Celebrity Estate Planning Mistakes that Keep on Giving–to the Wrong Person

My dad was a life insurance salesman. I remember rummaging around in his sales materials and finding a service he subscribed to that reported on the estate tax problems of the rich and famous and even the not-so-famous. He used the  reports to make the point that his prospective clients needed to do some estate and insurance planning, so their families wouldn’t face similar fates.

I was reminded of this when I stumbled upon this 2013 article from Forbes, “Monumental Estate Planning Blunders of 5 Celebrities.” The piece details the woes of rocker Jim Morrison, Rat Pack icon Sammy Davis Junior, hotelier Leona Helmsley,  QB Steve McNair, and, my favorite sad story, actress Marilyn Monroe:

Some celebrities have erred by not going far enough with their estate planning. For instance, famous actress and model Marilyn Monroe left most of her estate to her acting coach, Lee Strasberg.

“She left him three-fourths of her estate, and when he died, his interest in Marilyn’s estate went to his third wife, who did not even know Marilyn. Marilyn’s mistake was not putting her assets in trusts,” says Nass.

Strasberg’s third wife, Anna, eventually hired a company to license Monroe’s products, which involved hundreds of companies including Mercedes-Benz and Coca-Cola. In 1999, many of Monroe’s belongings were auctioned off, including the gown she wore to President John F. Kennedy’s birthday party, for more than $1 million. Strasberg ended up selling the remainder of the Monroe estate to another branding company for an estimated $20 million to $30 million, according to a remembrance of the star by NPR in 2012.

It’s unlikely Monroe would have wanted someone she didn’t know to profit so handsomely from her belongings. A trust would have provided for Strasberg while he was alive and then after his death could have directed the remainder of her estate to someone of her choosing.

Yes, I imagine was very unlikely that she wantedStrasberg’s 3rd wife to laugh all the way to and from the bank. But poor planning allowed that to happen.

Just Leave It Alone?

As many will recall, then candidate Trump promised to eliminate the estate tax. That was then. This is now–he’s the President. What will he actually do? Will he also eliminate the estate tax’s two siblings: the gift tax and the generation skipping tax? No one knows, though many people care, especially those who preach tax fairness.

Given that married couples currently have to be worth almost $11 million dollars before  the estate tax kicks in–it’s more complicated than that, but still–eliminating the estate tax is going to help only the very, very wealthy. And maybe that’s a bad (or a good) thing.

I’m here to argue for the advisor. Estate planning attorneys, life insurance and investment advisors, CPAs and financial planners. I’m betting that each and every one of them agree with the following:

Because the estate tax generates a meager 0.005 percent of annual tax collections, according to I.R.S. figures, it generates far more political debate than federal revenue. And among many tax planners, the calls aren’t so much for reform as for stability, or at least a period of benign neglect.

“Just leave it alone so we can plan,” Mr. Jenney said. “But every administration seems to want to put their own twist on the estate tax.”

Estate Planning Seminar at Pleasant Grove Library

I’ll be presenting a seminar on DIY — Do It Yourself — Estate Planning at the Pleasant Grove Library on Wednesday, March 8, 2017 at 7 PM. Come an enjoy the discussion. The address is 30 E Center St, Pleasant Grove.

If you have a question about wills, trusts, and other aspects of estate planning, maybe I can answer it.

How One Family’s Legacy is an Example to Your Family

So by now, you probably know that the Larry and Gail Miller family insured that the Utah Jazz would forever be the Utah Jazz--musical Mormon jokes aside (by the way ever heard of BYU’s Synthesis?). They did so via a so-called dynasty or legacy trust, a trust intended to live on and on and on, well beyond the lifetimes of the Millers and their children and even their grandchildren.

I intend to write more on this subject, but for now think about what financial legacy would you like to leave your family, your city, your school? A well-drafted trust will allow you to do that.

