E-Counsel on Lessons to Learn From
Celebrity Estate Planning Mistakes

April 2011
Dear Clients and Friends:
Rich - Business Photo  
Welcome to e-Counsel, a legal newsletter for clients and friends of The Law Office of Richard C. Petrofsky.  Our goal is to provide periodic newsletters on relevant and interesting legal topics.  We hope you find informative and educational material in this and future issues.
 
In this newsletter, we examine some famous celebrity estate plans and the mistakes they made.  Many of us have a fascination with the rich and famous.  But celebrities are just people, and like all people they can make estate planning blunders.  So what lessons can we learn from some of the more famous estate planning errors and miscalculations?  The main lesson is that although celebrities might have more money and fame than we do, their estate planning mistakes are actually quite common and can happen to anyone without careful planning.  In this issue of e-Counsel, we focus on what went wrong for some celebrities so we can hopefully learn from and avoid their mistakes. 

Please feel free to forward this newsletter to others who you think may benefit from it.  Also, please visit our website at www.petrofskylaw.com for additional information about the law, our practice areas and our expertise.  On our website, you can also bookmark and follow our legal blog or find archived newsletters.

 

If you have any comments on how we can improve our newsletter or any suggestions for future topics, please e-mail Rich Petrofsky at rpetrofsky@hnjlaw.com.  

 

Sincerely,
Rich Petrofsky
Lessons to Learn From Celebrity Estate Planning Mistakes
  
I firmly believe that pretty much everyone should have an estate plan, no matter what their net worth or social status.  The estate plans for most of us fly under the radar.  However, with radaronline, TMZ and the vast majority of celebrity "news" shows and Internet gossip sites, not only are the lives of celebrities a matter of public record, but so are their deaths. 

Although many in the public have a fascination with celebrities, they are just people.  And their estate plans can work well or create significant problems for their surviving loved ones.  For celebrities, however, when they make an estate planning mistake, it is posted for all to see.  So what lessons can we learn from some of the more famous celebrity estate planning mistakes?  

In this issue of e-Counsel, we will look at some basic estate planning lessons or rules that can lead to problems if not followed.  For the celebrities we talk about in this newsletter, they learned their lessons the hard way.  Hopefully by analyzing their mistakes, we will be able to avoid them.

 

Lesson One:  Everyone Needs an Estate Plan.

 

Some very famous people have died without a will or other form of estate plan.  Abraham Lincoln was the first President to be assassinated, and also the first to die without a will (and he was a lawyer).  Jimi Hendrix, Sonny Bono, Pablo Picasso and Steve McNair also died without estate plans.

 

If a person dies without a will or other estate planning document, the deceased's property will pass according to state law.  This is called intestacy.  Having property left by intestacy may or may not be the manner in which the deceased desired to leave his or her assets.  When property is left by intestacy, a court decides who is in charge of the estate.  Not having an estate plan can lead to family arguments because the deceased's intentions were not documented.  Ultimately, an estate may be opened for a considerable length of time and at a significant cost. 

 

Let's look at a few examples. 

 

Sonny Bono, an entertainer, singer, songwriter and ultimately a politician, died in a skiing accident.  He did not have an estate plan.  Sonny's wife, Mary, had to immediately go to court and try to get appointed to handle the estate's affairs.  Sonny had business opportunities and royalty arrangements, and with Sonny dead, no one could handle matters which needed immediate attention.

 

Other people, including Cher, made claims against his estate.  One person came forward and claimed to be Sonny's "love child."   DNA had to be taken from Sonny's dead body to determine whether the child was actually his.

 

Sonny Bono could have saved his loved ones a lot of money, grief and aggravation had he just taken the time to draw up a will or other type of estate plan.

 

Steve McNair was the former quarterback of the Tennessee Titans.  When he was shot and killed a few years back he did not leave a will.  What he did leave was a legal mess for the loved ones left behind. 

 

Because McNair did not have a will or other type of estate plan, it was unclear who would inherit what from his estate. McNair was married when he died, but it is a common misconception that a surviving spouse inherits 100% of their deceased spouse's separate assets.  In McNair's case, a probate judge had to determine who McNair's rightful heirs were aside from his wife and his two known sons since he allegedly was the father of other children born out of wedlock.  If McNair had an estate plan, a fight over who would benefit from his estate could have easily been avoided.

 

Even after the McNair's beneficiaries were determined, it still had to be decided what each beneficiary would receive from the estate and how they would receive it.  Minor beneficiaries are probably looking at court-supervised guardianships for their shares.  Again, this could have been avoided with proper planning.

 

From an estate tax perspective, reports were that the McNair estate paid federal estate taxes of a little under $4 million.  With just a little bit of planning, estate taxes could have been completely avoided on McNair's death.

 

Stieg Larsson, author of The Girl With the Dragon Tattoo died in 2004 without a will.  Under Swedish law, Larsson's estate was divided up between his father and brother.  His lifelong partner of 32 years, Eva Gabrielsson, received nothing. 

