Despite possessing sizable estates and having access to top-notch legal and financial counsel, celebrities are not immune to making significant blunders in estate planning. In fact, there are many instances of estate planning errors made by celebrities that resulted in costly and prolonged legal battles after their deaths.
In this blog post, we’ll explore some of these errors made by celebrities and provide expert advice on how to avoid these pitfalls.
Estate Planning Errors Made By Celebrities
Error #1: Failing to Draft a Will or Trust.
The failure to establish a will or trust is among the worst errors that celebrities make. Without a will or trust, state law will control the distribution of their assets, which could not be in accordance with their preferences.
Furthermore, if they don’t have a plan, their estate can be subject to probate, which can be a time-consuming and expensive process.
A thorough strategy that includes a will or trust should be developed by celebrities working with an estate planning expert to prevent making this error.
Also, they should routinely review and revise their plan, particularly after major life events like marriage, divorce, or the birth of a child.
Error #2: Not Accounting for Tax Planning
Failure to arrange for taxes is another error that famous people frequently make. Federal estate taxes, which can be as high as 40%, are applied to estates that exceed a specific threshold in value.
Depending on the state in which they reside, state estate taxes can also be applicable. In Massachusetts, the current estate tax threshold is “only” One Million Dollars.
Celebrities should collaborate with an experienced estate planning attorney and financial advisor to develop a tax-efficient plan in order to reduce the tax burden on their estate. This may involve techniques like making lifetime gifts of property, establishing trusts, or founding a nonprofit organization.
Error #3: Disregarding Digital Assets
As technology has advanced, digital assets like social media accounts, domain names, and cryptocurrencies have grown in significance in many people’s inheritance plans.
Yet, a lot of famous people neglect to include these assets in their estate plans, which can cause complications and legal disputes after their passing.
Celebrities should compile a list of all their digital assets and provide instructions on how to handle and distribute them after their passing to avoid making this mistake.
This could involve designating a trustee or executor for their digital assets.
Error #4: Not Updating Beneficiary Designations
Many assets owned by celebrities, such as retirement funds and life insurance policies, sometimes pass to their beneficiaries without the use of a will or trust.
Yet, a lot of famous people neglect to routinely update these beneficiary designations, which may have unforeseen results.
Celebrities should periodically examine and change their beneficiary designations to avoid making this error, especially following major life events like marriage, divorce, or the birth of a child. Also, they must make certain that their beneficiary selections are consistent with their overall estate strategy.
Error #5: Ignoring Family Dynamics
Celebrity households frequently involve several marriages, kids from various partnerships, and blended families. If these characteristics are not taken into account in their estate plan, there may be court cases and family conflicts following their passing.
Celebrities should consult an estate planning lawyer.