 

Gift and Estate Planning Coupons May Worth Less After This Election

When you give money or property to someone while you’re alive, you make a gift. If that gift is beyond a certain size, you will also have to pay a gift tax on it. When die, your money or property will go to those whom you name as your beneficiaries in your will or trust. But yet again, if your estate is beyond a certain size, your estate will have to pay a tax on it, this time an estate tax.

clinton-trumpNow Uncle Sam has, of late, been pretty generous**. He’s given each of us coupons* to pay that tax–up to a certain amount. Currently, each of us has a lifetime coupon worth $5,450,000; that is, each of us can give away (or devise or bequeath upon our death) $5,450,000 without having to pay any gift or estate tax. And if we’re married, we can combine these “applicable exclusion amounts” so that as a couple we can give away twice that amount, or $10,900,00 without any gift or estate tax being assessed.

It gets better. In addition to the amounts I just mentioned, each of us can make annual gifts of $14,000–an annual coupon, if you will–to as many people as we want, family, non family, friends, and enemies. Every year! And if we’re married, we can combine our gifts. That’s $28,000. Gift tax free.

And if you finally do have to pay an estate or gift tax? The top rate is 40%.

All that was to tell you this: If Hillary Clinton is elected, she’s promised to reduce the applicable exclusion amount–the large lifetime coupon–to just $3,500,00 for an individual, $7,000,000 for a married couple. That’s almost a $4 million drop from present levels. I’m unsure at this time if she had any plans to reduce the annual gift coupon.

Donald Trump wants to repeal the estate tax.

FWIW, this is not a political post, or at least I don’t intend it to be. Just the facts. And that’s that.

*In addition to the two “coupons” discussed in this post, there’s a third, the unlimited marital deduction, which allows spouses to pass property between one another without tax consequences. Ultimately, the last to die may have an estate tax bill to pay.

**Generous is being generous. We’re talking about money that is not Uncle Sam’s to begin with, but humor me here.

Get Your (Valuation) Discounts Now!

Two weeks ago, the Treasury Department released proposed IRS Code Section 2704 valuation regulations that, as proposed, will dramatically change the discounts currently allowed, including so-called minority and marketability discounts. Thus, gift and estate tax planning strategies that rely on such discounts to transfer property from one individual to another via the use of limited liability companies, family limited partnerships, and other such entities may not work so well in the future.

The IRS has scheduled hearings on the proposed regulations for December 1, 2016. Sometime after that hearing the regulations will become final; thus, anyone planning on taking advantage of such discounts has little time to waste.

As I learn more about the proposed changes, I’ll follow-up on this blog. If you can’t wait that long, the AICPA has a number of helpful resources.

Trustees and Beneficiaries: More Good News than Bad?

I really like the idea behind “The Positive Story Project,” a new monthly column at Wealthmanagement.com. Here’ the first three paragraph from the opening salvo:

My goal in writing this column is to focus thinking within our community of practitioners—important players in the transfer of wealth to younger generations.   And, with so much at stake for our clients and their families—a good deal more than preservation of financial assets—let’s make this column a conversation.

Can the widespread dissatisfaction and all the talk of “problem” beneficiaries and “problem” trustees, give way to more creative and productive relationships?  I say:  “Absolutely.”  And, if your intuition is the same as mine, the harder question becomes “how do we get from here to there?”

To begin to find out, my colleague, Kathy Wiseman, and I have been going to the source—beneficiaries, trustees and their advisors—asking them for positive stories about moments in time when their relationships have worked well.  I’ll discuss what can be learned from these individuals and their stories in this column each month.

I look forward to more on this subject, both to help me as a practitioner and to inspire my clients and potential clients to use trusts to better carry out their wishes.

Happy Birthday to It

It doesn’t look a day over . . . : The estate tax turns 100.

Estate Planning? I Don’t Have Time . . .

Why doves cry. Half of Prince’s estate to go to government.

Gonna Be a Prince of a Mess

Well, I guess since Prince didn’t have one, you don’t need one either . . .

Prince’s sister has said the superstar musician had no known will and that she has filed paperwork asking a Minneapolis court appoint a special administrator to oversee his estate.

Something tells me this will neither go smoothly nor end well.

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