 

The sad but true fact is that even with a fairly basic estate plan, Sonny Bono, Steve McNair and Stieg Larsson could have protected their wives, partners and intended children, protected their business interests, and saved or even eliminated estate taxes. A truly valuable estate planning lesson for us all.

 

 

Lesson Two:  Do Not Do Your Own Estate Plan.

 

Sometimes people try to do their own estate plan to save money.  The cost of a "due it yourself estate plan" can be much more expensive for the loved ones you left behind. 

 

Let's take Warren Burger as an example.  You would think that a former Chief Justice of the United States Supreme Court would know how to prepare his own will. Sadly though, Chief Justice Burger's self-prepared, 1 page, 176 word will reportedly resulted in unnecessary probate expenses, and likely cost his heirs over $450,000 in avoidable taxes.  According to an Associated Press article in 1995, Justice Burger's will lacked a number of ordinary provisions that resulted in needless costs, expenses and taxes.  All of this could likely have been avoided if Justice Burger had spent a little during his life and retained an experienced estate planning attorney.

If Justice Burger wasn't able to prepare his own estate plan, should you really be preparing your own? 

 

The Lesson - sometimes you get what you pay for.

 

 

Lesson Three:  Not Updating Your Estate Plan. 

 

An estate plan should be reviewed periodically to see if it needs to be updated.  There are many reasons an estate plan may need to be changed.  The law can change necessitating a change in a person's estate plan.  A person's personal circumstances can also change.  People that were named as beneficiaries may have died.  Other people that you would want to be a beneficiary may not have been born when you executed your estate plan.  People that were named to handle an estate, be trustee of a trust, or be guardian for minor children may have died or maybe you just are not as close to them as you once were.

 

Michael Crichton, the author of Jurassic Park and the creator of E.R., had a will when he died, but it excluded any unborn children.  When he died unexpectedly, his wife was pregnant.  This meant his unborn child was completely cut out.  Although Crichton left a will, he also left a legacy of distress, uncertainty and litigation for his family.

 

Anna Nicole Smith, former Playboy playmate and reality television "star," had a will which left everything to her son.  Her will specifically omitted any children not living at the time the will was executed.  Smith's son died before her.  She also gave birth to a daughter after she signed her will.  Therefore, her will left everything to her deceased son and nothing to her living daughter.  The legal battle which took place after her death could have easily been avoided had Smith simply updated her will (or had a provision in her current will which provided for after-born children). 

 

Heath Ledger, who won the Oscar for playing the Joker in The Dark Knight, established an estate plan, but did not update it after the birth of his daughter.  In fact, when Heath Ledger signed his estate plan, he did not have any children and he left his entire estate to his parents and siblings.  His young daughter was completely left out because Ledger did not update his documents after she was born.

 

The Ledger family was divided over the proceeds of Heath Ledger's estate.  Everyone said they were looking out for Ledger's daughter, but a legal battle still ensued which could have been avoided had he just updated his estate plan. 

 

The Lesson - not updating your estate plan is not a joking matter.

 

 

Lesson Four:  Do Not Take Shortcuts.

 

Although an estate plan may need to be updated, you should not take shortcuts.  Simply writing some change on a piece of paper, crossing things out of your will, or handwriting in additions could lead to unintended consequences.

 

After Princess Diana died in a car crash, a letter of wishes was discovered with her estate planning documents.  The letter called for a quarter of her personal possessions to be distributed to her 17 godchildren.  The executor of her estate did not follow the instructions in the letter and instead gave each godchild a small trinket.  A court ruled that not following the letter of wishes was proper.

 

Assuming Princess Di wanted her personal possessions to be distributed to her godchildren (which seems pretty safe since she wrote it down), her intent was not followed. 

 

The Lesson - a person's intent needs to be incorporated into his or her will or other estate planning documents and not placed in a separate and unrelated written instrument.  It should be noted that in Missouri, if a will makes reference to a "written list," a person can leave certain types of personal property outside of a will provided that the written list is dated and signed. 

 

 

Lesson Five:  Someone Needs to Know Where You Keep Your Estate Plan

 

If you have taken the time to have an estate plan drafted, someone needs to know where it is.  An estate plan that no one can find is just as bad as not having an estate plan at all.

 

Olympic sprinter Florence Griffith-Joyner ("Flo Jo") presumably had taken the time to prepare an estate plan.  When she died at age 38, the original could not be located.  As a result, her estate remained open for over four years.  Joyner's husband and mother took their disputes, including whether Joyner promised her mother that she could live in their house for the rest of her life, to court which incurred unnecessary expenses and delays. 

 

Probate courts always want an original will as opposed to a copy.  If the original cannot be located, the presumption is generally that it cannot be located because it was revoked. 

 

The Lesson - keep your original estate planning documents in a safe place, but not so safe that no one can find it. 

 

For more information on what a person should do with their estate planning documents once they are executed, see a prior newsletter we published titled "Now that I Signed My Estate Planning Documents, What Should I Do With Them?"

 

 
Lesson Six:  Finish What You Start.

