CELEBRITY ESTATE PLANNING DISASTERS: LESSONS FROM THE LIFESTYLES - PDF document

CELEBRITY ESTATE PLANNING DISASTERS: LESSONS FROM THE LIFESTYLES OF THE RICH AND FAMOUS Gregory S. Williams, Esq. Carruthers & Roth, P.A. Phone: 336-478-1183 E-mail: gsw@crlaw.com Disclaimer  The contents of this presentation have been prepared by Carruthers & Roth, P.A. and are offered for general informational purposes only and are not legal advice. You should contact your attorney directly to obtain advice with respect to any particular issue or problem. Carruthers & Roth, P.A. makes no representations or warranties regarding the accuracy of any information contained in this presentation, and you use the information at your own risk. You should consult with an attorney before taking any action that may affect your legal rights.  Unless specifically indicated otherwise, any tax information contained in these materials is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding any tax penalty that could be assessed related to any matter addressed herein or for purposes of promoting, marketing or recommending to any taxpayer any tax related matter addressed herein. Introduction  Everyone needs estate planning  Celebrities need estate planning too  America is obsessed with celebrities, and loves watching them reach the stars and hit rock bottom  Oftentimes that involves dying without planning or planning well  There are lessons to be learned! 1

Common Themes  No will  Old will  Insufficient or unsuitable planning  Ambiguities  Questionable capacity/undue influence  Questionable choice of fiduciary Problem Areas  Dysfunctional family  Blended family  Atypical dispositive provisions (particularly where unexpected beneficiary is involved in facilitating will)  Family business  Tyrannical or dilatory fiduciary Sonny Bono - Disaster  Disaster: No Will  Sonny Bono, of “Sonny and Cher” fame, was a musician and politician  Died in a skiing accident at age 62  Never wrote a will  Turns out he had an illegitimate child 2

Sonny Bono – Consequences  The illegitimate child showed up after his death to claim part of his estate Sonny Bono – Should Have  A simple will would have prevented the illegitimate child from taking part of his estate Jimi Hendrix - Disaster  Disaster: No Will  Jimi Hendrix, guitarist and singer/songwriter, died at age 27 without a will 3

Jimi Hendrix – Consequences  Even though he was very close to his brother, because Jimi died intestate the court awarded his entire estate to his father  Jimi’s father later left everything to an adopted daughter from a subsequent marriage, leaving the brother with absolutely nothing Jimi Hendrix – Should Have  Although no 27 year old expects to die so young, a simple will would have left Jimi’s estate to whomever he wanted to  Reminder that even young adults need basic estate planning documents, particularly powers of attorney and health care powers of attorney Stieg Larsson - Disaster  Disaster: No Will  Swedish writer of “The Girl with the Dragon Tattoo” and other novels  Died of a heart attack at the age of 50, leaving behind his girlfriend of 32 years 4

Stieg Larsson – Consequences  Under Swedish law (and NC law would be the same), his girlfriend would not be entitled to inherit any part of his estate  Instead his entire estate went to his father and brother, with whom he reportedly had little contact  Seems highly likely that he would have preferred his estate to go to his girlfriend  Unfortunately led to family disputes Stieg Larsson – Should Have  Pretty obvious, but he should have implemented a will or trust to include his girlfriend Florence Griffith Joyner - Disaster  Disaster: Lost Will  “Flo Jo” won several gold and silver Olympic medals and still holds the 100 and 200 meter world records  Unfortunately she died suddenly at 38  She apparently wrote a will, but never told anyone where it was 5

Florence Griffith Joyner – Consequences  Because the original will could not be located, she was considered intestate  Her husband and mother went to court over disputes regarding the estate  Administration had to be turned over to a third party Florence Griffith Joyner – Should Have  Flo Jo should have told her family where her original will was and kept it in a very safe place  Many attorneys will hold original wills for clients  Safekeeping other documents can be just as important, including powers of attorney, health care powers of attorney and medical directives Heath Ledger - Disaster  Disaster: Failure to update will  The actor died at age 29 from a drug overdose  He had a will that left his estate to his parents and sister, but did not update it to include his daughter born 3 years after signing the will 6

