Estate planning is defined by Merriam-Webster as the arranging for the disposition and management of one’s estate at death through the use of wills, trusts, insurance policies, and other devices.
A broader definition would include the same exercise in preparation of not only death but also one’s incapacitation. In plain English, it is instruction on how decisions should be made if you are not here, be it due to death, incapacitation, or maybe hiking Machu Pichu in an area with poor cell reception.
The aforementioned instructions can cover just about any topic imaginable Most references to estate planning are financial, but wills and trusts will often guide decisions regarding health care, guardianships, business, education, all the way to who gets grandpa’s rare penny from 1892.
Estate planning, which most folks first think of as drafting their will, is usually conducted by an attorney. Costs for drafting an estate plan vary widely based on location and complexity but can range from a couple hundred dollars on the low-end up to several thousand dollars. About 55% of Americans don't have a will, according to LegalZoom.
Even more worrisome is the fact that less than 1 in 5 millennials have a will. A survey by Caring.com showed the top reason why Americans don’t have a will was simply procrastination, followed by the feeling of not having enough assets, and it’s too expensive to set up.
Let’s look at some infamous estate planning mistakes by those who just hadn’t gotten around to it:
- Ted Williams (MLB Legend). At the time of his death in 2002, he had a will that said his body should be cremated, and another will that said he should be cryogenically frozen. A fight amongst his children soon ensued, eventually leading to his head being cut off. Yes, you read that right, the greatest slugger of all time’s body and head are frozen in Arizona at Alcor Life Extension Foundation. His head was severed and is kept in a pot, separate from his body, ABC News reported.
- Sonny Bono (Singer and Congressman). He never drafted a will, having died intestate. A lawsuit ensued by ex-wife and singing star, Cher, seeking future earnings from their earlier career together.
- Heath Ledger (“Dark Knight”). The movie star never updated his will after the birth of his daughter, Matilda. At his death in 2003, his entire estate was split between his parents and sisters. They eventually agreed to give all the money to his daughter.
- Pablo Picasso (Painter). Another icon who failed to ever draft a will. Many of his paintings were used to settle a huge tax bill to France, via transfer to the Musee Picasso in Paris. The rest were fought over by his illegitimate son, Claude, and his 5 siblings. It took over 6 years and $30 million to lawyers and appraisers to settle the estate, Vanity Fare reported.
- Philip Seymour Hoffman (Actor). Again, an actor that never updated his will, drafted by a real estate focused CPA mind you, after the birth of his two daughters. Because he was not married to his then girlfriend, there was an approximate $12 million estate tax owed.
- Joe Robbie (Owner of Miami Dolphins). Poor estate planning with a pour-over will and revocable inter vivos trust intended to defer estate taxes until after the death of his wife, Elizabeth, didn’t work as planned. She demanded her “elective share” as spouse, 30% of the husband’s illiquid estate. This created a $47 million tax bill that could only be settled by selling off his beloved team, Trust Counsel reported. His 11 children went to battle over his estate.
- James Brown (“Godfather of Soul”). A 12-year epic legal battle amongst several blended families that is far too cumbersome for this article.
- Michael Jackson (“The King of Pop”). He died in June of 2009 amidst child abuse scandals. Executors valued the estate at $7 million, claiming his name and likeness were almost worthless due to his reputation. Meanwhile the IRS claims his song copyrights make it worth $1.13 billion. Over a decade later, the battle in court continues, and time will tell if enormous tax bills could leave the government owning his hit songs.
- Prince. Another music legend passed away in 2016 without a will. His over $200 million will somehow be divvied up by his six siblings and half-siblings and possibly a prison inmate alleging to be his son. After over $45 million dollars in legal fees, the potential heirs have yet to receive any funds.
- Barry White (Singer). He passed away in 2003 in the midst of divorce proceedings. Technically, he was still only separated from his wife, therefore she received everything, and not his current girlfriend and mother of nine kids.
- Marlon Brando (“The Godfather”). Most of his $26 million estate went to his producer and colleagues. However, his longtime housekeeper and friend was promised his mansion, although it was never put in writing. She settled against his estate for just $125,000.
- Marilyn Monroe (Hollywood Star). She died in 1962 of a drug overdose and left much of her estate to her acting coach, Lee Strasberg. This amounted to only about $800,000, however Strasberg also claimed a right to her image. This led to an eventual payout of over $30 million to Lee’s third wife, Anna, a woman Monroe never even met.
- James Gandolfini (“Tony Soprano”). He died in 2013 of a heart attack in Rome. His will left 80% of his $70 million estate to his sisters and daughter. As his estate plan was will-based and went through probate, every aspect was available to the public. He left $7 million of life insurance proceeds in an Irrevocable Life Insurance Trust (ILIT) for his son to avoid taxation. His baby daughter will receive all of her share at the age of 21. Poor estate planning forced almost $40 million to be paid to the IRS in estate taxes.
Most Americans may not identify as mega-wealthy or public icons, but most do have assets and people they care about. Let these infamous errors be a lesson to the need for proactive professional planning.
While these stars don’t have time to go back and fix it, you still do.
Please tune into “The Kuderna Podcast” for more insight.
Bryan Kuderna is a Certified Financial Planner™, Life Underwriter Training Council Fellow, and Investment Adviser Representative with Kuderna Financial Team. He is also the author of the best-seller "Millennial Millionaire."
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