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Some Common Estate Planning Mistakes (Made by Celebrities) That Are Best Avoided

What might happen if you have the talent for success, but not the talent for business?

As can often be the case, many extremely talented people accumulate large estates and they often are not prepared to take on the task of organizing the transfer of assets, according to the Reno Gazette Journal in “Yes, even celebrities make estate planning mistakes.”

Here are the top four biggest mistakes:

No Will. The biggest names who had no Will: Prince, Aretha, Amy Winehouse, and that is just a few. Winehouse left an unwritten song about her finances, but she also left a $6.7 million estate. She had a brother and an ex-husband, but no direction as to who should get what. Without a Will, her estate was distributed to her parents. You need to have a Will to ensure that your assets are distributed according to your wishes.  Having no Will also often leads to some kind of litigation, costing the surviving family a lot of money.

Not setting up a Trust. Celebs want their glamorous red-carpet photos all over Instagram and Facebook, but that does not mean they want their personal finances to become public record. A Will is a public document, but a Living Trust keeps things private. There was more than one tragedy that followed Whitney Houston’s death. Her Will named Bobbi Kristina Brown as her sole beneficiary. However, her daughter died three years later. Then her estate was tangled up with an IRS battle over the valuation of recording royalties. The bill from the IRS: $2.2 million in additional taxes. Her ex, Bobby Brown, may yet end up the heir of the Houston estate, and that was probably not what Whitney wanted.  Not only would a Trust have kept her finances private, but it would have addressed how to distribute her Estate after her daughter’s death.

Not keeping the plan up to date. Life is all about change.  Everything changes - financial conditions, health, family relationships, divorce, marriage, birth, adoptions and estrangements. The world-famous author Michael Crichton, author of Jurassic Park and many other best-sellers, was diagnosed with throat cancer when his sixth wife was pregnant. His Will was not updated. She had to sue to include their new baby as an heir, and a daughter from a prior marriage opposed it. The Court ultimately ruled that the baby should inherit; however, simply updating his Will would have resolved everything without the additional litigation costs, stress and rancor.

Ignoring the Potential for Disability before Death. Estate planning is also for the living. You may be disabled and need help in managing your financial affairs. One out of 10 people over age 65 are diagnosed with Alzheimer’s disease, then at age 85, the rate skyrockets to one out of three. One celebrity whose dementia led to a nasty family rift was Etta James, the blues singer best known for the classic “At Last.” She had a signed Power of Attorney over to a son from a prior marriage in 2008. Her husband of more than 40 years said that she was already suffering from dementia and was not competent to sign any legal documents at the time. The son wanted to limit the amount of money the singer’s husband spent on her medical care. They finally settled, and her husband was named as her Conservator. However, he was given a limit of $350,000 for the care for his wife. Etta James passed away shortly thereafter.

Celebrities are not the only ones who make enormous mistakes when it comes to estate planning. However, they are the ones that we read about.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, and can help you avoid those costly mistakes.

Reference: Reno Gazette Journal (Nov. 14, 2018) “Yes, even celebrities make estate planning mistakes”

Your Estate Plan May Be Done, but Is the Job Finished?

As life progresses, an estate plan becomes even more important to you and your family.

As a person’s life progresses and the difficulties that can arise do, they are often motivated into creating an estate plan, but that is not necessarily the end of the story, according to the Brentwood Home Page in “The will and estate plan are done, what now?”

Once your Will and estate plan are done, the planning process does not stop, even in the face of an urgent situation. There are still tasks that must be done, and perhaps the most important one of all is talking with family members about the plan and what your wishes are.

Many families get started on their estate plan in the attorney’s office, discussing what they want to happen to their assets, who their executor should be and how they want their end-of-life decisions to be made. However, they find it difficult to discuss those issues with their children, and as a result, when the first parent passes, the only one who knows what the plan is (and where it is) is the surviving spouse.

Will the adult children know where to find the documents if the surviving spouse is so bereft that he or she is not functioning well? Will the surviving spouse or the children know what the next steps should be?  Will the person who was designated the executor know that this is their role?

Once you have completed your estate plan, do not leave out this critical next step. The executor and those left when you (or your spouse) have passed have a big job ahead of them, and you do not want to make it harder.

It can take months or sometimes years to settle an estate.  Here are a few facts to be aware of:

• Wills and estate plans are not filed with the court before death. The estate planning attorney may have a copy, but the court will want the original documents.
• The executor will need original death certificates.
• An attorney, possibly the same one who created the estate plan, should guide you through the settlement of the estate.
• Once the Will is probated and the executor is appointed, the beneficiaries will need to be named and creditors notified.
• The decedent’s property will need to be managed. This can be tricky if he or she owned a business, rental properties or other assets that require day-to-day management.
• Tax returns must be filed.

The administration of an estate is not a simple process, and many people to handle it without professional assistance. However, that is not a good idea.

An experienced estate planning and estate administration attorney can advise you on creating an estate plan that suits your unique situation, and then can help your heirs implement your plan after your death.

Reference: Brentwood Home Page (Oct. 31, 2018) “The will and estate plan are done, what now?”

