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Celebrity Deaths in 2020 — Six Estate Planning Lessons We Can Learn
As estate planners, we are often shocked to learn about wealthy celebrities who pass away without a will or trust. These wealthy celebrities had the financial resources to implement a comprehensive, up-to-date estate plan yet failed to do so before their deaths. So what went wrong? More importantly, what lessons can we learn from these high profile deaths? In this article, by JDSUPRA.com we analyze the estate planning mistakes and successes made by famous individuals in an effort to help educate others – famous or not – as to why good estate planning is important for everyone, regardless of your age or current health.
Tony Hsieh (1973-2020): $850 million
Estate Plan Efficacy Rating: 0/10
Tony Hsieh, the founder of Zappos, passed away after a tragic accident at the age of 46. Worth hundreds of millions of dollars at his death, Tony has become well-known for the critical mistakes he made in his estate planning. Tony’s family filed documents in Nevada probate court alleging that Tony died without a will. Under Nevada law, this means that Tony’s fortune will pass to his parents. The biggest challenge will be valuing Tony’s estate and identifying his assets. Tony left “thousands” of sticky notes representing potential business deals and financial commitments all over his Park City, Utah mansion. Tony also owned numerous properties in different states, often purchasing real estate for friends and family. It is unknown whether these purchases were gifts or personal investments, and the probate court will be tasked with sorting it all out. It will likely take several years before his estate is fully settled.
Kobe Bryant (1978-2020): $600 million
Estate Plan Efficacy Rating: 5/10
Kobe Bryant was not only a famous basketball player, he was a savvy businessman, brand-builder, and investor. It is no surprise that Kobe had a carefully crafted estate plan in place prior to his untimely death at the age of 41. Kobe’s estate plan protected his assets, reduced estate-tax liability, and passed his wealth to his family members. Despite careful planning, Kobe made a tragic oversight. Kobe failed to update his estate plan after the birth of his daughter, Capri Bryant, who was just six months old at the time of his death. Seeking to fix this oversight, the co-trustees of the Kobe Bryant Trust petitioned the court to modify Kobe’s trust to add Capri as a beneficiary, so that she will be eligible to inherit her share of the family estate. This mistake not only requires the trust to expend unnecessary legal fees, it also eliminates the privacy aspect of Kobe’s estate plan because the trust and its terms have become public record.
A second (potential) mistake was Kobe’s failure to leave a gift to his mother-in-law. Kobe’s mother-in-law has alleged that Kobe promised “to take care of her” for the rest of her life. Unfortunately for his mother-in-law, Kobe did not memorialize these promises in his estate plan. Kobe’s widow, who is the primary beneficiary of his estate and a co-trustee of the trust, is refusing to support her mother despite Kobe’s alleged promises. This dispute has drawn widespread public attention and driven a wedge between Kobe’s widow and her own mother.
Eddie Van Halen (1955-2020) $100 million
Estate Plan Efficacy Rating: 7/10
Rock and roll legend Eddie Van Halen passed away from cancer at the age of 65. Little is known about Van Halen’s estate plan, suggesting he likely executed a trust or other estate planning device prior to his death. Nonetheless, Van Halen’s death raises several important reminders about estate planning for individuals with multiple marriages. Van Halen was married twice, and had a son with his first wife, Valerie Bertinelli. Although we do not have details about Van Halen’s estate plan, we can learn a few lessons from his situation. For those who have experienced divorce, children, and remarriage, there are unique estate planning issues to consider. For example, estate planning should account for any alimony (spousal support) that may have been put in place at the time of a divorce. The terms of the divorce and the conclusions regarding property ownership may significantly impact how one plans to distribute his or her property. Additional considerations regarding children from that union should also be addressed. This becomes even more important if more children are brought into the picture during a second marriage.
Justice Ruth Bader Ginsburg (1933-2020) $5-7 million
Estate Plan Efficacy Rating: 10/10
Known by her initials “RBG,” Justice Ginsberg passed away in September of 2020, leaving a long legacy in her wake. Yet little is known about Justice Ginsburg’s estate. This is not by accident. When a famous individual dies and the estate planning is done properly, there is virtually no media coverage. Justice Ginsberg was a pioneer for gender equality, successfully arguing that men should not have preference over women for appointment as administrator of a decedent’s estate. It would come as no surprise if Justice Ginsburg nominated a women to serve as the administrator of her estate.
Lesson 1. Make an estate plan. Dying without an estate plan means the probate court will divide up your estate pursuant to state law. This may result in your assets being inherited by estranged family members or, even worse, family members who you strongly dislike. Make it a priority to find the time to execute your estate plan. Simple estate plans are affordable. Most estate planners will prepare a simple will for under $1,000. For high net worth individuals, failing to execute an estate plan may expose your estate to the federal estate tax, which could reduce the net value of your estate by up to 40%. Phillip Seymour Hoffman’s estate plan was prepared by his CPA. His estate ended up paying approximately $15 million in estate tax, almost all of which could have been avoided with proper tax planning.
Lesson 2. Update your estate plan. After a divorce or the birth or adoption of a new child, you should always revisit your estate plan. It is not uncommon for a child to be left out of a trust or a will, or for an ex-spouse to be the named beneficiary of an IRA. Many people mistakenly believe that a divorce automatically revokes any gifts to an ex-spouse. Although this is true for gifts left to a spouse in a will, this is not always the case with other gifting devices, such as IRAs. After a divorce, you should contact the financial institutions to verify that your ex-spouse has been removed as the beneficiary.
Lesson 3. Minimize family disputes and honor your promises. The ongoing bitter dispute between Kobe’s widow and her mother may have been avoided if Kobe had included a gift to his mother-in-law in his trust, honoring his alleged promise to take care of her. One of the most common disputes we encounter in probate court is when a family member claims that the deceased person made a verbal promise to that family member, but that promise was never documented in the estate plan. These promises include cash gifts, gifts of sentimental personal property, or forgiveness of loans.
Lesson 4. Avoid unnecessary administrative expenses. The administration of Tony Hsieh’s probate estate will undoubtedly drag on for many years, costing millions of dollars in attorney and other professional fees. This is precisely what happened in the administration of Prince’s estate. Although he did not die in 2020, there is much we can learn from Prince’s untimely death in 2016. Prince died without a Will. As a result, Prince left a large amount of money—approximately $250 million—to his six siblings and half-siblings. Prince’s probate case has dragged on for years. Since 2016, bankers, lawyers, and other professional consultants have been paid millions of dollars to help administer the estate. These extraordinary administrative fees could have been avoided if Prince had a trust or will.
Lesson 5. Honor charitable giving. During his life, Tony Hsieh made generous gifts to several charities and private foundations. By not having an estate plan, not a single dollar of Tony’s estimated $850 million estate will pass to charity. The same is true for Prince. It was well-known in the Minneapolis community that Prince was a generous donor to many charities. Because he failed to implement an estate plan, Prince lost the opportunity to leave a portion of his wealth to his favorite causes.
Lesson 6. No news is good news. When Justice Ginsburg died, the public heard nothing about the administration of her estate. Why? Because she most likely had a comprehensive, up-to-date estate plan in place before her death. Good estate plans minimize family fighting, keep the estate plan private, honor promises, and leave a legacy of good will.
Read more related articles at:
Lessons From The Rich And Famous: Why Estate Planning Should Be Part Of Your Retirement Plan
Also, read one of our previous Blogs at:
Which Stars Made the Biggest Estate Planning Blunders?
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