When it comes to estate planning, it seems that most people generally fall into one of four categories: (1) those who do no planning; (2) those who do some (often do-it-yourself) planning; and (3) those who plan, but who failed to have it reviewed and possibly updated timely; (4) those who do planning and keep on top of it. Several recent celebrity cases serve as a primer on these various categories. As you read the stories of these famous people, how do you compare? You may find that this winter is a good time to consider your estate planning to make sure you fall into the last category.
Leaving It to Chance with No Planning
Steve McNair was a Super Bowl quarterback, 3-time Pro-Bowler, McNair was killed at the age of 36 by his mistress. McNair did no estate planning at all, leaving his estate worth nearly $20 million to be argued over in the Tennessee probate courts. His children, when they turn 18 will receive their inheritance outright. Can you imagine giving an 18-year-old child several million dollars?
Even if you don’t have millions, don’t you want your loved ones to be able to enjoy their inheritance but knowing that you can provide them with guidance to help them protect and preserve what you leave behind?
Inadequate, or “Do-It-Yourself” Planning
Nearly 70% of all Americans have done no estate planning at all. But even of those 30% of people who have done some estate planning, many have not done a very good job, and may have unknowingly designed an estate plan that inadequately deals with their property or fails to represents their directions for their children. In many cases these do-it-yourself plans cause confusion, delays, disappointment and unmet expectations.
Heath Ledger had a will. It was a simple, three-page document created before he made his fortune in his Oscar-nominated performance in Brokeback Mountain. When he died at age 28, his 3 page will provided that his estate should be divided equally among his parents and his siblings, but failed to provide anything for his daughter with Michelle Williams. Although his family ultimately provided for his daughter, Ledger left his family a legacy of lawsuits, confusion and negative publicity.
Outgrown or Inadequate Estate Plans
The estate plan that you spent time, thought and expense to get just right on one date will not automatically evolve as your life changes. Even if your estate plan is in place you must remain vigilant. The current battle over Michael Crichton’s estate illustrates this point. Michael Crichton was the creator of movie hits like Jurassic Park and the television series ER. Understanding the importance of sound estate planning, Michael Crichton had apparently planned carefully, incorporating a premarital agreement with his fifth (and surviving) wife into his planning to make sure that he fully provided for his child from a previous marriage. However, Crichton and his wife were expecting a new baby when Crichton died unexpectedly. His 5th wife is now contesting his planning. It appears that despite his careful estate planning, having failed to update or anticipate the possible changes in his life, Michael Crichton will leave a legacy of litigation for his family.
Some celebrities have not gone far enough with their estate planning. For instance, Marilyn Monroe left most of her estate to her acting coach, Lee Strasberg. She left him three-fourths of her estate on the “promise” that he would leave it to charities she wanted supported. But when he died, his interest in Marilyn’s estate actually went to his third wife. Strasberg’s third wife, Anna, eventually hired a company to license Monroe’s products, including Mercedes-Benz and Coca-Cola. In 1999, many of Monroe’s belongings were auctioned off, including the gown she wore to President John F. Kennedy’s birthday party, for more than $1 million. Strasberg ended up selling the remainder of the Monroe estate to another branding company for an estimated $20 million to $30 million, according to NPR. None of Marilyn’s estate benefitted the charities she had asked Strasberg to benefit. In fact it went to Strasberg’s 3rd wife and her family whom Marilyn had never met. If she had included a trust for Strasberg in her planning the trust would have provided for Strasberg while he was alive and then after his death could have directed the remainder of her trust estate to the charities of her choosing.
Even if you have done your planning did you discuss the possibility that your loved ones will become a spendthrift, develop a creditor problem, have a marriage that ends in divorce, or receive government benefits such that an outright inheritance would result in disqualification of those benefits?
Keeping Up with Your Family and Planning
Have you ever heard the expression – nothing is certain in life but death and taxes? In estate planning you are working to protect your family and to minimize the taxes at your death. Although none of us likes to face our mortality, as responsible adults we have to prepare ourselves and our families for the inevitable. Whether you are a billionaire, millionaire or of even more modest means, you want to leave a lasting legacy of family harmony, security, and caring protection for those you love.
Remember Las Vegas legend Sammy Davis Jr. who died in 1990? He was a member, along with Frank Sinatra and Dean Martin, of the “Rat Pack.” Despite a long career in show business, including a Grammy Lifetime Achievement Award, Davis’ estate had dwindled from its height by the time of his death. When he died, he left behind a huge tax bill that the estate was unable to pay. The problem? Although his will left very generous gifts to a lot of people, at the end of the day, his estate was insolvent and the beneficiaries of his will got nothing. Basically, the tax debt exceeded the assets he left.
Estate planning is challenging, but to ensure your family is provided for, planning should not be done and put away. Your planning should be reviewed at least every year or two, and in the case of a major change in your circumstances or life event should be reviewed and updated. Take the time to discuss your needs with a team of well-trained, attentive estate planning professionals.