example, Sanford could have set up a trust to benefit both of his sons and demanded that
Charlie only receive distributions if he helped to care for Raymond. Becoming active in
Raymond's life could have incentivized Charlie to take a more mature course of action while
bringing the brothers together.
Charlie's surprise at learning about a brother he did not know existed set the stage for dramatics
that befit a Hollywood movie. And, while it worked out in the end for the Babbitt brothers, in
reality, most parents would want to avoid such theatrics. Careful estate planning can not only
help stave off family conflicts but also strengthen family bonds.
Trust Privacy
Charlie demands that his father's attorney reveal the identity of the mystery beneficiary but is
stonewalled. He only manages to learn the truth by sweet-talking an employee at the trust
office. This sequence of events touches on the privacy offered by a trust and a beneficiary's
rights, including the "right to know" (or the right not to know) certain information about the trust.
Since Charlie is no longer a beneficiary of the trust after his specific distributions are made, he
is not entitled to know anything else about it. Privacy is a major benefit of trusts. Trusts are not
subject to the probate process. Wills, however, go through probate and become part of the
public record. Anyone can view them and find out what assets were left to whom. Also, most
states require a will and other probate documents to be served to interested parties, which
usually include heirs (also referred to as next of kin).
Make It Rain for Your Clients
You can play a key role in your clients' legacy planning by instructing your clients on how to
fund a trust with sufficient assets to provide for their loved ones as they intend. You can craft
different inheritance distribution plans for each beneficiary, tailored to their individual needs and
situation. You can also help clients select the right trustees to manage assets for an adult child
and advise the trustees in the administration process.
To discuss specific issues and strategies involving the intersection of trusts and financial
planning, please contact us to schedule a time to talk.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
