Just like regular people, celebrities also fail to adequately plan for their estate. Estate planning is a vital tool that provides guidance in the event of a death. It is a common belief that because celebrities have much more wealth than the average person, protecting that wealth would be of the utmost importance. However, there are cases that prove that to be untrue. Having copious amounts of money and assets do not make a savvy financial planner. For this week, we are discussing celebrities that didn’t properly plan for their estate.
1. Prince Rogers Nelson (“Prince”) – No Will
The most recent estate planning cataclysm is Prince’s multimillion-dollar estate left without a will. After Prince’s death, 45 potential heirs came forward to benefit from the unprotected estate. A Minnesota Judge decided who Prince’s heirs were, ruling that his sister and five half-siblings were the rightful heirs. Prince’s estate continues to be litigated. Various record deals, rights to unreleased music and appeals from other potential heirs must be resolved before the heirs can collect from the estate. Leaving such a large estate open to court interpretation makes the estate hard to manage and more difficult for beneficiaries to inherit. Read more on Prince’s estate here.
2. Whitney Houston – Outdated Will
Unlike Prince, Whitney Houston had a will, however her will was created in 1993, leaving everything to Bobbi Kristina Brown (Houston’s only child) and was never updated thereafter. Accounting for the future is a major part, if not the most important aspect of estate planning. Houston’s will should have been updated as her success grew. Additionally, the terms for distribution did not adequately protect Houston’s assets. In her original will, Houston’s entire estate was to go Bobbi Kristina Brown in three (3) installments, giving Bobbi Kristina two-million dollars at the age of 18. Furthermore, Bobbi Kristina passed away shortly after her mother. Houston’s will did not have specific distribution instructions if the beneficiary (Bobbi Kristina) could not receive the distribution. Therefore, the question of whether the estate goes to Houston’s remaining heirs or gets litigated through Bobbi Kristina’s estate becomes relevant. Read more on Whitney Houston’s estate here.
3. Joan Rivers –Tax Planning
Joan Rivers died leaving behind a pour-over will and a revocable living trust, which is all seemingly proper. However, in her trust documents Rivers states that she was domiciled in California, but a resident of New York. The problem being that New York, while it has a lower income tax, it has an estate tax, while California does not have a state mandated estate tax. A domicile is where you always intend to return and where most of your primary contacts are. A residency is where one physically lives on a temporary or semi-permanent basis. It is not uncommon to incorporate tax-strategy into your estate plan, especially when your estate is large like Rivers’. However, splitting residency and domicile can waive a red flag to state tax authorities. A court must look at various factors including the intention of the deceased in making one state their domicile an