097: Estate Planning Lessons from the Rich and Famous

It’s hard to deny that we now live in a celebrity-centric society. At one time, programming like “Lifestyles of the Rich and Famous” seemed a novel concept. Now we’re bombarded almost daily with content chronicling the everyday activities of celebrities of all kinds — including stars with no real claim to fame other than having amassed a large following on social media.

Our fascination with the rich and famous is hard to put down. We like to believe that our favorite celebrities are like us — they walk their dogs, go shopping, hit the gym, and live much like we do. That’s probably why all that TMZ-style photo and video content centered on celebrities going on about their daily lives is such a mainstay of social media. It reinforces the notion that stars are very similar to us despite their wealth and fame.

Comforting as that may be, most of us — probably yourself included — also realize that, in some respects, celebrities are, in fact, nothing like us. After all, multi-million-dollar estates, exotic cars that cost more than many houses, entourages, and travel via private jet are luxuries that few of us get to experience.

Considering the financial resources at their disposal, you’d think that most celebrities would have a legion of financial experts at arm’s reach to not only maximize their income but also build estate plans that leave nothing to chance when it comes time to transfer all that accumulated wealth to the heirs of their choosing.

As it turns out, that’s often not the case. When it comes to estate planning, many celebrities are very much like us, either putting it off entirely or dealing with it in a haphazard fashion. In our newest episode of Absolute Trust Talk, Kirsten Howe and associate attorney, Madison Gunn, take a closer look at some of the surprising missteps — ranging from poor planning to outright avoidance — that many members of the rich and famous have made when planning for that time when they’ll no longer be around.

A number of these situations will probably seem pretty familiar, yet the fallout from these celebrities either taking ill-conceived actions — or no action at all — can be substantial. Huge amounts of wealth that could have otherwise been shielded end up in the government coffers via taxation, heirs battling it out in court for years (literally), and some heirs being enriched to the extent that has led them down a tragic, and sometimes even fatal, path.

It’s a bit of a departure from most of our ATC podcasts, but it still maintains a common thread. You’ll hear stories about the rich and famous that are, at times, both sobering and entertaining, and yet there’s no shortage of teachable moments included. Besides being better equipped to avoid estate planning mishaps, you’ll also walk away from this podcast with a better idea of the right steps to take for a smoother process when planning and administering your estate.

In this episode, we’re going to discuss:

  • How, despite wealth and access to the best financial advice, celebrities often avoid the topic of estate planning altogether
  • The challenges that come with estates that include music rights and other intellectual property
  • Missteps by the rich and famous that have led to the government taking huge shares of estates at the expense of potential heirs
  • How poor planning has led to heirs being enriched to the extent that they proved unable to handle
  • Why having the best of intentions and communicating them to others is no substitute for a properly executed will
  • The privacy implications of a celebrity dying intestate

And more.

Because so much wealth is usually at stake, we tend to assume that the rich and famous almost always take the necessary steps to ensure their estate plans reflect their intentions and are airtight. Unfortunately, this is often not true, but as you’ll see, when celebrities either improvise with their estate plans — or take no action — the consequences can be enormous. The fallout may make for good tabloid fodder, but at the same time, it’s sobering.

Big Three from Episode #096:

  1. Because estate planning involves thinking about a time when we’ll no longer be around, it’s inherently unpleasant to most of us. That might lead you to believe that dying intestate without a will would be the most common misstep that the rich and famous make. It does happen surprisingly often, but there are also a variety of other reasons that the passing of a celebrity has led to a veritable feeding frenzy and plenty of bad feelings that can teach us a lesson. They include failure to fund a trust, not signing or executing your will properly, throwing your wishes together in a document that doesn’t protect your estate, or dying without anything in place. That means years or probate ahead.
  2. You see it all the time in movies — a person facing their own mortality either tells a loved one how they want their estate to be distributed or scribbles out a note and then haphazardly sets it aside for the future. When that fateful moment occurs, neither is sufficient to ensure a smooth transfer of assets to the intended heirs. Half of your money could go to the government in taxes, hundreds of people can come out of the woodwork claiming rights, and more.
  3. The desire to want the best for our loved ones is nearly universal. Small wonder that the death of a wealthy person often leads to a financial windfall for his/her heirs. And yet, this windfall can sometimes lead to unintended outcomes for those heirs that not only aren’t in their best interest but are downright tragic. For example, if a child or young heir gets a large sum of money, will they know how to handle it? Or will they go through it all quickly? In our discussion, we have a few examples where Hollywood royalty left behind large sums of money to children who couldn’t handle it, and they ended up, unfortunately, dead.

