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Even Celebrities Underestimate the Importance of Estate Planning

Posted by Kimberly Crank Browning | Jan 27, 2023 | 0 Comments

Deciding what should be done with your estate—your land and real estate, possessions, financial securities, cash, and other assets—after you die is easy to put off when you're busy living your life. It turns out that even celebrities sometimes procrastinate on estate planning, in spite of having often large estates and plenty of legal help at their disposal. They might neglect to create a plan altogether, or they'll create one with so little attention to detail that confusion and chaos ensue.

For celebrities and mere mortals alike, estate planning can mean the difference between a turbulent, expensive, and public journey through the courts and an easy and dignified transfer of assets from a deceased person to their heirs and beneficiaries. Depending on the nature of their estate and their wishes for it, some people might choose to set up a living trust to ensure a smooth transfer, while for others a will is sufficient.

Whether you're rich and famous or a regular Joe or Jane, a knowledgeable estate planning attorney can help you create the right plan for you and your family—and make sure there aren't any loose ends to unravel everything later on.

Naming Domicile

The case of actor Heath Ledger, who died in 2008, illustrates the importance of tending to the details. When Ledger died at age 29, he'd been living in the U.S. for nearly a decade. His only recorded will at the time of his death had been filed in his native Australia in 2003. In it, he left half of his estate to his sisters in equal shares, and the other half to his parents after his debts had been paid.

Two years after filing the Australian will, Ledger and actress Michelle Williams welcomed a daughter named Matilda. To be closer to Michelle and Matilda, Ledger sold his Australian residence and moved to New York City. He also purchased a $10 million life insurance policy and named Matilda as the beneficiary. But in spite of Ledger's obvious commitment to his daughter and care for her future, two estate planning mistakes complicated her ability to inherit.

The first of these was Ledger's failure to update his will after Matilda was born. If Ledger's parents and sisters had not voluntarily passed their inheritance onto Matilda in recognition of her as Ledger's “rightful heir,” Matilda would have been forced to bring a family provision claim in order to receive any part of his estate.

The second was that it was unclear from his will whether Australia or the U.S. should be considered Ledger's permanent residence: he had identified his residence as Australia when he created the will, but he'd been living in the U.S. for several years before that, and he continued to do so until he died.

The ambiguity of Ledger's domicile—his permanent residence—posed an even larger complicating factor for his estate. When a U.S. citizen or resident passes away, they must pay a federal estate tax on their assets, even if those assets are in other parts of the world. They also get a large federal estate tax exemption. Nonresidents are subject to the same federal estate tax, but only on assets in the U.S., and they only get a smaller federal estate tax exemption.

If Ledger were considered a nonresident of the U.S. when he died, his $10 million life insurance policy would not have been included in his U.S. taxable estate. If he was a resident, the policy proceeds and the balance of his worldwide estate would have been included in his taxable estate.

Domicile also affects questions of inheritance. All states have statutory rules that provide for children born after a will is executed if the will does not provide for the child. But the rules vary from state to state, so knowing where the decedent was a resident helps clarify that issue. For instance, in New York, where Ledger lived, the case law suggests that domicile is based on where the deceased person resided at the time of their death.

Michigan, on the other hand, says that if an individual lives in the state for at least 183 each year, or more than half the days during a taxable year that is less than 12 months, they are domiciled there. If these circumstances had applied to Heath Ledger, the court would have been able to allocate assets for Matilda because Michigan law provides a legal mechanism to allow minor children to receive a small sum called exempt property.

An updated intention of domicile would have clarified which country Ledger considered his place of permanent residence and allowed his survivors to avoid this entire issue.

Not Having an Estate Plan Can Mean Losing an Estate

Heath Ledger isn't the only celebrity to pass away without an up-to-date, thorough estate plan. When Michigan-born singer Sonny Bono died in 1998 in a skiing accident, he left behind neither a will nor a trust. This left his estate subject to probate and the laws of intestate succession, creating several issues for the courts to resolve with no statement of his intentions to guide them.

