You may want to live like a celebrity, but you shouldn’t die like some famous people who left a mess for their heirs.
You’d think that the rich and famous would care about who inherits their riches when they’re dead and gone. But oddly, many celebrities have died intestate, which means they never made out a will.
Howard Hughes’ $2.5 billion estate was eventually distributed among 22 cousins because he died without a will. Prince’s $300 million estate is being fought over by family members because he didn’t name heirs. Jimi Hendrix, Bob Marley, Pablo Picasso and Michael Jackson all died without wills, making their estates battlegrounds and subject to huge estate taxes.
In fact, a 2009 Lawyers.com survey revealed that only 35 percent of Americans had a will. So instead of making a plan for their wealth after death, most Americans don’t ensure that their estates are distributed in a specific way that can avoid federal and state estate taxes.
Failing to update a will
Life continues to unfold even after you’ve signed a will. You could add children, subtract a spouse or have a falling out with your best friend. So even if you go to the trouble of drawing up a will, you must update it whenever life changes.
When singer Barry White died in 2003, he was reportedly separated from his second wife and living with his girlfriend of several years. Because he never changed his will, the estranged wife inherited everything, while his last love got zip.
You don’t stop paying taxes after you die. If you don’t plan correctly, your heirs may have to sell part of their inheritance to pay for federal and state estate taxes.
“The Sopranos” star James Gandolfini died with a $70 million estate and a will leaving only 20 percent to his wife. Consequently, about 80 percent of his estate was subject to state and federal estate taxes that could have amounted to 55 percent of his fortune.
Tax planning could have reduced the tax burden for Gandolfini’s heirs. He could have drawn up a marital trust that would have taken advantage of the marital tax exemption — you can leave your entire estate to a spouse tax free — and protected his two children too.
Forgetting about personal items
When thinking about your estate, it’s easy to overlook personal items that could be worth a lot of money and become the subject of family battles.
For example, Robin Williams’ family fought over his collection of film memorabilia.
To avoid such fights, make sure you bequeath personal items in your will. If you want your son to get your baseball card collection, make sure you state that explicitly in your will. If you want your daughter to get your Lexus, write it down and include the bill of sale so no one can dispute that you had already given the car away before your death. Vrakas can help if you have any questions, give us a call at (262) 797-0400.