The Benefits of Pre-Planning
According to an article in the Detroit Free Press, Aretha Franklin died without a will or trust despite being repeatedly urged by her entertainment lawyer to get her legal affairs in order.
Jimi Hendrix and Bob Marley each died without a will. Legal battles over their respective estates continued for over 30 years.
Heath Ledger did have a will, but it was created before the birth of his daughter and never updated.
The findings of a 2016 Gallup Poll show that only 44% of Americans have a will.
What are the Benefits of Having a Will?
While not every fortune is of the magnitude of those belonging to these celebrities, even a modest estate should be protected with a will.
A will states where your assets go upon your demise. This includes personal property (i.e., jewelry, art, furniture, etc.) as well as financial assets (bank accounts, brokerage accounts, etc.). Some assets may have a designated beneficiary, such as life insurance and retirements accounts, and those assets do not pass according to your will, but instead directly to the designated beneficiaries.
Your will is also where you name your Executor, the person who follows your instructions to settle your estate, and Guardians if you have minor children. Without a will, the person or persons who will be responsible for these important jobs are decided by a court.
Intestacy
When someone dies without a will, as is the circumstance of Aretha Franklin, they are called having died intestate. This then means that the laws in the state that they live will determine how their assets are distributed, and these laws vary greatly by state.
For example, if you are married with no children, assets may pass to your surviving spouse or get split between your surviving spouse, siblings and parents, in percentages determined by your state. If you are single with no children, assets could be divided by parents, siblings, half-siblings, nieces and nephews, or even more distant relatives. For someone married with children, their assets may pass to a surviving spouse, children (from same spouse or a former partner) or grandchildren. The percentages and distribution may not match your wishes.
Privacy vs. Public Access to Information
When you die intestate, your estate can become public information with the courts. Even if you have a will, your information can become public as part of the probate process. You can keep things private by avoiding probate with the use of correctly funded trusts.
Charitable Bequests
Estate documents can have specific bequests, such as $10,000 to a favorite charity. This can allow individuals to continue their lifetime philanthropy even after death. Warren Buffet plans to donate billions of dollars to the Bill and Melinda Gates Foundation. His plan is for his charitable bequest to be far greater than the amount to be inherited by his children.
Lengthy Process
Probate can be a long process, with unnecessary delays. A will can speed up the probate process by providing the blueprint for how the deceased wished for their assets to be distributed. The use of certain trusts can help avoid the time and possible costs of the probate process altogether.
Estate Taxes
We may think, I don’t need to plan my estate because I’m not multi-millionaire. We often equate the need to have a will with the desire to avoid estate taxes. Federal estate taxes are not due on estates of less than $11,180,000. State estate taxes vary by the state and should also be considered. While many states link their exclusion amount to the federal amount, some states have their own exclusion amount while others have no estate tax at all.
Careful planning can help minimize estate taxes, especially for large estates. For artists such as Aretha Franklin, Michael Jackson and Prince, their estates include music copyright and royalty rights. The value of these rights can increase upon the death of the artist as their music becomes more in demand. Pre-planning strategies are often more beneficial than post-planning strategies.
Out-Of-Date Documents
Just because you have once done some estate planning doesn’t mean those documents should sit in your safe deposit box and never get reviewed again. Your documents can be written to encompass some contingencies, such as naming your current children and future born children as beneficiaries but should also be reviewed occasionally to ensure they match your current wishes. As Heath Ledger’s will did not provide for future born children, and his documents were not amended after his daughter’s birth, this led to a legal battle that could have otherwise been avoided.
While it can be difficult to face one’s own mortality, as so many celebrities have passed away without legal arrangements for the distribution of their estates, these examples can be used as tales of caution. It may seem easier to ignore the inevitable, but frustration, uncertainty and potential legal battles can be alleviated with proper planning now. If you need assistance in creating an estate plan, please contact us.
