Monday, October 12, 2015

Estate Planning Mistakes to Avoid

As an estate planning attorney, I often find it of interest to read about a celebrity’s estate plan.  Celebrity estate plans can provide both good and poor examples of what should and should not be done by all of us.  Recently, I came across an interesting article entitled “7 Estate Planning Lessons from Celebrities” which brought focus to this very topic.  I would recommend reading it as the lessons provided are applicable to those with significantly less wealth than the celebrity examples found in the article.  To bring focus to just two of the seven lessons provided in the article, I would like to focus on the estate plans of Philip Seymour Hoffman and Heath Ledger.  

Philip Seymour Hoffman didn’t want his children to become “trust-fund kids.”  However, it is reasonable to conclude that Hoffman had a desire that his children’s reasonable needs be met with his wealth.  Against the advice of his attorneys, Hoffman’s estate plan was to leave his entire estate to his long-time girlfriend Mimi O’Donnell.  It was Hoffman and O’Donnell’s mutual understanding that she would use his wealth to provide financially for the children, in her absolute discretion.  This plan had two significant flaws.  First, because Hoffman and O’Donnell were not married, the transfer of Hoffman’s estate to O’Donnell was taxable for estate tax purposes.  Second, without proper instructions and guidelines as would typically be found in a trust agreement, there is no guarantee that O’Donnell will use Hoffman’s wealth in a manner that Hoffman would have approved of in relation to the upbringing of his children.  Lesson to be learned from Hoffman’s estate plan is to not leave your estate to one person without proper guidelines and instruction in a legally enforceable document like a trust.

Although quite young at the time of his death, the 28 year-old actor Heath Ledger had a will when he died in 2008.  Apparently, Ledger had drafted his will previous to the birth of Ledger’s daughter leaving his entire estate to his parents and sisters.  Fortunately, Ledger’s family did the right thing by allowing the entire estate to pass to his daughter.  The result of Ledger not taking the time to update his will after the birth of his child could have been ugly with the worst case scenario of Ledger’s daughter receiving nothing from her father’s estate.  The lesson to be learned from Ledger’s estate is that as certain life events occur, a review and update of your estate plan should take place.



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