Heath Ledger – Consequences  Legally, Ledger’s own daughter was disinherited because of his failure to update his estate plan  Fortunately, his daughter was the beneficiary of substantial life insurance, and his family ultimately reached a settlement that would protect the daughter. Heath Ledger – Should Have  “Estate planning is a process not an event”  Estate plans should be reviewed after any significant life event, including births, adoption, deaths, marriage, divorce or separation, sale of family business, etc. Warren Burger - Disaster  Disaster: Wrote his own will  Warren Burger was Chief Justice of the US Supreme Court from 1969 to 1986  Justice Burger’s will was famously 176 words long 7

Warren Burger – Consequences  Will did not address estate taxes, give powers to his executor or include other important administrative provisions  Allegedly cost his family $450,000 in avoidable estate taxes, court costs and attorney’s fees Warren Burger – Should Have  Even though Justice Burger was clearly a brilliant scholar in jurisprudence, he was a trial attorney inexperienced in estate planning and taxation  Perhaps he should have asked one of the other justices for a referral to an estate planner Joe Robbie - Disaster  Disaster: No Planning  Joe Robbie was an attorney and successful entrepreneur  Owned the Miami Dolphins and the Miami football stadium named after him  While owner, Don Shula coached the team to a perfect season and 2 Super Bowls 8

Joe Robbie – Consequences  Much of Joe Robbie’s large estate was illiquid  Upon his death in 1990, his estate qualified for the marital deduction, but his wife died shortly thereafter  Facing a $45 Million estate tax bill, the family had to sell the team and the stadium at a deep discount Joe Robbie – Should Have  Should have done some advanced planning to minimize the impact of the estate tax  Because of the illiquidity of the estate, Mr. Robbie should have considered establishing an irrevocable trust to purchase a large life insurance policy  Lifetime gifting and/or charitable giving would also have helped Philip Seymour Hoffman - Disaster  Disaster: No Planning  The Oscar winning actor died of a drug overdose with an estate of $34 million  Not wanting to create “trust fund kids”, he left everything outright to the mother of his children (to whom he was not married). 9

Philip Seymour Hoffman – Consequences  Despite reported advice of legal and financial advisors, Hoffman declined to do any advanced planning, including establishing gift trusts for his children  Given that he was not married, the bequest to the mother did not qualify for the marital deduction  Unfortunately a large estate tax was due Philip Seymour Hoffman – Should Have  Hoffman should have considered the typical strategies for high net worth folks, including lifetime gifts to trusts, purchasing life insurance and/or including charity in the plan  Perhaps he should have considered marrying her??? Tom Clancy - Disaster  Disaster: Ambiguity in estate planning documents  Residuary estate divided into Marital Share (benefiting second wife), Family Trust (benefiting spouse and their minor child) and Trust for kids from prior marriage  An ambiguity arose from a codicil as to whether the estate tax was to be shared between Family Trust and Trust for kids from a prior marriage 10

Tom Clancy – Consequences  Clancy died with an $82 million estate; the ambiguity was whether the Family Trust (part of the wife’s share) would bear half of the $16 million estate tax or whether the children would bear all of the tax  Years of litigation ensued to determine whether the Family Trust should bear part of the estate tax or whether it would all come out of the share of the children from the prior marriage Tom Clancy – Should Have  Tax apportionment language is important and complicated, particularly where significant estate tax is at risk and the residuary estate is divided among different beneficiaries with competing interests  A tax apportionment clause that made it clear whether the Family Trust was to share in part of the tax would have saved a great deal in time and money J. Howard Marshall - Disaster  Disaster: Insufficient planning/undue influence  Marshall was an elderly oil tycoon who met Anna Nicole Smith at a strip club where she performed  During their 2 year relationship he showered her with gifts and asked him to marry her several times.  When they married in 1994, she was age 26, and he was age 89. 11