Multiple individuals made claims to portions of his estate. For instance, Cher, the second of his four wives, claimed that she was owed unpaid alimony in the amount of $1.6 million and that his estate should pay it. And a man named Sean Machu came forward, claiming that he was Bono's illegitimate child and was entitled to a share of the estate under intestate succession.

Laws regarding intestate succession vary from state to state, but in general they are intended to provide guidance for probate courts as they divide estates that have no clear plan attached to them. At the time of his death, Bono was a resident of Palm Springs, California. Intestate succession law there specifies that a spouse will receive the entire estate if there are no other family members with a claim to an inheritance. If there are other family members, depending on how they were related to the deceased, the living spouse's portion will be reduced.

For example, if the decedent's parents or siblings are alive, the spouse will only receive half the property. If the deceased leaves behind a spouse and two or more children, the spouse only gets one-third. Further, in California, children are considered equal beneficiaries whether they are born outside or inside of the marriage as long as they can prove that decedent acknowledged them.

Michigan handles the question of intestate succession similarly. Here, the spouse's share of the probate estate depends on whether the decedent had living descendants (children, grandchildren, etc.) and whether they had any surviving parents. The spouse only receives the entire estate if there are no other surviving individuals.

Michigan law also covers other scenarios. For instance, if the decedent had parents but no children, the spouse would only receive $253,000[1] of the intestate estate and three-fourths of the balance. The remainder would go to the parents. If the spouse and decedent share at least one descendent,  on the other hand, the spouse will receive the $253,000 of the intestate property and half of the balance, with the remainder going to their descendent. If the deceased person has at least one descendent but does not share them with their spouse, the spouse will only receive $169,000 of the intestate property and half of the balance, with the rest going to the descendants.

While Bono's estate was ultimately divided between his surviving spouse and two children, much of his estate was lost to the costs of probate (i.e., inventory fees, attorney fees, and court costs). If he had created an estate plan when he was alive, the legal process would have been streamlined. A revocable living trust, for instance, would have allowed his heirs to avoid both probate court and the expense that comes with it. Moreover, his estate planning team could have counseled him on the importance of including named beneficiaries.

Dying Without a Will vs. Dying with Too Many Wills

Another native Michiganian, Aretha Franklin, died in 2018 without a will—or so it was thought. Nine months after Franklin's death, Sabrina Owens, Franklin's niece and the executor of her estate, discovered four documents under sofa cushions as she was cataloging her home and assets. All four appeared to be unsigned drafts of Franklin's will, and two of them were even handwritten.

Making matters worse, the documents varied in how the assets in her estate were to be divided. One of them, which was supposedly drawn up in 2018, created a trust to benefit her son Clarence, who has special needs, and split the rest of the assets among her other sons, in addition to specific smaller inheritances for other relatives. This apportionment contradicted the one in an earlier draft, allegedly created in 2014, which gave a larger share of her estate to her youngest son, Kecalf, and less to Clarence.

While her family had seemed happy to navigate intestate succession, the discovery of the four documents divided the family, with some asking the probate court judge to favor one document over the other. Because Franklin did not have an estate plan prepared by an attorney, her family was forced to litigate over the validity of these wills in probate court.

If Franklin had been a client of Great Lakes Family Probate & Estates, our attorneys would have counseled her on the benefits of creating a complete estate plan, including a revocable living trust. In Michigan, a will does not take legal effect until death and it has been filed with probate court. Then, interested parties can still contest the will(s).

In Franklin's case, a trust probably would have been a better way to protect her lifetime assets and protect her and her family's privacy. By determining during her lifetime who she wanted to provide for, she could have prevented her family from seeking a different outcome because it would have been clearly laid out in her trust.

Hire an Experienced Estate Planning Attorney

When you try to plan your estate without the advice of a qualified and experienced estate planning attorney, you run the risk of leaving your family members in conflict, and possibly facing costly court battles, rather than giving them the space to grieve, heal, and move forward. Planning ahead of time will ensure your loved ones understand your wishes and have a clear sense of direction for carrying them out. Call 888-554-5373 today or schedule an appointment online.  

[1] The year 2022 values

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