19 Oct EIGHT ESTATE PLANNING ERRORS BY THE RICH AND FAMOUS
Although you would think the rich and famous would be the last to make estate planning errors, but they make mistakes (from which we can learn) like others. Here are some celebrity estate planning mistakes:
- No Estate Plan. Famous singers Prince and Aretha Franklin failed to leave a Will or Trust resulting in expenses that could have been avoided being paid to consultants, administrators, lawyers and bankers. It is estimated that up to ½ of Prince’s $163 million (the IRS has claimed that value, but the administrator reported a value of $82 million) estate will be paid in estate taxes (federal and state) in addition to those expenses – not to mention his estate going the way he may have desired instead of passing under state laws with the court choosing who is in charge of his estate. It is estimated it may take a decade to finalize Prince’s estate. Aretha Franklin’s children now are bickering (they got along prior to her death). See our prior articles by clicking here for Prince and here for Aretha.
- Failure to Fund Trust. Many people desire to avoid the probate process (when one has a Will) and guardianship by creating a Trust, but the most common mistake is failing to fund their Trust. Even if you list your assets on an exhibit or schedule, the assets must be actually re-named as part of the Trust. For example, the checking account would need to be changed into the name of the Trust. Michael Jackson made this mistake. As a result, his $500 million estate went through the probate process and the estate was managed by the executor after claims of creditors, fighting between family members and numerous legal disputes in the court.
- Failure to Update Plan. Whitney Houston had a Will with a testamentary trust for her child, Bobby Christina, until she was age 21. However, her daughter was having drug problems before she was 21. She should have updated her Will to continue to have her assets held in trust.
- Failure to Keep Your Original Will in a Safe Place. After Olympic sprinter Florence Griffith-Joyner (FloJo) died, her original Will could not be located. Her mother claimed that the Will said she could live for the rest of her life rent-free in the condominium owned by FloJo and her husband. After years of legal wrangling, the court presumed the original Will was destroyed and no longer valid. As a result, her mother had no right to live in her house.
- Failure to Provide for Unborn Children. Prior to his death earlier this year, Kobe Bryant always updated his Trust to provide for his spouse and children – except for the child born in the last year before his death. Although the court permitted modification of his irrevocable Trust based on his past history, his family still incurred legal fees, court costs and delays in distribution as a result of his failure to include his youngest child.
Heath Ledger, before his death, had a Will (prepared five years prior to his death) that left everything to his parents and three sisters. After he signed the Will, he had a child with actress Michelle Williams. Thus, his Will failed to provide for his child born subsequently to the signing of the Will.
- Failure to Remove a Beneficiary. Famed singer Barry White’s Will left everything to his second wife from whom he was separated and was in the process of divorcing at the time of his death. His girlfriend of several years and his nine children received nothing. If he had been divorced at the time of his death, then his second wife would have received nothing as a matter of law (unless he did a new Will after the divorce indicating she was to be a beneficiary). However, since there was no divorce decree and since he didn’t revise his Will, the second wife received his entire estate. A divorce is not final until a court order is signed.
- Failure to use Trusts. Trusts can be used for many reasons – including reducing estate taxes protecting beneficiaries who are a minor, disabled or a spendthrift. Trusts can also be used to avoid probate, guardianship, create creditor protection and protect privacy. Actor Phillip Seymour Hoffman made this mistake as his estate grew significantly to be taxable from the date of signing to the date of his death. Also, his planning failed to protect his children.
- Oral Promises are Insufficient. The housekeeper of Marlon Brando alleged that he promised that she would inherit his home. She was unsuccessful in her lawsuit since the promise was not part of his estate planning documents.
The rich and famous can make mistakes even though they have the funds to protect their loved ones or charities as they desire. We can learn from their mistakes. Furthermore, it is anticipated with the upcoming election, there will be changes in the law – no matter which candidate is elected. As a result, estate plans should regularly be reviewed.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming virtual Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.