Part 2: Estate Planning Mistakes of Celebrities
Over the next couple of weeks, you will receive a series of articles entitled “Lessons Learned from Estate Planning Mistakes of Celebrities,” demonstrating why probate is such a nightmare and lessons that can be learned from the costly mistakes of celebrities.
Part 1 will explain how Amy Winehouse didn’t have an Estate Plan, leaving behind a $6.7 million estate.
Part 2 will describe how Whitney Houston didn’t have a Living Trust and her Will was filed publicly in probate court.
Part 3 will explain how Michael Crichton didn’t update his estate plans, leaving his wife and baby empty-handed.
Part 4 will describe how Etta James didn’t have a Durable General Power of Attorney, causing a father/son feud in court.
Below is Part 2:Whitney Houston Didn’t Have a Living Trust – Her Will Was Filed Publicly in Probate Court
Would you want others to see private details such as how much money you had and who you left it to when you died? Did you know that this can happen if you die with only a Last Will and Testament, which is by law a public document?
Singer Whitney Houston had a Will, but didn’t have a Living Trust. As a result, instead of her final wishes remaining private, her Will was filed in probate court and her information became public for all the world to see.
Whitney’s Will was written so that her beneficiaries receive their inheritances outright. Whitney left most of her assets to her daughter Bobbi Kristina. Because her daughter is 18, she is entitled to receive everything at once with a Will in place. However, according to TMZ, there have been concerns about Bobbi Kristina’s responsibility and her struggles with substance abuse issues, much like her mother.
If Whitney Houston did her Estate Planning using a Living Trust, this result would have been avoided. Unlike a Will, which passes through probate court, a Living Trust is handled privately, outside of court. Living Trusts typically have provisions to spell out what beneficiaries inherit, when, and how. Typically, young adults (in our firm, this typically means adults under the age of 25, but could be defined differently in the trust document) do not receive money under a Living Trust until they reach a certain age. Typically Living Trusts state that money going to younger beneficiaries is to be managed by a Trustee and used for their benefit, for things like health, education, living expenses, but not given directly to the younger beneficiaries to spend and control.
As we explained last week in Part 1 of our series, here at The Law Firm of Evan H. Farr, P.C., we almost always recommend that our clients use a Living Trust as their primary Estate Planning tool, in order to protect assets at death from being forced through the nightmare of probate. A Will allows you to name your beneficiaries (the people you choose to inherit your assets) and your executor (the person who manages your estate), but a Will does NOT protect your assets from the dreaded probate process. Only a Living Trust, properly funded with all of your assets, protects those assets from the probate nightmare.
In Part 1 of our series, we examined two of the reasons that probate is such a nightmare. Here are two more reasons:
1. Probate can take years, unless your executor is certain that there aren’t any debts owed by the estate and he/she is willing to accept personal responsibility for your debts. Virginia probate law mandates that your assets will not be distributed for at least one year after your death, to allow creditors the time to petition the court for full payment. Any assets disseminated before that time come with a sizeable cost for your executor and he or she will become personally liable for the repayment of the complete amount, even if the beneficiaries to whom distribution is made have spent the amount distributed to them already. Therefore, your executor will more than likely be very hesitant to distribute anything before all the debts and taxes are disbursed. The court, rather than your family members, will supervise and permit the settling of all debts and the payment of inheritances, with its delays and in its own time.
2. On average in the United States, the probate process takes approximately 5% of your family’s estate out of your beneficiaries’ hands and gives it to the courts and other outside individuals. Planning with a Living Trust can save the typical American family about $30K in probate expenses, attorney fees, and court costs alone, based on the findings of a national study conducted by the AARP. The upfront cost of a Living Trust is not significantly higher than the cost for a simple Will, but the savings you will see in the end almost always make the initial costs more than worthwhile.
In Part 3 of this series, we’ll examine another “celebrity mistake” and examine more reasons why probate is such a nightmare. Learn more about the benefits of using a Living Trust for Estate Planning.
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