Celebrity Estate Planning Mistakes—Part One

Credit: Matthias Zomer / Pexels.com

Last week I promised to share in the weeks ahead some celebrity estate planning mistakes. Here’s the first installment, courtesy of AARP, beginning with an introduction.

With all the millions some celebrities have, you’d think they would be able to afford good estate planning advice.  But too often after celebrities die, we learn that they made some simple blunders that trigger years of court battles or cost their heirs millions of dollars. Here are the stories of actors, athletes, and entertainers who have passed away — and what we can learn from them financially.

Prince Rogers Nelson’s Mistake: Not having a will. The April 2016 death of entertainer Prince wasn’t just shocking because he was only 57 years old. Many people were also surprised the “Purple Rain” singer had no will. Accordingly, a Minnesota judge was faced with deciding how to distribute Prince’s estimated $300 million estate among six siblings. Other potential heirs have surfaced, too, including a federal inmate claiming to be Prince’s son. 

Not preparing a will is a basic mistake. “But it’s estimated that 60 percent to two-thirds of adults in America don’t have a last will and testament, so Prince isn’t alone,” says Andrew Mayoras, a trust and estates lawyer and coauthor of Trial & Heirs: Famous Fortune Fights! 

Whitney Houston’s Mistake: Not updating the will. Singer Whitney Houston had a will when she drowned in February 2012, but it was quite outdated. Drawn up a month before the 1993 birth of Houston’s only child, Bobbi Kristina Brown, the will was never revised — not even as the singer’s fortune climbed to $20 million. Bobbi Kristina was 18 when her mother died, and under the will’s terms, she was to receive 10 percent of the estate — $2 million — when she turned 21, and the rest later.

By not updating her will, Houston failed to consider whether her daughter was mature enough to handle millions of dollars. Bobbi Kristina got the $2 million but not the rest of her inheritance. She died in 2015, also as a result of drowning and drug intoxication.

James Gandolfini’s Mistake: Not finishing planning. Sopranos actor James Gandolfini was reportedly worth $70 million when he died in June 2013 of a heart attack in Rome. His will provided for his widow, daughter, and two sisters (his son from his first marriage was provided for in other ways). But Gandolfini didn’t use proper tax planning. The result: The estate ended up paying federal and state estate taxes at a hefty rate of 55 percent.

Gandolfini made a will before leaving on vacation but did no planning beyond that. For many people, not just celebrities, a simple will isn’t enough. There are a lot of estate taxes that could be legally avoided with better estate planning.

Stay tuned for next week’s continuation of Celebrity Estate Planning Mistakes. In the meantime, don’t neglect your own estate plan. It’s not too soon to plan your legacy!

Two Important Tasks

Credit: Carlos Muza on Unsplash

Last year I created an Excel spreadsheet for the purpose of planning a family budget for the next ten years. For this purpose, our immediate family is Terry and yours truly.

My thought is that someday I’ll probably want to retire from full time employment. Because I began working for pay from the time I was about 12 years old, and still do so today, fully retiring from gainful employment will be a big step in my life. I’m not ready yet. But it will happen someday.

Be that as it may, I believe it’s not only important but critical for individuals or couples approaching the end of their working career to take a close look at anticipated income and expenses to see how the two match up. So that’s what I did.

The expenses on our list include generous contributions for our home congregation and other favorite ministries and charities; home mortgage, including PITI; auto expenses, including payments, insurance, maintenance, and gasoline; utilities, including water, gas, electricity, cable TV, internet, and cell phones; health and life insurance premiums; groceries, occasional restaurant meals, clothing, and routine household expenses; family birthday and Christmas gifts; travel and vacation allowance; federal taxes; medical expenses; savings; unexpected and miscellaneous expenses.

The sources of income on our spreadsheet include salary, estimated to terminate at an approximate point in time; retirement plan/pension payments; social security checks; income from IRAs, 401(k)s, 403(b)s, and annuities.

I planned for gradually increasing expenses with income adjusted by loss of current salary, followed by stable but slightly increasing revenues. As long as the difference between these two numbers is positive on the revenue side, we should be alright. That’s certainly the plan.

This process is closely related to estate planning myth #6: “No need to make a list of what I own. My family will be able to find it all.” Here’s the reality. This myth is the result of indifference, laziness, lack of care and concern for loved ones. It takes time and effort to create a budget and at least as much time and effort to make a list of assets and liabilities.

To assist in this process, we at Legacy Deo have created what we call the “Red Book.” It’s designed to help record in writing your assets and liabilities; account numbers and balances; contact information for each account, including address, phone, user name, and password; location of important legal and financial documents, etc. This is a very significant document!

Request your free electronic Red Book at mailto:info@legacydeo.org or call (512) 646-4909. You’ll be glad you did. And while you’re at it, get busy on that budget. Both are important tasks!