Tragedies in life, and in death, are all too common among celebrities. But there are some celebrity tragedies that continued even past the celebrities' deaths. Naturally, their families and friends mourned their loss, but I'm not talking about personal tragedies. I'm speaking about Estate Planning tragedies. Whether they botched their will, handed over their trust to a crook, failed to consult an experienced attorney, or forgot to do an estate plan altogether - these celebrities made larger than life mistakes with their fortunes.
Howard Hughes (d.1976) - No Estate Plan
Like his life, the story of Howard Hughes' last will (or lack thereof) was material for the movies (think Leo DiCaprio in "The Aviator"). At the time of his death, billionaire businessman and aviator Howard Hughes died with an estimated net worth of $2.5 billion. A few days after his death (which was reportedly due to malnutrition and liver failure), a handwritten Will mysteriously surfaced at a Mormon church in Salt Lake City. The "Mormon Will," as it was later called, had reportedly been delivered there by a confused gas station owner, who just happened to be named in the will as the beneficiary of $156 million. The Nevada court eventually concluded that the Mormon Will was a fraud, just as they ruled multiple other wills that would surface over the next few years were as well. After an extensive search for the real Will, officials were forced to conclude that Hughes neglected to do a Will at all. With so much money at stake, a court battle ensued between the estate's temporary administrator (Howard's cousin) and the Howard Hughes' Medical Institute. Also part of the legal battle were the states of Nevada, California, and Texas, who each laid claim to the distribution of the estate.
The fight for a piece of Hughes' estate went on for years. It included multiple wives, a woman claiming to be his wife, and several people who claimed to be Hughes' long lost children. In the end, a large part of the money went to the Howard Hughes Medical Institution, with the rest being split among relatives and attorneys in the form of both money and shares in the Howard Hughes Corporation. The entirety of the state was not settled until nearly 30 years later, in 2010.
What this means for you:
Let's be honest, very few of us will die with an estate worth $2.5 billion. Nevertheless, you may not wish for what you do have to be eaten up by attorneys' fees, or distributed to distant relatives. Attorneys fees are of particular concern for small estates, as a larger percentage of the estate can be depleted if a legal fight occurs. In summary, a clear well constructed Will or Estate Plan can ensure your assets are passed to who you intend while minimizing stress and legal fees.
Phillip Seymour Hoffman (d. 2014) - Paid an extra $15 million in Estate Taxes
Actor and celebrity Phillip Seymour Hoffman died tragically from a drug overdose in early 2014. A second tragedy occurred after his death, when his estate had to hand over $15 million in estate taxes that could have been avoided if he had married the woman who for all intents and purposes served the role as his wife. Ms. O'Donnell, who was the mother of Hoffman's children and his long time partner, received an estimated $20 million upon his death. Had they been legally married, however, she would have received the entire $35 million in his estate. This is because spouses can receive an unlimited amount of money tax free both during and after one's life. In addition, Mr. Hoffman neglected to put his money in a trust, which meant his estate became public information when his will was filed with the court. Several news articles have concluded Hoffman may have wanted it to be this way, and knew what he was doing. However, I imagine most U.S. tax payers would rather their money remain in the family if given the choice.
What this means for you:
Currently, anyone who passes away with less than $5.43 million doesn't have to worry about estate taxes. However, if one was not married, but left everything to another individual who was not their spouse, the estate would still have to go through probate. Probate can be a lengthy and costly process, which is best avoided if possible. Probate has a particularly devastating effect on small estates, as attorney's fees eat up a larger percentage of the estate.
James Brown (d. 2006) - It's Complicated
At his death in 2006, Celebrity and Soul Music legend James Brown's estate was estimated at $50 - $100 million. James did his due diligence as far as estate planning. In 2000, his lawyer set up a complete estate plan for him, which bequeathed the majority of his assets to a Charitable Trust meant to provide scholarships for needy children in South Carolina and Georgia. Despite his apparent good intent, Brown's estate ended up in a massive legal fight that is still going on today. Brown didn't make any outright mistakes regarding his estate plan, at least to his knowledge. However, there were several issues with his estate plan that are worth noting. Firstly, he did his estate plan sooner rather than later. The older one is, the more likely it is beneficiaries will argue the person was subject to undue influence or financial elder abuse. Secondly, Brown made the all too common error of not communicating with his heirs. In Brown's situation it may not have been possible, as it was well known that he had strained or nonexistent relationships with many of his family members. His third mistake - executing his estate plan in South Carolina - could not have been foreseen by anyone.
What this means for you:
1. Do your estate plan before you turn 65
In California, persons over 65 are more vulnerable to elder abuse from a legal perspective. A large part of the legal fight over Brown's estate was predicated on the fact that his attorney and close friends (who also happened to be named as trustees and executors) may have applied undue influence on Brown. In other words, they advised him to set up his estate plan in a way which would most benefit themselves, and may not have been what Brown would have done if he had his full mental capacity. Lack of mental capacity is most often associated with dementia, but in Brown's case it appears it also had to do with his ongoing drug use. At least this is what his disinherited heirs would argue.
