by Dan A. Baron, Baron Law LLC
You might think that the rich and famous have the best of the best legal representation, especially when it comes to planning their estate, but even some of the most popular celebrities have fallen victim to poorly drafted estate plans or, even worse, no plan at all. Some celebrities have remained in the limelight even long after passing due to major mistakes in their estate plans that take years to sort out. Today we’ll go over some of these mistakes, how they might apply to you and how we can avoid them.
1. Michael Jackson: Failing to Link Assets to Trust
Michael Jackson planned ahead and knew he would need to protect assets in a trust in advance of his passing. Unfortunately, Jackson’s mistake was that he failed to officially “fund the trust” before he died. Since the funds were not where they needed to be at the time of his death, they were unable to be distributed and his estate, worth $500 million when he died, had to go through probate court. When you are planning your estate, an important final step is to link your financial accounts to your trust to ensure it is funded. This can be accomplished simply by naming the trust as the beneficiary of the account. In our estate planning process, we guide you from start to finish, including working with your financial planner to associate your accounts with your trust, ensuring a smooth transition of funds to your beneficiaries.
2. Whitney Houston: Choosing the Wrong Trust
In the case of Whitney Houston, she shrewdly started planning her estate early in life, creating a will at age 30. After her daughter, Bobbi Kristina, was born, she knew she needed to update her will to include Bobbi as a beneficiary of her estate, so she elected to add a testamentary trust provision. Unfortunately, a testamentary trust was not the best option because it requires settlement in probate court after death and thus leaves all documents, such as her will, open to the public. Instead, Whitney could have created a revocable family trust, avoiding probate, while also allowing her flexibility to make updates as life events occurred. The family trust would have also provided asset protection for her daughter and any unborn children.
3. James Gandolfini: Disregarding Estate Taxes
“Sopranos” star, James Gandolfini, created his will just six months before dying unexpectedly of a heart attack – a great reminder that the best time to start planning your estate is now. Similarly to Whitney Houston, Gandolfini’s use of a will instead of a living trust meant his final wishes could be viewed by anyone across the internet. His greater mistake though, was to leave only 20% of his assets to his wife, leaving the other 80% to his kids and other associates subject to a massive combined federal and state tax rate of 55% (in his case, approximately $30 million). Instead, he could have left 100% of his assets to his wife tax-free due to marital deduction laws and she, in turn, could have established trusts naming their children and family friends as beneficiaries. They also could have created a joint revocable family trust in both of their names. It is important for you and your spouse to discuss your estate plans with each other and your attorney, whether you would like your assets passed on together or separately. A good lawyer can help you strategically establish and execute your estate plan to take care of your family and avoid leaving them with a major tax bill after you are gone.
4. Etta James: Failing to Name Powers of Attorney
A common theme in estate planning advice is to get your plan started earlier than you think you will need to. As for Grammy-winning recording artist Etta James, she did establish an estate plan naming her son, Donte James, as her sole power of attorney for medical and financial matters. However, her husband, Artis Mills, disagreed with some of Donte’s decisions and argued that his power of attorney status was invalid because Etta was already afflicted with Alzheimer’s at the time of his appointment. It is important to establish your financial and health-care powers of attorney long before you think you will need them. These are two separate designations and the roles can be assigned to two different people or the same person. You can also name one or more successors to ensure that even if your first choice is unable or unwilling to serve in this capacity you have a backup plan in place.
5. Marlon Brando: Making Verbal Promises
It is said that before his passing, Marlon Brando made a verbal promise to his long-time housekeeper that he would give her his home, but this was not reflected in his court-validated will. Without a written provision established in his estate plan, the housekeeper was legally entitled to nothing. It is important to remember that verbal commitments are not enough for the court of law, and if there is any part of your estate that you do in fact wish to grant to family, friends or otherwise, it needs to be established in writing as part of your will and or trust. This is why it is consequential to update your estate documents regularly for any life changes, including new marriages or divorce, the birth or adoption of new children or grandchildren, changes in your health, income or state of residence, as well as any promises made to friends and family for physical or monetary assets.
No matter how large or small your estate is, it is important to properly lay out your wishes in an established estate plan. For more information or to schedule a complimentary consultation, contact us at 216-573-3723. (Article co-authored by Emily Smith, Legal Assistant and Dan Baron, Esq.)
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Opinions and claims expressed above are those of the author and do not necessarily reflect those of ScripType Publishing.