In the article “Yes, even celebrities make estate planning mistakes,” the Reno Gazette Journal takes a close look at four big estate planning mistakes we should all avoid. These are such basic estate planning mistakes that you’d think no one would make them!
You don’t have a will. Your affairs should be properly handled, and your family should be protected, when you pass away. However, neither singers Aretha Franklin nor Amy Winehouse had a will. Franklin left behind four sons with some financial issues. Amy didn’t take the time to plan either. She didn’t say how she wanted her $6.7 million estate to be distributed. Without any written instructions, her estate went through probate and was distributed to her parents. The primary purposes of a will are to designate the guardians of minor children, an executor of your estate and which beneficiaries are to get what assets.
Not considering a trust. Who wants to be a celebrity when it comes to private matters? Remember that a will is a public document, and anyone can go to the courthouse and look it up. However, with a living trust, your wishes remain private. Learn from the saga of the late Whitney Houston, who died at age 48. First, her will named her daughter Bobbi Kristina Brown as sole beneficiary. However, then her daughter died three years later at age 22. Houston’s estate was then involved in a battle with the IRS over the valuation of recording royalties and was assessed a tax bill of $2.2 million. To top it all off, her ex-husband Bobby Brown, ironically may be the heir of the Houston estate.
A living trust can help your estate plan remain private and away from others. It names who is entitled to your assets and how they are to get them. A trust names trustees. It also may provide estate tax benefits. If you look at Whitney Houston’s situation, a living trust may have helped by providing guidance to daughter Bobbi, after her mother’s death.
Failing to update your estate plan. We all experience changes throughout our lives. This includes finances, health, family dynamics and relationships—any one of these can mean it’s time for an estate plan review with your attorney. Look at the late Michael Crichton, the author of Jurassic Park, who was diagnosed with throat cancer, when his sixth wife was pregnant. Crichton failed to update his estate plan to include his soon-to-arrive son. His wife sued to include the baby as an heir, and Crichton’s daughter from a prior marriage opposed. The judge ruled the baby could inherit. Crichton could have saved everyone a lot of stress, anguish and money, by simply updating his estate planning documents.
Failing to plan for disability before death. You should also think about planning for the possibility of being disabled and needing assistance in managing your affairs. Ask your estate planning attorney about powers of attorney and living wills to help protect you and your loved ones, in case of incapacity. For example, the final years of blues singer Etta James, known for “At Last” and “Tell Mama,” were full of court hearings. The legal battle was between her husband of 42 years and her son from a prior marriage. Etta signed power of attorney over to the son in 2008, but her husband claimed that she suffered from dementia and was incompetent. Her son wanted to restrict the amount of money Etta’s husband spent for her medical care. They settled, and the husband was named as conservator. However, he was limited to $350,000 for medical care for his wife. Etta James passed a short while later.
So you’re not famous and don’t have a room with gold records and Emmy statues? That doesn’t matter so much as you might think. Make your kids proud not because you are a global star, but because you took the time to meet with an estate planning attorney and protected your family. Now that’s cool.
Reference: Reno Gazette Journal (November 14, 2018) “Yes, even celebrities make estate planning mistakes”