Estate Planning Missteps of the Rich and Famous

Nov. 21, 2022

Like us, celebrities create estate plans to direct the distribution of their assets, minimize estate taxes, and accomplish other goals. Also like us, while the vast majority of celebrity estate planning is sound, celebrities and their advisors are prone to making mistakes. However, for every story about a celebrity with an effective estate plan, there are twenty stories that point out the pitfalls (or lack thereof) of estate plans.

Our theory for the reason behind this is two-fold. For one, the story of conflict, tragedy, and loss from a bad estate plan creates a much more interesting drama than a neat and tidy estate. Secondly, famous estate planning blunders create an opportunity to discuss sometimes mundane estate planning topics in an interesting way. Here are notable celebrity estate planning mistakes and what you can learn from them.

Dying Without an Estate Plan or Will

Who did it? Prince, Michael Jackson, Chadwick Boseman (Black Panther), Abraham Lincoln, Martin Luther King, Jr., Jimi Hendrix, Bob Marley, Kurt Cobain, Aretha Franklin, and many others.

Why Does it Matter?

A will is a legal document conveying your wishes regarding the distribution of property, the care of dependents, and names the individuals you have chosen to execute your wishes. Without a will and/or other estate planning documents, your family and the courts have no way of knowing and/or proving what your wishes were.

As a result, the fate of your fortune could be decided in a courtroom, based on the application of state law. This process is called intestate succession.

What Can Happen?

When Prince, the musician, died in April 2016 with an estate valued between $200 and $300 million, many were shocked to find out that he had no will. Over the next year, more than 45 people (including a prison inmate) came out of the woodwork claiming to be heirs.

Ultimately, a Minnesota judge named Prince’s six siblings and half-siblings as heirs, though we will never know what Prince’s true intentions were. Furthermore, the estate may face combined federal and estate taxes in the range of $100 to $150 million. While it is virtually impossible for an estate that large to escape estate taxes, estate tax planning could have helped reduce the tax liability by millions.

Not Reviewing Your Estate Planning Documents

Who Did It? Heath Ledger, Philip Seymour Hoffman, Barry White, Gary Coleman

Why Does it Matter?

Since estate planning documents control everything from the distribution of property to the care of minor children, it is important to review your estate after any significant event. For example, you should review your plan upon momentous life moments. Events such as the arrival of children and grandchildren, a separation and divorce, moving to a new state, or making a significant purchase (especially real estate), are all triggers to review your plan and update it if necessary. Estate planning documents often include broad language that accounts for such events, so in many cases it may not be necessary to draft new documents, but you should, at a minimum, review them to be sure.

Furthermore, remember to review and update beneficiary designations for retirement plans and life insurance policies. Beneficiary designations supersede any direction provided by a will or other estate planning document. Given that a significant portion of any individual’s estate is held in retirement accounts or in the form of life insurance, it is vital to ensure proper beneficiary designations.

What Can Happen?

Heath Ledger had his estate planning documents drafted prior to the birth of his daughter in 2003. When he died in 2008, his will named his siblings and parents as beneficiaries, but made no provision for children, and of course, made no direct reference to his yet-to-be-born daughter, Matilda Rose. As a result, a very public inter-family battle between Ledger’s father and his brothers, who were afraid his father would keep the money, ensued.

Fortunately, this story has a positive outcome; his daughter was granted his entire estate. However, the bad blood and negative publicity could have been avoided with a routine update.

Not Properly Conveying Your End-of-Life Care

Who Did It? Ted Williams, Casey Kasem

Why Does it Matter?

It’s important to review wills, powers of attorney, health care proxies, and living wills to ensure your affairs can be efficiently handled from a medical and financial perspective. Since relationships change and evolve over time, be sure that the people the documents list to make decisions on your behalf are still the people you want making those decisions. Likewise, always name both a primary and successor agent. Finally, when updating documents, destroy old versions and make it clear that this version is your last and final.

What Can Happen?

When Ted Williams died in 2002, his will requested that he be cremated. However, a conflicting document stated he wanted his body to be cryogenically frozen when he died. A public legal battle amongst family members ensued, eventually ending when one side could no longer keep up with mounting legal bills, even after dipping into retirement savings.

While most celebrity estate planning is sound, there are plenty examples of estate planning missteps among the rich and famous. Estate planning is just one of the many areas of financial planning that our team can help with. To learn more, schedule a call with us today.

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For more, download our Estate Planning Guidebook, which includes planning recommendations for a variety of life stages and scenarios, a checklist to help you get started, and more.

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Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.

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