Americans are drawn to celebrities. We read about their lives, gossip about their deeds and ogle their pictures. Perhaps it is admiration of glamour, fascination with royalty or learning their tricks of the trade. However, celebrities often make the same mistakes as us “commoners.” Let’s use their stories as lessons learned in protecting our wealth and values.
Here are the top four estate planning mistakes by celebrities we want you to avoid:
We want our affairs to be properly handled and loved ones protected when we are gone. However, neither Aretha Franklin nor Amy Winehouse had a will. The Queen of Soul left behind four sons with some financial headaches. Winehouse left an unwritten song about her finances. How did she want her $6.7 million estate to be distributed? To her brother, ex-husband and charity? Absent her written instructions, her estate went through probate and was distributed to her parents. Only one in four Americans have wills according to a 2018 survey by Caring.com. The main purposes of a will are to name guardians of minor children, an executor of your estate and which beneficiaries are to get what assets.
Failing to set up a trust
Glamorous photographs are one thing, but do you really want your financial affairs given red carpet treatment? A will is a public document. With a living trust, your wishes remain private. Several tragedies followed Whitney Houston’s death at age 48. First, Houston’s will named her daughter Bobbi Kristina Brown as sole beneficiary. Second, her daughter, unfortunately, died three years later at age 22. Third, Houston’s estate was involved in a battle with the IRS over the valuation of recording royalties and was assessed an additional tax bill of $2.2 million. Finally, and ironically, her ex, Bobby Brown, may be the heir of the Houston estate.
A living trust can help keep your estate plan private. It designates who is entitled to your assets and how they are to receive them. The document names trustees and the trust may provide estate tax benefits. In the Houston case, a living trust may have helped by providing guidance to Bobbi following her mother’s death. A trust can help leave the legacy you want including harmony in the family.
Not updating the plan
Life changes. Shifting financial conditions, health, family dynamics and relationships may signal the time for an estate plan tune-up or overhaul. Michael Crichton, author of Jurassic Park, was an unfortunate example. He was diagnosed with throat cancer, his sixth wife was pregnant and he didn’t update his estate plan to include his eventual son. His wife sued to include the baby as an heir, and Crichton’s daughter from a prior marriage opposed. Ultimately, the judge ruled the baby could inherit. However, anguish and expense could have been avoided by simply updating the documents. Is it time to contact your attorney to account for important life transitions and reflect your current wishes and situation?
Disabled before death
Also, consider planning for living before you pass. You may be disabled and require assistance in managing your affairs. For example, one out of 10 people aged 65 is diagnosed with Alzheimer’s. The rate grows to one out of three at age 85 and quickly moves to one out of two. Powers of attorney and living wills help protect you and your loved ones in case of incapacity. They too need to be reviewed and updated. The last years of blues singer Etta James, known for “At Last” and “Tell Mama,” were mired in court. The legal battle was between her husband of 42 years and her son from a prior marriage. Etta James signed power of attorney over to the son in 2008, at a time her husband argued that she suffered from dementia and was incompetent. The son wanted to limit the amount of money the singer’s husband spent for her medical care. They finally settled, and the husband was named as conservator, however, he was limited to $350,000 for medical care for his wife. Etta James passed shortly thereafter.
Celebrity misfortunes with their estate planning could be our very own. Avoiding them shouldn’t be left to divinity or luck. Your financial successes in life require a dedicated process of setting goals, making decisions, adapting the plan, and repeating the process.
Secure your future wisely.
You can view this article on the Reno Gazette Journal.