Celebrity Estate Planning Mistakes and the Lessons We Can Learn from Them
By Scott Rojas, MBA, CFP®
We are often surprised to hear about celebrities who pass away without a will or a trust. The rich and famous have financial resources and access to accountants, attorneys, and financial professionals, yet some still pass away without a good estate plan or die intestate (without a will or trust).
The consequences are the same ones we would face without an estate plan and can lead to increased taxes for the estate, increased anxiety for heirs, loss of control as to where the assets go, and an increase in the time it takes to settle the estate.
Aretha Franklin: $80 Million Estate, No Will or Trust
The Queen of Soul recently passed away without a will and left her heirs an $80 million estate that may take years to sort out. Aretha’s estate will likely be split evenly among her four sons, one of which is incapacitated and represented by a guardian.
Not having a will or trust will:
Slow down the distribution of her estate, in some cases by years
Due to the probate process, make public what could have been done in private
Cause the probate judge to determine where her assets will transfer, not Aretha
Force the estate to pay more in taxes, leaving a smaller estate for the heirs
Prince: $250 Million to $300 Million, No Will or Trust
Prince died over two years ago, when he was 57 years old. Prince left his heirs a very complicated estate to sort out, and it will likely take years to settle.
You combine a large estate, no will or trust, and five half-siblings, and this is sure to be a drawn-out and expensive process.
Howard Hughes: $1.5 Billion, No Will or Trust
Howard Hughes’ story is interesting in that when he died in 1976, he had no direct descendants, family, will, or trust. Eventually, a will was found in Salt Lake City, but it was later proven to be a fake.
Hughes’ estate was eventually settled in 2010, 34 years after he passed away.
Heath Ledger: $20 Million, Old Will, Created Before Daughter’s Birth
Heath Ledger passed away in 2008 with a will that was created before his daughter was born. His $20 million estate was initially granted to his parents, not his daughter.
This story does end well in that eventually his estate was directed to his daughter. The important lesson here is that once an estate plan is developed, it needs to be reviewed every three to five years or whenever major changes are made in the tax code.
Philip Seymour Hoffman: $35 Million, Poor Planning = Big Tax Bill
Philip Seymour Hoffman died when he was 46 years old. He had a will written 10 years before his passing, and no trust. One of his goals was to create non-“trust-fund kids.” His will left his entire estate to the mother of his three children and nothing to the children or charities.
The poor estate planning ended up creating a $15 million estate tax bill and turned a $35 million estate into a $20 million estate. If he had been married, the entire estate ($35 million) could have transferred to his wife tax-free.
Florence Griffith Joyner (Flo-Jo), Had a Will—Where Is It?
Flo-Jo had a will, but her heirs could not find it. Her estate eventually went through probate and took four years to settle.
Flo-Jo’s big mistake was creating a will without direction to her heirs on where to find it.
Why You Should Have a Trust
It is estimated that 60% to 66% of Americans don’t have a will or a trust. A trust is an agreement between three parties: the trust maker (grantor or settlor), the trustee, and the beneficiary. The trust maker is the person(s) who creates the trust, the beneficiary uses the trust assets, and the trustee manages the trust.
For most revocable trusts, the maker, the beneficiary, and the trustee can all be the same person. You will still need a will, but the will can simply point your assets to the trust.
Here are several reasons why you should contact an estate planning attorney and create a trust for your estate:
Simplicity and clarity: Setting up an estate plan allows you to document your wishes and simplifies matters for your family during a difficult time.
Privacy: A trust allows your assets to transfer to your heirs without going through the probate system, which is open to the public.
Taxes: Taxes are not as critical an issue as they were in past years due to the recent increased exemption amount to $11.1 million. However, tax laws may change, and if you have a large estate, planning is critical.
Cost and time: Creating a will and a trust is less expensive than having your estate go through probate. California probate will take at least a year to settle and cost you roughly 3–6 % of the value of the estate.
End-of-life care: A good estate plan should always include health care directives in case you become unable to direct your own care.
Comprehensive estate planning can maximize what you leave to your heirs and, if done right, can provide safety and security for your family during a very difficult time. Please give us a call if you would like to review you plan and figure out the next step with your financial plan as it relates to estate planning.
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