It would be normal to think that people with millions of dollars at their disposal would retain the best lawyers to help plan their estate. Sadly, poor financial advice is not above the rich and famous.
Many celebrities gather diversified fortunes during their career. Around every corner, it seems, are friends, acquaintances or family members looking to pick up a little extra cash. When a celebrity dies, the vultures come out of the woodwork claiming that the deceased meant to leave them everything they had.
Estate planning is often less than perfect, and poor planning is not limited to celebs; it crosses all of the socio-economic boundaries, but when an affluent star forgets to draft a will, the result is a legal and emotional tsunami that continues long after their death.
Yulia Vangorodska, a high-profile estate planning attorney in New York, says the biggest downfall she has seen among the rich and famous is the failure of maximizing lifetime giving as the federal estate tax is only subject to lifetime gifts.
“While sophisticated financial planning and strategies to transfer wealth is mainly in the realm of estate planning lawyers, a trusted financial advisor can be a force to get the plan implemented,” she says.
With that in mind, here are five who didn’t check to make sure and do it right – and one who did.
The Dirty Dancing star still has some relatives that believe Swayze’s will was forged when he was hospitalized 60 days before his death. Swayze’s will left his estate to his widow and zero to his mom and siblings. The will is still being contested and remains valid because no formal lawsuit was ever filed to challenge it. Since it’s been over five years since the actor died in September, 2009, it’s likely that there never will be a court case.
Lesson: Estates are administered according to timelines imposed by the state where the deceased had their residency. Anyone who considers there is a problem with an estate planning document should talk to an experienced probate lawyer. The clock is ticking.
Author Tom Clancy has left his family battling over about eight million dollars because his estate planning was less than clear. The disagreement revolves around the question of who should be held accountable for the estate taxes. Clancy’s estate was $82 million, but no one is sure who would pick up the IRS tab.
Lesson: It is vital for trusts to be written clearly. When ambiguous documents are drafted, avoidable disputes are, well, avoided. This can be especially important in blended families where the spouse is often pitted against children from a previous marriage.
Actor and television star Paul Walker was killed in a car crash in 2014 at 40. His father has filed paperwork to open Walker’s estate in probate court, letting the world know that the actor had about $25 million in assets. Walker had his will written in 2001, the same year that Fast and Furious made him famous.
Lesson: While Walker deserves kudos for doing his estate planning at a relatively young age, he should not have gone so long without updating the documents. Typically, estate planning documents — wills and trusts — should be revised after major life changes such as a child’s birth, significant change in the amount of money and marriages/divorces.
The former child star’s death focused attention on the growing problem of poor estate planning and elder abuse. When Rooney died in 2014 at age 93, he was penniless. The lack of riches didn’t keep his family from going to court, but with no money to fight over, they chose to battle about where the star would be buried.
Lesson: It’s not just the wealthy estates that give rise to fights after death. Many families end up spending almost all of an estate playing lawyers to fight it out in court.
Philip Seymour Hoffman
The Oscar winner didn’t listen to his team of legal advisors and failed to create a trust because he claimed he didn’t want his children to be “trust fund kids.” Instead, Hoffman left everything to his children’s mom, hoping that she would manage the money for the children. Hoffman’s planning left a giant estate tax bill which may well have been dodged with proper planning.
Lesson: Trusts don’t have to create “trust fund kids.” Creative estate planning attorneys can draft trusts to meet any goal including avoiding any incentive for the beneficiaries to become lazy, to stay away from drugs and even earn a set amount of money before the trust kicks in.