2. Communicate with your Heirs
Communication is especially important if you're planning to leave the majority of your wealth to a charity, and not your heirs. Communication is also beneficial if parents wish to leave different assets to each child, as opposed to an even division of all their assets. If people are taken by complete surprise when a will is read out, the heightened emotional state can lead to lawsuits which may have been avoided if the beneficiaries had been prepared.
3. Avoid a late in life move to South Carolina
After a complicated legal battle involving multiple parties and lawsuits in the lower SC courts, a judge decided to completely rearrange Brown's estate plan. This simply is not done. At least not in California probate courts. The purpose of doing an estate plan is so that the state cannot decide what to do with your assets - you can. Consequently, the SC Supreme Court overruled the lower court's actions, calling them an "unprecedented overstepping of authority that threatened to undermine public confidence in the probate process." From my experience, California probate courts seek to honor the wishes of the decedent. This means that a valid Will or Trust will be honored by the court unless undue influence or elder abuse can be definitively proven.
Marlon Brando (d. 2004) - Changed Executors 13 Days before Death, and - It's Complicated
Marlon Brando's estate has been mired in nearly two dozen lawsuits since his death in 2004. In large part, this was due to his decision to change the executors of his estate just 13 days before he died. The numerous lawsuits are also perhaps an inevitable result of Brando's tumultuous personal relationships, which included multiple marriages and partnerships, and an unclear number of children.
A former aide of Brando also claimed Brando broke an Oral Contract. It's unclear exactly what Brando had promised his caregiver, but in the end Ms. Borlaza received a settlement of $125,000.
What this means for you:
Think carefully before amending your Estate Plan late in life
Making a drastic change to your estate plan late in life raises elder abuse flags. In the California court system, financial elder abuse allegations are taken very seriously. Heirs and beneficiaries are quick to bring lawsuits when there is suspicion of elder abuse. Elder Abuse cases have particularly strong teeth when the plaintiff can offer proof of undue influence, or alternatively, proof that the decedent suffered from Alzheimer's or dementia. Also notable when considering elder abuse in California is the "Caregiver Clause." When a decedent makes gifts to a caregiver late in life that gift is presumed to be obtained by fraud or undue influence, unless the caregiver can prove otherwise. In Marlon Brando's case, he made the brash decision to replace all three of his executors. With several parties claiming Mr. Brando was suffering from dementia, his last minute decision set the stage for a large estate brawl.
Don't Disregard the Validity of the Oral Contract.
I currently have several probate cases in which no written will exists. In many cases where there is no will, assets are simply distributed according to intestate succession, as set out by the state of California. When no known relatives exist, the assets fall to the state coiffures. In some instances, however, the decedent made promises to gift their assets to a particular individual upon the decedent's passing. In legal terms, this is known as an "Oral Contract to Make a Will." Whether you make promises to gift one asset, or all of your assets to a particular individual, you have entered into an oral contract. When proof - such as the testimony of others - is present, and oral contract is a legally enforceable contract.
James Gandolfini (d. 2013) - Disregarded the Revocable Trust
Actor James Gandolfini's will has been widely criticized by estate planning attorney and news organizations alike. The main reason for the criticisms are the massive taxes his estate incurred upon his death. It is estimated Gandolfini's estate payed nearly 55% of its $70-$80 million value to the IRS. There are a number of ways Gandolfini could have avoided such a massive tax bill. While his situation may not be relevant for most of us (no estate taxes are owed for an estate worth less than $5.43 million or $10.86 for a married couple), there's still something we can learn from his mistakes. The main takeaway for residents of the San Francisco East Bay is that Gandolfini did not place any of his assets in a trust. In California, a trusts have the benefit of allowing estate proceedings to remain private, avoid estate taxes in certain situations, and avoid fees associated with probating an estate. If one has only a will, as James Gandolfini did, the estate must go through the state's probate process. Attorney's fees are based on the value of the estate, and the information also becomes available to the public.
It is certainly possible that Gandolfini had not finished his estate plan, and was planning to set up a trust, or multiple trusts, at a later date. Gandolifini's heirs would have been significantly better off if he had set up his estate plan correctly. A specialized trust, such as a Charitable Remainder Trust or GRAT Trust would have sheltered some of his assets from tax liability. In addition, Gandolfini could have set up a trust for his children that contained specific instructions for the distribution of his assets - such as allowing them to receive funds only after they had completed college. As it stands, his children will inherit the entirety of their bequests upon turning 18.
What this means for you:
It's never too soon to do your estate plan, especially if you have children. While most of us will live to grow old, we truly never know what will happen. After all, why wait?
Consider a trust, even if you have a smaller estate. A revocable trust allows one to provide specific instructions for distribution by setting up an entity to hold funds and real property until a time specified by the terms of the trust. It also avoids your estate becoming public, and costs less to administer.
While these celebrities made mistakes us estate planning attorneys consider tragic, perhaps they knew what they were doing. After all, their lack of estate planning has enabled them not only to be famous in life, but in death, as well. Some may have even reveled in the drama which occurred in the years following their passing. So, what's the bottom line? If you want to gamble and don't mind letting your heirs fight it out, or paying a bit extra in taxes and attorney's fees, consider skipping the estate plan. But you like to play it safe, find an experienced estate planning attorney you can trust and take a few hours to hammer out the details. You can revel in the fact that you've done your best, and the rest is up to your beneficiaries.