If you are like most people, you have done no estate planning. If that is the case, you are in good (bad) company.
You would think lawyers — trained legal professionals — would have completed their own estate plan. Alas, lawyers are no different than anybody else and often fail to plan. One of the most famous and respected lawyers of all time, Abraham Lincoln, died without a will. I also have known a number of attorneys who died without even having the simplest of wills.
More often problems arise when lawyers, who are not estate planning specialists, attempt to do their own estate plans. These lawyers often believe they are qualified to prepare estate plans for themselves and their clients. I regularly review wills and trusts, powers of attorney and other estate planning documents that are drafted by lawyers who are not estate planning specialists.
These plans usually have unintended results.
There are health care powers of attorney that do not to have living will provisions, mental health care powers, Health Insurance Portability and Accountability Act access and releases or signed patient advocate acceptances.
It is not uncommon for trusts to have faulty tax provisions. I have seen wills, which are death instruments; contain health care powers, which can only be used during a lifetime.
I often see financial powers of attorney that do not allow for the gifting of assets to the family instead of spending it all down on nursing home care. Unfortunately, many times I only see the estate planning documents after the maker’s incapacity or death when there is little that can be done to remedy the situation.
What do Pablo Picasso, Howard Hughes and Sonny Bono all have in common? None of them had a will.
Often the rich and famous do no planning or poor planning. However, with estates whose amounts end in lots of zeros, the unintended consequences have much more of a financial impact.
The rich and famous make the same mistakes as everybody else, only worse. The failure to plan or failure to plan properly has resulted in many their estates to be eaten up administration expenses, taxes and litigation costs.
One of the more well-known estates that had unintended results is the estate of Elvis Presley, the King of Rock ‘n’ Roll. Considering his stature in the entertainment world, Elvis left a relatively modest $10.2 million estate.
However, the settlement costs of his estate totaled nearly $7.4 million leaving only about $2.8 million to his heirs. About 73% of his estate was eaten up by the settlement costs.
The super-rich also are not immune from doing poor planning. Conrad Hilton of the Hilton Hotel chain left an estate of nearly $200 million. More than half of that was consumed in settlement costs.
Author and filmmaker Michael Crichton, best known as the author of “Jurassic Park” and creator of the TV series “ER,” died unexpectedly when his wife was pregnant. He had not provided for his unborn child in his estate plan. This resulted in substantial legal fees for his widow in her quest to obtain a share of his estate for their child.
Andy Warhol on the other hand, did proper estate planning. This resulted in only a fraction of his estate being eaten up in settlement costs. Although his estate settlement costs were nearly as much as Elvis’ at a reported $6.9 million, because his estate was nearly $300 million, only 2.3% of his estate was consumed by the settlement costs.
Because it looks like many celebrities’ estate settlement costs have left their legacy as “not so rich and famous,” don’t take your cue from them.
Do proper planning with a legal specialist in estate planning. You wouldn’t go to an oncologist to treat your diabetes any more than you should have a divorce or criminal lawyer prepare your estate plan.
The estate planning professional who prepares your estate plan should have a working knowledge of not only estate planning, but also federal and state tax laws and elder law. Without a working knowledge of all three of these areas, your estate plan could be missing some critical elements. So go forth and do proper estate planning today.
Matthew M. Wallace
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