Estate planning mistakes – And how to avoid them


There’s a calm comfort that comes with estate planning. A sense that your family will be taken care of after you pass away (hopefully peacefully at a ripe old age). Sadly, it doesn’t always happen that way. Forgotten details can create confusion and havoc for your family — or, suck them into a time-consuming court case to get it all ironed out. Even those who think they’ve got their estate plans buttoned up can and should review — then update — those documents at least once a year. You won’t regret thoroughly reviewing your estate plan; perhaps even better, you’ll take comfort in knowing you gave your family one less thing to worry about when the time comes.


Avoiding the Great Estate “Oops”

Regular reviews can help prevent your estate from descending into chaos. Let’s look at the consequences of neglecting your estate plan and forgoing this oft-overlooked but absolutely critical review.


I Got You Babe (And Babe)

Back in 1998, after Sonny Bono’s untimely death in a skiing accident, we learned he never wrote a will. And a man claiming to be an illegitimate son attempted to get part of the Bono estate, as did ex-wife Cher, with whom he shared royalties on music they made together. His blended family became a public spectacle at a time of grief and uncertainty.

Avoiding the Oops: Resolve to write a will as soon as possible. And keep your beneficiaries updated. Everyone over 18 needs an estate plan that includes a comprehensive will (at the very least) and properly documents your wishes. Remember, life is unpredictable, perhaps more so if you have a complex professional or personal life.


The Girl Without a Ring

Stieg Larsson, who wrote “The Girl with the Dragon Tattoo,” was devoted to his girlfriend of 32 years. When the Swedish author died without a will, his entire estate was divided between his father and brother in accordance with Swedish law. His beloved was left out, legally speaking.

Avoiding the Oops: Resolve to learn how estate laws affect nontraditional relationships. Learn and understand the laws that govern transfer of property in your chosen state or country, so you can protect the interests of those you love. And don’t presume others will honor your wishes without a written directive. Beyond writing a will, asset titling is especially important when you’re in a “nontraditional” relationship. Legally, your partner may not have the same rights a spouse would.


The Injustice of It All

Former U.S. Supreme Court Justice Warren Burger presided over his own will, penning a brief 176-word declaration. But the poorly executed document left his family with more than $450,000 in estate taxes and court fees that could have been avoided. You’d think a Supreme Court judge would know better, but he didn’t.

Avoiding the Oops: Trust a qualified estate planning professional to help you write your will and other estate planning documents.


No Laughing Matter

“Dark Knight” actor Heath Ledger drafted a will naming his sibling and his parents as beneficiaries. Sadly, he didn’t update it after the birth of his daughter, Matilda. When he passed away unexpectedly, there was great confusion about who were the rightful heirs of his estate, and the difficulties played out publicly.

Avoiding the Oops: Resolve to review your plan any time your life changes. Remember that every life event — births, adoptions, disability, deaths, marriages, divorces, even moving — should trigger a review and update of your estate documents. If any of these events occur in the life of a beloved beneficiary, take note! That requires another look, too.


Empty Trust

Michael Jackson created a trust, but it seems the king of pop may not have fully funded it. As a result, members of his famous family fought in probate court — and in the media — before settling the estate.

Avoiding the Oops: To find out if a trust makes sense for your family, consult knowledgeable estate planning professionals to learn more about the various types.


A Complicated Man

When he died last year, actor Philip Seymour Hoffman left his entire estate to his long-term girlfriend, bypassing his three young children because he didn’t want them to become entitled trust-fund babies. But their non-married status meant that she didn’t qualify for the marriage exemption on inherited assets, according to Forbes. So approximately $30 million of the $35 million estate ($5.34 million is excluded because of the federal lifetime exclusion; $10.68 million for couples), which could have been passed tax-free, was fully taxable at up to a 40% rate. On top of that, New York state has its own 16% estate tax for non-spouses on any amount over its $1 million exemption. Forbes estimated that the Oscar winner’s loved ones lost at least $15 million to the IRS and the state.

Avoiding the Oops: Resolve to research estate-planning strategies that align with your wishes. Remember to review and revise your estate plan any time your life changes. Also, don’t let principles cloud your judgment. We’re not saying ignore them. We’re suggesting that your professional advisors may be able to keep the CRA at bay and protect your legacy, while still respecting your stance against the institution of marriage or an unwillingness to bequeath significant wealth to your children.


Papa Didn’t Know Best

Like the Hoffman family, “Sopranos” actor James Gandolfini’s family ended up owing $30 million in taxes on his $70 million estate. While he had a plan that included his wife, children (some from a previous relationship) and sisters, he neglected to implement some well-known techniques that could have minimized that tax burden. For example, he left 20 percent of his assets to his wife, which didn’t take advantage of the unlimited marital deduction that allows tax-free transfers between spouses, in most cases. Instead, 80 percent of his wealth was subject to federal estate taxes and New York’s 16 percent estate tax. While he may not have wanted his current wife to inherit all his wealth, he could have implemented different provisions to protect the financial security of individuals within his blended family, while softening the tax blow.

Avoiding the Oops: Resolve to take advantage of all available estate-planning techniques. Make sure your will accurately reflects your existing family structure. And, don’t forget to talk to professionals about estate planning techniques that take advantage of all the tax exemptions currently available. Doing so could ease the transfer of assets and keep more of your hard-earned wealth within the family.


Resolve to Review

Like any financial plan, an estate plan is based on the best available information when the plan was developed. But once created, the work is not over. Life isn’t a snapshot; it’s more like a video that changes second by second — sometimes subtly, sometimes dramatically. Your estate plan reflects just a single frame. Shouldn’t it be edited to include the important events — and people — that make your life meaningful? Don’t put this off. Resolve to review your documents, or put new ones in place. And don’t forget to take into account any changes that could impact your plan, including family, personal interests, wealth, and changes in tax law. There are more than enough reasons to review your estate plan on a regular basis. You may not recognize a change, but your advisers might.

Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. Investors should consult a tax professional for tax advice specific to their situation.