A few weeks ago, the world experienced the passing of Aretha Franklin, a music icon. Within days of her death, it was reported that she left no will and none of her assets were held in trust. As a result, her reportedly $80 million estate will now have to go through the probate process, which becomes a matter of public record. This process can take years, which is costly and often leads to family disputes. Sadly, we’ve also recently seen this with Prince’s estate, which shows that this estate planning mistake is very common among public figures with access to sophisticated estate planning advice.
Celebrities are no different from the rest of us. No one wants to talk about death, let alone plan for it. It’s easy to procrastinate and not address it, which often leads to the worst result and a big mess for survivors. Without proper estate planning, you fail to take advantage of beneficial tax planning strategies. You have no control over how your assets are distributed, or who handles your affairs and cares for your children. What ends up happening may not be what you wanted or intended.
Whether you are single, married, young, old, wealthy, or not wealthy, here are a few essential estate documents that everyone should have completed and executed:
Financial Power of Attorney (POA)
Authorizes an appointed person (i.e. your agent) to handle your financial matters on your behalf. A power of attorney may be needed when you are no longer able to manage finances or you chose not to. A financial POA does not give the agent any ownership rights to your property, it simply allows him/her to act on your behalf.
Healthcare Power of Attorney (POA)
Authorizes your agent to make your medical decisions if you no longer have the mental capacity to do so. The agent must do what he/she thinks you would do in a given situation (i.e. make the same decision you would make if able to do so). Healthcare POA includes related matters such as who should be told of your condition and who should be allowed to visit you.
States what your wishes are in certain medical situations. Examples include life support/ventilators, artificial nutrition/hydration, and your other wishes, such as organ donation, disposition of remains, religious issues, and family/other emotional issues. A living will comes into play in the end-of-life setting, which is if you are terminally ill and mentally incapacitated. It can help guide your Healthcare POA in making your medical decisions.
Last Will and Testament
States who the executor of your estate is. It also indicates how your assets should be distributed, how expenses should be handled, and who should be the guardian of your children (if applicable). Unlike your POAs and living will, your will only becomes effective upon your death.
Depending on your situation, a revocable living trust may be a smart option. This type of trust is a bucket that holds title to assets while you are living. It’s also a standby-by device waiting for incapacity or death. Upon your death, a revocable living trust becomes irrevocable and acts as a funnel to distribute your wealth at the right time, to the right people. This trust makes court intervention unnecessary, keeping your estate private.
People change, priorities change, and circumstances change, which is why your estate plan documents should be reviewed periodically. None of these documents are irrevocable, which means they can be updated at any time. It’s crucial to review your documents regularly to confirm they still match your current situation and wishes. If they don’t, it’s crucial to not only update the documents but execute them. If you fail to do this, it can be extremely difficult and complicated for your wishes to be followed.
This situation played out on the TV show, Nashville. Rayna, a huge country music star, was seriously injured in a car accident. She unexpectedly succumbed to her injuries, leaving behind two teenage daughters. As her family mourned her passing, they realized that her estate plan documents had not been updated in years.
Since the last update of her estate plan documents, Rayna had been divorced and then re-married to her long-time love and bandmate, Deacon. Deacon was the biological father of Rayna’s older daughter, Maddie; although he didn’t raise her, he was around throughout her entire life. Rayna’s first husband, Teddy, raised Maddie and was the biological father of her younger daughter, Daphne. At the time of Rayna’s death, Teddy had been in jail for several years. During this time, Rayna and Deacon got married, and Deacon stepped in to raise the girls. Their everyday life was now with Deacon.
On her deathbed, Rayna made Deacon promise that he would care for the girls. Unfortunately, Rayna’s estate plan documents named Teddy as the girls’ guardian because the paperwork had not been updated in years. This created unnecessary stress for her young, grieving daughters, as well as numerous family disputes. All of which could have been avoided if Rayna had reviewed and updated her estate plan documents as her situation changed over the years.
Even with all of the help and support that celebrities have, they can still make estate planning mistakes like the rest of us. Incapacity and death are never high on anyone’s list of things to think about or talk about it. But the more we can prepare and plan for it, the more likely our wishes will be followed and the stress on our family and loved ones will be reduced. If you don’t already have these documents in place or haven’t reviewed them in a while, it’s extremely important to make this a priority.
Erin Itkoe, CFP®, CPA®/PFS
Director of Client Experience / Senior Wealth Counselor
Erin provides comprehensive wealth management solutions to a range of Versant Capital Management’s clients. She also ensures that every client has a consistent and positive experience working with the firm and its advisors.
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