Decedent’s Estate Held Not Bound By Arbitration Agreement

The Alabama Supreme Court has ruled that the daughter of a deceased dementia patient does not have to submit to binding arbitration with a nursing and rehabilitation center because she did not have the authority to sign the agreement, according to Legal NewsLine in “Alabama Supreme Court: Daughter in wrongful death case didn’t have authority to sign arbitration agreement,”

The woman, Rhonda Stephan, signed an arbitration agreement when her father was admitted to a nursing home (the Millennium Nursing and Rehab center). This is something that many family members do since it is part of many nursing home’s admissions requirements.  However, the Supreme Court said that the woman did not have the power or authority to do so because she signed as a family member and not as a Power of Attorney.  Because of this, when the woman became the personal representative of her father’s estate, she was not bound by the arbitration clause.

By way of background, Stephan, on behalf of her father’s estate, sued the Millennium Nursing and Rehab center for wrongful death following her father’s death in 2015. The facility moved for the enforcement of the arbitration agreement and the Madison Circuit Court agreed when it granted Millennium’s motion to compel arbitration.  Subsequently, the State Supreme Court found that Stephan’s father had been too incapacitated to enter into any legally binding contract when he was admitted, and that Stephan had signed the agreement as a family member, not as a power of attorney.

This case presents an interesting legal issue - if a family member has power of attorney, which is frequently the case, and they sign all the admission papers to have their family member admitted to a care facility, in what capacity are they signing those papers?

If you are serving as someone’s power of attorney, you should consult with an experienced estate planning attorney regarding the responsibilities and liabilities of your role.

Reference: Legal NewsLine (Oct. 30, 2018) “Alabama Supreme Court: Daughter in wrongful death case didn’t have authority to sign arbitration agreement”

Multi-Jurisdictional Estate Planning

Many people retire in the snowy north and head to the warm south for a few months each year. If that is your scenario, it would be wise to keep your estate plan current because state laws are not usually the same, and your plan needs to take that into account, according to The Indiana Lawyer in “Multi-jurisdictional estate planning requires research, collaboration.” 

This multi-state approach applies to anyone with property in more than one state—or country.  Their estate planning attorney needs to understand and advise them about the laws governing each of the jurisdictions where they have assets. It requires extensive research and may require the help of other attorneys.  If the cost is a concern, understand that the cost of doing this after death will likely become far more costly.

The first step is to identify the assets and where they are located, and then determine where the client maintains legal residence.   People often have property in a few states, as well as bank accounts in a few states. Tangible assets, such as real estate, and intangible assets, such as bank accounts, are treated differently in estate planning law.  Tangible assets are typically governed by the law where the asset is owned, while intangibles are governed by the law of where the client resides. One way to simplify this process is to put all the assets into a revocable trust, which helps the client avoid multiple ancillary probate proceedings.

Many states have probate laws with similar general principles; however, the details are often different.  The problems become even more complex when the person has assets in foreign countries.  In some countries, forced heirship will actually prohibit citizens from dictating where their assets go after death. In these countries, a certain percentage of a citizen’s assets must go to their children, spouse, etc. And some countries do not recognize the concept of a trust, so creating a revocable trust to avoid ancillary probate will not work in those countries.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, and that may include multiple jurisdictional estate planning.

Reference: The Indiana Lawyer (Oct. 17, 2018) “Multi-jurisdictional estate planning requires research, collaboration”

Transferring Property After A Death Can Be Challenging

There is a lot of paperwork involved in transferring property/assets and it all needs to be done correctly.

Ownership of property/assets must be transferred from one owner to another after someone dies.  When someone passes away, that creates the need for a lot of paperwork that needs to be done at once, according to U.S. News & World Report in "How to Deal With the Paperwork Scramble After a Spouse Dies."  It is easy to get overwhelmed and make costly mistakes when there is that much paperwork to fill out and file in such a short period of time.  Those mistakes require even more paperwork and time to fix. People who are grieving and who do not know all the things that need to be done are prone to making numerous mistakes all the time.

Although every estate administration presents its own unique circumstances and challenges, the process of administering an estate in a modern world is usually much more complex and time consuming than most people realize. Estate administrations present the person administering the estate with numerous requirements and tasks that must be performed in a timely manner, and most people simply do not have the knowledge, the skill or the time required to properly complete them. Unfortunately, many people will attempt to administer the estates of their loved ones without professional assistance, and they eventually become frustrated, confused and intimidated when they encounter procedures/issues with which they are not familiar. As a result, such people either encounter substantial difficulty in completing certain tasks or unknowingly fail to fulfill all of their responsibilities (which will likely lead to some form of litigation or other adverse ramifications).

An experienced estate administration attorney can assist you with the many complex administrative tasks associated with the administration of an Estate.

Reference: U.S. News & World Report (June 19, 2018) "How to Deal With the Paperwork Scramble After a Spouse Dies."

What Do You Do When You Cannot Find the Will?

There are some essential steps to follow if there appears to be no Will.

If a parent passes away and did not leave a Will, or you cannot locate one, there are a few steps people need to take, according to Forbes in "Your Parent Didn't Have a Will: What Should You Do Now?"