 

Many people have revocable living trusts as part of their estate plan.  Revocable living trusts are beneficial for a number of reasons, including that probate is avoided for all assets which are placed in the trust.  Avoiding probate saves time, expense and publicity.  However, signing a revocable living trust is not enough to avoid probate.  You actually have to fund the trust with assets.

 

Pop singer Michael Jackson created a revocable living trust as part of his estate plan.  His trust, however, was never fully funded.  This defeated one of the primary purposes of his estate plan.  Michael Jackson's estate went through probate, incurred probate expenses and the legal battles became a matter of public record for all to see.

 

The Lesson - by way of an analogy to football, you don't get any points for bringing the ball to the ten yard line - if you started an estate plan, make sure you finish it by dotting all the i's and crossing all the t's.

 

 

Lesson Seven:  Do You Really Want to Leave Your Property in a Way That Invites Challenge?

 

Sometimes the way a person leaves his or her property simply invites a challenge.  This is not to say that a person should leave his or her property in a way they don't want.  It simply means that maybe they should think about it and take precautions.

 

The so-called Queen of Mean, Leona Helmsley died with an estate plan that left $12 million in trust for her dog.  She also disinherited two of her grandchildren.  The grandchildren filed suit and reportedly settled for $6 million.  The dog apparently got his inheritance cut back to $2 million (which could still buy a lot of milk bones).

 

Contrast Leona Helmsley with Frank Sinatra who did it his way.  Sinatra put a "no-contest" clause in his estate  plan.  This means if somebody challenges the way he left his property and they lose, they get completely cut out for making the challenge.  Sinatra's estate plan supposedly favored one child over the others, but no one contested.  Everyone took what they got and no one was too greedy, in fear of losing what was given to them in Sinatra's estate plan.

 

The Lesson - if your estate plan seems to invite a challenge, think about taking certain precautions that could help ensure your intent is followed.

 

 

Lesson Eight:  If You Have a Business or Estate Tax Will be Due, Plan Ahead.

 

For many people, interests in a closely-held or family business make up a large percentage of their estate.  Who will run the business after they die and how will estate taxes be paid without having to liquidate the business?

 

When Joe Robbie died, his estate had to pay a reported $47 million in estate taxes.  The single largest asset in Joe Robbie's estate was the Miami Dolphins football franchise.  In order to pay the estate tax, the team had to be sold.

 

Families struggle with how estate taxes will be paid all the time, especially when an illiquid asset such as a family business makes up a large part of the estate.  There are many ways to ensure liquidity and/or efficiently pass on property without incurring unnecessary estate tax.  Life insurance, gifts or sales to family members or trusts for the benefit of family members are typically used provide liquidity or pass on a business to other generations. 

 

The Lesson - if estate tax is a concern, it is essential that you plan a head.

 

 

Lesson Nine:  Make Your Intent Clear. 

 

If something is important to you, your wishes need to be clearly stated.

 

Telling some people some things and other people other things, or giving conflicting directions over time can only lead to problems.

 

Baseball player Ted Williams said he wanted to be cremated.  However, after his death, two of his children produced a note saying he wished to be put in "biostasis" and his body was froze until 2002.  Another child fought to have his body unfrozen and cremated.

 

The Lesson - conflicting directions or expressions of intent could lead to litigation.  If you change your mind about your burial wishes, make your intent clear in a will or codicil to a will.

 

 

Lesson Ten:  Choosing an Untrustworthy Personal Representative or Trustee.

 

Think about it.  Everything you saved and collected during your life needs to be disposed of in some manner at death.  You need to appoint someone to oversee all of this.  Someone you trust.  Someone who will do what you want.

 

Tobacco Heiress Doris Duke died with an estimated estate of approximately $1.3 billion.  She named her butler as executor and trustee of a charitable foundation.  After the butler's lifestyle and spending habits were questioned (surprise, surprise), he was removed from his duties by one court, reinstated by another, and a settlement was ultimately agreed to where a board of trustees would manage the foundation.

 

The Lesson - Don't let your butler do it.  Pick someone competent and trustworthy to handle your estate. 

  

 

Conclusion

 

Celebrities have the same estate planning problems we all do.  Hopefully we can learn from the mistakes of the rich and famous and not make these same type of errors ourselves.

 

If you have any questions regarding the contents of this issue of e-Counsel, please do not hesitate to contact us.

 

  

CIRCULAR 230 DISCLOSURE

 

Under U.S. Treasury Department guidelines, we are required to inform you that (1) any tax advice contained in this communication is not intended or written to be used, and cannot be used by you, for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or by any party to market or promote any transaction or matter addressed herein without the express and written consent of Helfrey, Neiers & Jones, P.C., (2) Helfrey, Neiers & Jones, P.C. imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein, and (3) any fees otherwise payable to Helfrey, Neiers & Jones, P.C. in connection with this written tax advice are not refundable or contingent on your realization of federal tax benefits from the advice contained herein.

About Our Law Firm
 
The Law Office of Richard C. Petrofsky
120 S. Central, Suite 1500
St. Louis, Missouri, Missouri 63105
Phone:  (314) 725-9100
 
Rich Petrofsky acts as Of-Counsel at Helfrey, Neiers & Jones, P.C.