(Related: The Early Retirement Your Clients Didn’t Plan For)
Estate planning is defined by Merriam-Webster as the arranging for the disposition and management of one’s estate at death through the use of wills, trusts, insurance policies, and other devices. A broader definition would include the same exercise in preparation of not only death but also one’s incapacitation. In plain English, it is instruction on how decisions should be made if you are not here, be it due to death, incapacitation, or maybe hiking Machu Picchu in an area with poor cell reception.
The aforementioned instructions can cover just about any topic imaginable. Most references to estate planning are financial, but wills and trusts will often guide decisions regarding health care, guardianships, business, education, all the way to who gets grandpa’s rare penny from 1892.
Estate planning, which most folks first think of as drafting their will, is usually conducted by an attorney. Costs for drafting an estate plan vary widely based on location and complexity but can range from a couple hundred dollars on the low-end up to several thousand dollars.
According to LexisNexis, about 55% of Americans do not have a will. Even more worrisome is the fact that fewer than 1 in 5 millennials have a will. A survey by Caring.com showed the top reason why Americans don’t have a will was simply procrastination, followed by the feeling of not having enough assets, and that it’s too expensive to set an estate plan up. Let’s look at some infamous estate planning mistakes by those who just hadn’t gotten around to it…
1. Ted Williams (Major League Baseball Legend): At the time of his death in 2002, he had a will that said his body should be cremated, and another will that said he should be cryogenically frozen. A fight amongst his children soon ensued, eventually leading to his head being cut off. Yes, you read that right, the greatest slugger of all time’s body and head are frozen in Arizona at Alcor Life Extension Foundation. ABC News has reported that his head was severed and is kept in a pot, separate from his body.
2. Sonny Bono (Singer and Congressman): He never drafted a will, having died intestate. A lawsuit ensued, with Cher, Bono’s ex-wife, seeking future earnings from their career together.
3. Heath Ledger (“Dark Knight”): The movie star never updated his will after the birth of his daughter, Matilda. At his death in 2003, his entire estate was split between his parents and sisters. They eventually agreed to give all the money to his daughter.
4. Pablo Picasso (Painter): Another icon who failed to ever draft a will. Many of his paintings were used to settle a huge tax bill to France, via transfer to the Musée Picasso in Paris. The rest were fought over by his illegitimate son, Claude, and his five siblings. It took over six years and $30 million to lawyers and appraisers to settle the estate, according to an article that ran in Vanity Fair in 2016.
5. Philip Seymour Hoffman (Actor): An actor that failed to update his will, which was drafted by a CPA, after the birth of his two daughters. Because he was not married to his then girlfriend, there was an approximate $12 million estate tax owed.
6. Joe Robbie (Owner of Miami Dolphins): Estate planning with a pour-over will and revocable inter vivos trust intended to defer estate taxes until after the death of his wife, Elizabeth, didn’t work as planned. His wife demanded her “elective share” as spouse, 30% of the husband’s illiquid estate. This created a $47 million tax bill that could only be settled by selling off his beloved team, according to a 2015 TrustCounsel.com analysis. His 11 children went to battle over his estate.