Those steps include (but are not limited to):

• Check to see if your parent had a safety deposit box. Your parent might have created a Will and put it in their safety deposit box. It can be difficult to gain access to these boxes, but it is possible.
• Search around the house for a Will. Check any place your parent put any important financial or legal information. You might find a Will stuffed away in some old file folder at the back of a drawer.
• While you are doing this, gather all of the information that you can find about your parent's finances. This information will help you later, so you might as well get it while you are searching for the Will.
• Hire an estate administration attorney to assist you with the administration of your parent’s estate. The attorney can assist with the probate process and make the overall administration process much easier on you.

Reference: Forbes (June 4, 2018) "Your Parent Didn't Have a Will: What Should You Do Now?"

Michael Jackson Estate Files Another Lawsuit

The Jackson Estate has filed many lawsuits. This time it is suing the Walt Disney Company over a documentary.

The Walt Disney Company is being sued by the Michael Jackson Estate over a documentary that includes footage of his two children, plus short clips of two of his songs. Disney claims it did not need permission because it is a documentary, according to TMZ in "Michael Jackson Estate Sues The Walt Disney Co. You've Got Balls For Exploiting MJ's Kids!!"

The estate does have a duty to protect any copyrights entrusted to it, but is has filed many lawsuits over the years and remains in litigation. As a general rule, if someone were to make a movie and use an entire Michael Jackson song in it, then the estate would need to file a lawsuit if the song had been used without permission. However, in this case the estate might be a little overzealous.

Copyright does allow for the use of material without permission if that use falls under the fair use doctrine.  Doctrine normally does allow for short clips of material to be used and more material can be used if it is done for educational purposes.

Reference: TMZ (May 30, 2018) "Michael Jackson Estate Sues The Walt Disney Co. You've Got Balls For Exploiting MJ's Kids!!"

Be Sure to Choose the Right Executor

Sometimes little thought is given in the choice of one’s Executor - and that can create problems in an estate administration.

The person in charge of your estate after you pass away is the Executor. Instead of thinking about whether the person they are choosing is the right person, many people just pick their oldest child or a close relative. However, this can be a very big mistake if the person is not organized or not financially knowledgeable, according to Forbes in "Choosing an Executor for Your Estate."

The Executor of your estate will have a lot of work to do during your estate administration, and there are often important tax decisions that need to be made quickly.  Among other things, your Executor needs to determine what assets you have at the time you pass away and collect them all for distribution.

But first the Executor needs to go to probate court and be officially appointed to administer the estate. They will then need to determine if you had any debts when you passed away, and that debt needs to be paid out of your assets before any property can be distributed to your beneficiaries.

Your Executor needs to be someone who not only has the time to serve in the capacity, but also can handle administrative and financial tasks well.  You should put some thought into this important decision and visit with an experienced estate planning attorney to advise you on creating an estate plan that fits your unique circumstances.

Reference: Forbes (May 16, 2018) "Choosing an Executor for Your Estate."

Scammers Prey on Hopeful Heirs

People do inherit from a long, lost relative.  However, it is not all that often.

If you should inherit money from a long lost relative, someone administering the estate will contact you and let you know. This always comes as a very welcome surprise for the heirs. However, this rare occurrence is also the subject of a very common scam that might be increasing, according to the Gazette Extra in "Police warn of IRS, inheritance scams."

The scam is not a sophisticated one. It usually consists of someone receiving a letter in the mail informing them of an inheritance, but with a catch. To make sure the person receiving the letter is the appropriate heir, the “heir” is required to provide some personal details and send cash back to help facilitate the process.

This should raise alarm bells, but people want the inheritance so badly to be legitimate, that they are often taken in by the scam. They not only lose the cash they sent, but they are often then the victims of identity theft. How? It is because they have given the scammers too many personal details.

While a legitimate attorney might someday contact you about an inheritance, that attorney will never ask you for money up front to tell you about any inheritance that you might receive. If you receive word that you have an inheritance coming, do not send the messenger any money.  

Reference: Gazette Extra (April 19, 2018) "Police warn of IRS, inheritance scams."

Leftover Items from Estate Sale are Not Free

An estate sale is a good way to get rid of unwanted items.  However, sometimes things end up badly.

Colorado police filed a report about an estate sale that went badly, but the case was dropped for lack of suspects, according to Fox News in "Colorado house ransacked after estate sale mix-up."

The incident, which turned out to be a mix-up, occurred when Longmont resident Mary Andrews had a garage sale but did not manage to sell everything she had to offer.  That was not unusual for an estate sale.  However, before Andrews cleaned up all of the leftover items from her lawn, she left her house without locking her door. When she came home later, she found a lot of people inside her home taking everything that was not nailed down.

What happened? An estate sale was supposed to be held two doors down from Andrews. People mistakenly believed that hers was the house for the estate sale.  Furthermore, these people mistakenly believed that everything left over, which included the items in her house, were all left over and free for anyone who wanted them.

Reference: Fox News (March 28, 2018) "Colorado house ransacked after estate sale mix-up."