You hate the idea of dying. We do too. However, we bet what you hate even more is the idea of your husband’s ex-wife inheriting millions in insurance proceeds, because he never updated his beneficiary designations.
Documents that were never updated, beneficiary designations that haven’t been changed in decades and other estate planning mistakes can keep assets tied in up probate court for years. For celebrities, these mistakes get on the front page, says Kiplinger’s in the article “6 Estate-Planning Mistakes Celebrities Made.” Your estate issues may not make the national news, but you still don’t want to make these mistakes.
A person with a simple estate or someone with substantial net worth, numerous assets and a team of advisers can make estate planning missteps that have far-reaching consequences. Let’s look at some well-known people who made estate-planning mistakes that affected their intended heirs.
No Estate Plan Whatsoever. Right after Prince's 2016 death, we found out that he didn't have a will. If you die without a will (known as dying “intestate”), the task of dividing your assets is left to the state court. A Minnesota judge was left to distribute Prince's $200 million in assets among his six siblings and half-siblings. Now two years after the singer’s death, bankers, lawyers, and consultants have earned millions (so far), and his heirs haven't received a dime. Instead of letting a judge make the decisions on who gets your property, draw up a will. Work with a qualified estate planning attorney.
Not Removing Beneficiaries From Your Estate Plans. When singer Barry White died in 2003, he was separated, but not yet divorced from his second wife. She inherited everything. His live-in girlfriend of several years and nine children received nothing. White's girlfriend, his daughter, and son filed lawsuits. During the divorce, your options for limiting your soon-to-be ex's inheritance are limited. For example, if your spouse is the beneficiary of your 401(k) plan, federal law won't allow you to disinherit him or her, without his or her signature. Any other changes can also complicate divorce proceedings. Check with both your estate planning attorney and divorce attorney. You can update your financial and your health care power of attorney to make certain that your soon-to-be ex won't be the person making financial or medical decisions on your behalf, if you're unable to do so. Make sure to update the rest of your estate plans after the divorce.
Failing to Add Beneficiaries to Your Estate Plans. When Heath Ledger died at age 28 in 2008, his will left everything to his parents and three sisters. This is O.K., but his will was written before his daughter, Matilda, was born. As a result, the then 2-year-old and her mother, actress Michelle Williams, got nothing (Ledger's family gave all the money from the estate to Ledger's daughter). A life-changing event should make you act to review and update your estate-planning documents and the beneficiaries who are named on your financial accounts. Work with an estate planning attorney to help avoid these pitfalls.
Hiding the Whereabouts of Your Estate Plan. Even if your estate plans have the details covered, it won’t help anyone if no one can find the originals. Olympic sprinter Florence Griffith-Joyner was thought to have had a will, when she died in 1998. However, her family couldn't find it! Years of legal battles followed, as Joyner's husband and her mother couldn't agree on whether or not she said her mother could continue to live rent-free in the couple's condominium for the rest of her life. Most estate planning lawyers will keep a copy of your will or trust on file. However, you should also have the original documents in a safe, accessible location. Let at least two people know where to find the documents. One of these people may be the executor of your estate or a trusted family member.
Failing to Put Promises in Writing. When actor Marlon Brando died in 2004, he left most of his $26 million estate to his producer and other friends. His longtime housekeeper said that he’d promised her that she’d inherit his home, when he died. However, the actor either never promised her the home or never put the promise in writing. She later sued Brando's estate for the value of the home, plus $2 million in damages (the case was settled in 2007 for $125,000). Put each of your wishes in writing and update your estate planning documents to include new promises or beneficiaries.
Neglecting to Fund a Trust. The battles over Michael Jackson's $500 million estate were as big as the estate. He had a revocable living trust created that was intended to transfer wealth to his children and his mother on his death. However, the trust was never funded. His entire estate went through probate, while his kids and his mother lived on an allowance. Granted, $8 million a year isn’t exactly spare change, but the costs and delays were considerable. The estate’s executor and a judge had to oversee the estate. During that time, there were many legal challenges from creditors and other family members.
Had it been funded, the trust would have streamlined the process of transferring assets and avoiding probate. Avoiding probate, in Jackson’s case, may have lessened the number of people showing up with claims. Privacy is a luxury created by estate planning.
Reference: Kiplinger (August 31, 2018) “6 Estate-Planning Mistakes Celebrities Made”