Time-stamped Show Notes:

0:00 Introduction

2:20 Let’s kick things off with Prince. His estate is a perfect example of how dying intestate can lead to plenty of confusion and a financial windfall for the taxman.

4:45 This is why musicians — or any individual holding a substantial amount of intellectual property — present an additional challenge regarding estate planning.

5:24 Kirsten and Madison discuss the Whitney Houston estate, a textbook example of why a will absolutely MUST be reviewed and updated as life changes occur.

6:25 When an underaged heir comes into a substantial fortune, the results can be tragic. Unfortunately, Bobby Christina, Whitney Houston’s daughter, provides a cautionary tale of why you should revisit your estate plan.

8:02 Did you know that James Gandolfini wrote up a quick will right before he went on vacation, the same vacation he had that fatal heart attack? Many of us have written up a quick will before embarking on a holiday, but there can be some unfortunate consequences without proper estate planning. As this story goes, over half of his $70 million went to the federal government. Yikes!

9:08 Creating a trust is excellent estate planning, and Michael Jackson hit that nail on the head, but he missed one very important step. Funding the trust. Here’s what you need to know.

11:52 The Heath Ledger estate is another example of a celebrity not taking the necessary steps to update their will after a significant life change. Things turned out okay this time, but easily could have gone in a different direction.

14:28 If you haven’t heard what happened after Florence Joiner (Flo Jo) passed away, you’ll want to press play here. A properly executed will won’t matter if no one knows where to find it. Here’s what might happen when a will can’t be found.

15:09 Howard Hughes, the billionaire, died intestate, or without a will, and it took 34 years to settle his estate. His close friends knew that he wanted his money to go to medical research, but with not having a proper estate plan, his money did not go where he intended.

16:50 The more valuable the estate, the more likely people will scramble for a piece of the pie. Howard Hughes had over 600 wives, children, and cousins petition for a share.

17:50 Next, Kirsten and Madison discuss the Anne Heche estate, who improvised her will. Those who take shortcuts when creating a will can ensure their family will face fallout, just like this case.

18:46 Here’s a common concern people have in the aftermath of an estate planning meeting. Unfortunately, this is what remains to be done.

20:29 Steve McNair’s estate was more sordid than most. Why? Because it included holdings in multiple states, which makes things more complicated as it can lead to assets being frozen when rightful heirs are counting on them to live.

23:57 Aretha Franklin also had an unusual estate story. Unfortunately, hers was the result of bad financial advice.

25:37 Paul Walker was a celebrity who did the leg work and created an estate plan, but things got a little hairy when it came out that his intentions seemed to run contrary to family law. This is an example.

27:20 President Abraham Lincoln and Supreme Court Justice Warren Berger were famous attorneys with their own estate planning mishaps. As it turns out, they sometimes make the same mistakes as the rest of us.

30:04 The Elvis Presley estate is one more example of what happens if your kids get a hold of A LOT of money when they are still too young. Do they really know how to manage money?

33:00 Q&A: Does it make a difference where a person lived at the time of death, and how their estate plan is carried out?

34:38 Q&A: What kind of estate plan did Queen Elizabeth have?

37:35 Madison shares some final thoughts and one last example that demonstrates even the best estate plan can still be tricky. Why? Because you can control how people will react or handle certain situations.

Resources and Links Related to this Episode:

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