Now into the second month of 2011, it’s not too late to make a fresh start with the important topic of estate planning, which so many people find ways to keep putting off. We think it’s helpful to see what happened last year with some celebrity estates to help add motivation for proper legal planning in 2011.
What happened in 2010? Dennis Hopper and Gary Coleman both passed away, sparking ugly court fights. The estates of Michael Jackson and Steve McNair dragged on with no end in sight, and Anna Nicole Smith’s efforts to claim a share of her 90-year old deceased husband’s billion dollar estate continued into its fifteenth year in court! In addition, the estates of Farah Fawcett, Gary Coleman, Brittany Murphy, and George Steinbrenner provided valuable lessons on how to (and how not to) protect families through estate planning.
Here’s how to make the most of changes in the law this year.
Familiarize Yourself with 2011 Estate Tax Laws. George Steinbrenner timed his death well by passing away in 2010 when there was no estate tax. (See, “Steinbrenner Goes Out A Real Winner.”) Of course, billionaire Roger Milliken timed it even better, dying less than 48 hours before the 2011 laws would take effect. In fact, with the new laws, Milliken’s heirs and others can elect whether to use the 2010 or 2011 laws, picking the ones that are most advantageous.
So what are the 2011 laws? The estate tax is back at a maximum rate of 35%, with a $5 million exemption for individuals and $10 million exemption for married couples. If the spouse that passes away first fails to use up the full $5 million exemption, it carries over and can be added to the second spouse’s $5 million exemption. The gift tax and generation skipping tax are both set at the same $5 million level. Additionally, the annual gift exclusion remains $13,000 per year, and gifts of tuition and payments of medical care are still exempt.
Review and Update your Estate Planning Documents. A critical component of estate planning is to update wills, trusts, powers of attorneys and other documents every few years. It is especially important after significant life events, like marriages, births, and divorces. You don’t have to wait until the life event is complete to update your legal documents. (See, “CelebrityDeathAndDivorce Train Wrecks.”)
Gary Coleman broke this critical rule. He created a handwritten codicil to his will in 2007 leaving much of his estate to his wife, Shannon Price. After they divorced, however, Coleman never updated his will or created a new one. That led to a court fight after he died about whether Coleman was still married to Price. Even though they never officially tied the knot for a second time, Price claimed they had a “common-law marriage,” which would mean that the handwritten will would be valid. Had the former Diff’rent Strokes! star simply made a new will, it’s likely that he could have avoided the estate fight.
Beware of Financial Exploitation. This year the first “official” baby boomer turned 65. In fact, there will be around 2.5 million boomers hitting this standard retirement age this year. Exploitation of those 65 and older is a growing epidemic, and the aging baby boomer population will only make it more common. A study by Met Life found that seniors are exploited in the amount of 2.6 billion dollars each and every year and that this figure will grow as the baby boomers cause the number of seniors to increase.
The same study reported that about two-thirds of those who exploit seniors are family members or others that the victim already knows and trusts. A common method is through “undue influence,” where someone tries to convince a senior to change his or her will, trust, bank account, and/or deed, against what the person would otherwise want to do.
Does the Anna Nicole Smith case come to mind? The United States Supreme Court ruled in 2010 that it will hear her case for the second time. Did she wrongly take advantage of her 90-year old husband, or did his son use fraud and other improper means to stop the billionaire from leaving money to Anna Nicole? After 15 years of fighting, we still don’t have a definitive answer.
Don’t make the mistake of thinking that exploitation only happens to 80 and 90-year olds. Farrah Fawcett’s estate and trust are in the midst of two heated lawsuits. In the Fawcett case, a Holllywood producer and the trustee of Farrah’s Trust accuse each other of taking advantage of Farrah’s weakened state, before she died of cancer on June 25, 2009.
Good estate planning and proactive, vigilant families are the keys to preventing both the exploitation of seniors and court fights after someone passes away. Make 2011 the year that you and your loved ones stop procrastinating and get your legal affairs in order.
To read more about Anna Nicole Smith, Farrah Fawcett, Gary Coleman, and the latest celebrity cases, subscribe to The Legacy Update, our monthly e-letter, which includes celebrity cases with lessons to protect yourself, your loved ones and your clients. To subscribe to The Legacy Update or to learn more about the authors, go www.TrialandHeirs.com or email them at email@example.com.