Poor estate planning knows no socio-economic bounds. What happens to average American tax-payers also happens to celebs who have unusually large estates. But who actually suffers when estate planning is, well, non-existent or just poorly done, regardless of income level? The heirs, that’s who. Whether you’re a famous rock star or not, there are mistakes to be avoided when it comes to estate planning. Here are just a few examples (along with big name celebrities who made them!)
1. No will or trust.
When you die, someone is going to get your assets. The question is who and how long it will take. Dying without a will or estate plan, even the most rudimentary of do-it-yourself documents, means that your estate will go into probate. It also means that a stranger will end up deciding who gets what. Furthermore, it will cost those eventual recipients a little or a lot, depending on how many are fighting for what was yours but is now perceived as theirs. Even if a probate judge awards your belongings to the person that you would have chosen if you had gotten around to it, it may take years for it to actually make its way into their hands. In 2016, mega-star Prince died without a will. His estimated $150 million estate went into probate, to be split among a handful of siblings and half-siblings. Six years and three million dollars in fees later, the case was finally settled.
2. Outdated estate plan.
As marriages come and go, one thing remains: an estate plan, which is why estate language, and the beneficiary plan, should be updated following a divorce. While a divorce is in progress, it is very difficult to remove someone as a beneficiary unless he or she signs off. But it is possible to update a healthcare directive and power-of-attorney, so if you do become incapacitated before the marriage is legally over, your soon-to-be ex won’t be making decisions on your behalf. While most states do not recognize ex-spouses as having property rights, this isn’t the case for retirement benefits and pensions, and this is because pensions are governed by federal laws (Employee Retirement Security Act of 974 – ERSA). Don’t be like R&B star Barry White. White had been separated (but not legally divorced) from his second wife when he died unexpectedly. His biological children from his first wife and his live-in girlfriend of several years received nothing.
3. Failing to fund a trust.
Let’s say you have done the responsible (and kind thing for your heirs) and created a trust with an estate attorney. It’s all there in black and white. Or is it? The step that some people skip, forget about or just put off a moment too long is actually funding the trust, which is legally transferring the ownership of the assets to the trust. Own a car? The title must be changed to the name of the trust (e.g., The John Smith Family Trust). Own a home? Same deal. Even your bank accounts need to be updated with the name of the trust. Otherwise, straight to probate it goes. One notable celeb who made this mistake was Michael Jackson. He created a revocable living trust, but his $500 million estate went into probate resulting in years of legal wrangling by potential heirs and creditors before the estate was eventually sorted out, all because of that crucial final step left undone.
Take the time to create a will or an estate plan and follow through with whatever legal requirements are needed to ensure a smooth transition of your assets to your heirs (and no paycheck for a probate attorney) someday.