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It’s a lesson seen periodically in news headlines: A famous celebrity or musical artist passes away, leaving behind a substantial estate, and there is no will in place to determine how it will be passed on. As a result, lawsuits and family fights ensue.
It leaves many people shaking their head and thinking, “someone that well-off, and they didn’t have an estate plan?”
Indeed, such passings can prompt people to reach out to a financial professional and get their own situation set.
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Yet many people don’t. According to one recent survey, only about one out of four Americans have a will or other estate plan in place. Yet most of the respondents in the survey agreed that having one is important.
Estate planning pitfall #1: None
Even if your estate will be just a fraction of the ones typically left behind by A-listers, it's no less critical that you adequately prepare for your inevitable passing. While it's never fun to face one's mortality, failing to prepare an estate plan will put the government in charge of your financial afterlife. Indeed, drawing up an estate plan is an advanced act of protection and mutuality for your loved ones. (Discover more: Wills and the basics of estate planning)
It's called intestate succession, and the particulars vary from state to state. But generally, said Kimberly Hanlon, an estate planning attorney in Minneapolis, most states give top priority to a surviving spouse, followed by adult children. But if you're unmarried and have no kids, then things get a bit murkier as parents and siblings come into the mix.
And in cases like celebrities, where the estate is large and has control of songs and copyrights that can produce future revenue, arguments often ensue.
Family squabbles on the scale you often see occurring following a celebrity's death are less common among more mainstream people, but they do happen, generally when tensions have already been running high in the family before a person dies.
"The thing about probate cases, is there's an element like family law," said Hanlon in an interview. "With divorce, you only have two people, but in these cases you can have multiple players — and sometimes they group together in alliances, similar to a reality TV show. There are all sorts of long-standing family dynamics that are the undercurrent of what's happening. There's no other area where 'Mom always liked you best' is something that really arises in a case. They can be very difficult cases for the court to sort out and manage — and they're difficult for the families going through them."
It's worth noting that some assets — like life insurance policies and retirement accounts with named beneficiaries — pass outside a will entirely. Others, like real estate and bank accounts without transfer-on-death designations, can get tied up in probate. (Related: What happens to your debts when you die?)
Estate planning: Need more than a will?
Wills aren't everything when it comes to estate planning, of course. Many people also set up trusts and foundations to avoid certain tax liabilities — and shield their net worth from the public.
Put simply, a will lets you divide your assets however you'd like, but gives you no say as to what's done with them beyond that. A trust is an entity that holds property and lets you establish rules around what's going to happen to your assets (i.e., it dictates how money will be used or what's to happen to specific assets). (Discover more: Is a trust right for you?)
An overall estate plan should address:
- Asset and property distribution.
- Guardianship for dependents.
- Healthcare directives.
- Powers of attorney.
Estate plans should also account for digital assets — from social media accounts to cryptocurrency to online banking — which require specific instructions or beneficiary designations to transfer properly.
Having an estate plan isn't a set-it-and-forget-it procedure, either. It's important to regularly review your plan to adjust it for changes in your life.
"You should at least review it periodically to make sure it says what you thought it said or what you want it to say," said Allen Porter, a partner at Miller Porter & Muller, P.C., in Princeton, New Jersey. "Relationships evolve and people change and die — so you want to draft a will so it’s good not only for today, but so it has some durability. You might name not just one executor but a few backups as well."
Comprehensive estate planning isn't cheap. Prices vary widely by location and your complexity. A basic estate plan — covering a will, power of attorney, and healthcare directive — typically runs $1,000 to $2,500 with an estate planning attorney. A trust-based plan adds to that cost. Either way, estate planners note that the upfront expense is small compared with the potential cost of intestate probate proceedings, which can run tens of thousands of dollars.
So the short-term cost, say estate planners, is far outweighed by the long-term security and peace of mind.
In the meantime, reviewing and updating beneficiary designations on retirement accounts and life insurance policies is a quick step that has an immediate impact — and costs nothing. (Related: Beneficiary mistakes to avoid)
"The price of having that estate plan done is minimal compared with the value of the decisions that you get to make and having your estate be in order for your family and not leaving a mess behind," said Hanlon. "I have people who come to me to do estate plans and, as soon as we're done, they breathe a sigh of relief."
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Frequently Asked Questions about estate planning and the celebrity effect
Q. Why do so many celebrities die without a will?
A. Despite their wealth, celebrities aren't immune to the common tendency to put off estate planning — often because it forces a confrontation with mortality. Some may also assume their financial teams have handled it, when in fact no one has. The result can be years of litigation and family conflict that overshadow their legacy.
Q. Does having a lot of money mean you need an estate plan more than someone with less?
A. The size of your estate doesn't determine whether you need a plan — it determines the complexity. Even a modest estate can create legal headaches and family conflict without a will to guide its distribution.
Q. What happens if you die without a will?
A. Dying without a will means dying "intestate," and your state's intestate succession laws take over. Typically, assets pass first to a surviving spouse, then to children — but the process goes through probate court and can take months or years, especially when the estate is large or disputed.
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Discover more from MassMutual…
Calculator: How much life insurance do I need?
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Estate planning: How to set up a trust
This article was originally published in April 2016. It has been updated.
_______________________________________1 Caring.com, “2023 Wills and Estate Planning Study.”
2 NOLO, "How Much Will a Lawyer Charge to Write Your Will?"
