This is an article from The Law Firm of Evan H. Farr, P. C. (http://www.farrlawfirm.com/) in Fairfax, Virginia, that we thought others may find helpful.
In 2016 so far, we have said farewell to some of the most legendary names in music, film, literature, and television, including Prince, Harper Lee, and David Bowie — all within the first four months of the year. While nothing can make the horrific loss of these legends better for their families, friends, and fans, we hope they have taken the proper steps with their estate planning, to put less stress on loved ones.
Today, we will take a look at these celebrities to see how well they planned, and hopefully learn a thing or two from their proper, thoughtful planning, or what not to do from their mistakes.
Nelle Harper Lee
Nelle Harper Lee, better known by her pen name Harper Lee, died on February 18, 2016 at the age of 89. She was a novelist and a Presidential Medal of Freedom recipient best known for the Pulitzer Prize-winning 1961 book, To Kill a Mockingbird. She’s also the author of a sequel titled, Go Set a Watchman, which was controversially published in 2015, 60 years after she wrote it.
Lee never married and had no children, and her parents and siblings died years ago. Lee has a nephew, named Hank Conner. She lived in her hometown of Monroeville, Alabama until she died, and it is the place where she created her nonprofit called the Mockingbird Company.
At the time of her death, the value of Lee’s estate wasn’t immediately clear. However, paperwork from an old lawsuit indicated that she earned nearly $1.7 million during a six-month period in 2009. And that’s before the release of her second book last year, sales of which were set to total $40 million.
So, what will happen now to the legendary writer’s earnings, which will likely continue to grow as millions read her works?
Raley L. Wiggins, an estate planning attorney in Montgomery, Alabama believes that Lee probably didn’t die without her affairs in order, since the writer’s father and sister were both practicing lawyers (and her estate has been involved in multiple lawsuits). And, given her desire for privacy, he suggested that Lee may have opted for a trust rather than a will. Why? Wills become public record when they are submitted to probate court, whereas trusts just get taken over by someone else. (In Lee’s case, Tonja Carter, Lee’s lawyer, is apparently the trustee of her trust.)
In addition, Lee once publicly referenced having a will, but only her friends and family know for sure, since she was a private person whose last formal interview was in 1964.
On January 16, David Robert Jones (known as David Bowie) died at the age of 69 from liver cancer. He was a British singer, artist, actor, and Rock and Roll Hall of Fame inductee with a five-decade glam rock career, five platinum albums, and roles in Labyrinth, The Last Temptation of Christ, and The Prestige. He was survived by his wife, Iman, their 15-year-old daughter, Alexandria, and a son from his first marriage, Duncan Jones, who is a film producer.
Similar to his approach to music, his estate plan was creative in the way it preserved his assets for his family. After nearly experiencing bankruptcy, Bowie took charge of his finances by selling an interest in his archive of music. Investment banker David Pullman helped Bowie develop “Bowie Bonds,” which permitted him to sell a 10-year investment, which functioned like an annuity, and yielded a fixed rate of return of 7.9 percent. The sale price was $55 million.
Pullman revealed that Bowie was curious about estate planning when he was much younger, and wished to make certain that his assets were transferred to his family. He prudently carried out the Bowie Bonds transaction for the purpose of tax savings, and to ensure that his estate would realize advantages from his music catalogue.
As far as his assets go, it was reported that Iman Bowie will in all likelihood receive the bulk of Bowie’s estate, which is believed to be approximately $200 million, excluding the predicted rise in sales that will continue in light of Bowie’s death. David Bowie’s children will also receive significant bequests. Considering the accounts about his sophisticated estate planning, David Bowie probably used one or more trusts, which may have increased the value of assets he left to his heirs in a way that reduced estate taxes. In addition, the use of trusts, rather than only a will, allowed his assets to be transferred confidentially, and without a probate proceeding, as the details of probate proceedings are public.
Last week, Prince died at age 57. He was a legendary musician and actor whose music spanned three decades, many instruments, and numerous genres. His body was discovered at his Paisley Park compound in Minneapolis, Minnesota. No cause of death has been determined, but a week prior, his private plane make an emergency landing when he became ill with the flu.
Prince’s parents have been deceased for more than a decade. He had six siblings from the same father, but it’s unclear how close he was with the ones still alive (at least two have died). He was married and divorced at least twice. He reportedly had one child — a son — who died one week after being born due to a genetic cranial ailment known as Pfeiffer syndrome.
At this point, it is believed that Prince died intestate (or without a will). This was confirmed yesterday by Prince’s sister, Tyka Nelson, 55, who indicated in probate documents filed with the Carver County District Court in Minnesota that her brother died without a spouse, children or surviving parents, and that she “did not know of the existence of a will.” According to Minnesota law, as in most states, in the absence of a will and without having a surviving spouse, with no descendants and no living ancestors, the estate goes to his brothers and sisters (and to the children of the deceased siblings) in equal shares.
Prince’s estate is worth approximately $300 million, according to the Celebrity Net Worth website. That figure could grow exponentially if any of his unreleased music sees the light of day. If history is any indication, when a legendary musical performer dies, there is sure to be a legal battle over all of the above. However, this may be a non-issue, since Prince was a faithful Jehovah’s Witnesses, and some have speculated that he wished to leave all of his money to the church (although, it is unknown if this is documented anywhere).
Harper Lee and David Bowie appeared to have taken the proper steps with their estate planning. Prince, on the other hand, may have died without planning in place.
Had Prince done proper estate planning and used a Living Trust, then his estate wishes would be private and not in the public eye. The cost of settling a Living Trust range anywhere from less than 1% to 3% of your assets — much less than the costs of probate, which is another huge advantage of the Living Trust.
In the past, we looked at other celebrities, whose estate planning you can also learn from, as follows:
- Amy Winehouse didn’t have an Estate Plan, leaving behind a $6.7 million estate;
- Whitney Houston didn’t have a Living Trust and her Will was filed publicly in probate court;
- Michael Crichton didn’t update his estate plans, leaving his wife and baby empty-handed;
- Etta James didn’t have a Durable General Power of Attorney, causing a father/son feud in court;
- James Gandolfini left his heirs $70 million and a hefty tax bill;
- Philip Michael Hoffman hadn’t updated his estate plan in 10 years, leaving his companion $35 million and a hefty tax bill, and his young daughters empty-handed;
- Robin Williams put a lot of thought into his estate planning, and made some wise decisions. For instance, he was very careful with the money he left his children, splitting their trust funds into three equal shares that they will each receive when they turn 21, 25, and then 30.
We advise that our clients should almost always use a Living Trust as their primary Estate Planning tool, in order to protect assets at death from having to go through the nightmare of probate. A Will allows you to direct who receives your assets (i.e., who are your beneficiaries) and who manages your estate (i.e., who acts as your executor), but a Will does NOT protect your assets from becoming public knowledge and going through probate. Only a properly-funded Living Trust protects your assets from going through the nightmare of probate.
Please keep in mind that a Living Trust does always not eliminate the need for a Will. A Pour-Over Will is still important to pass on any assets you have not transferred to the trust.
The Law Firm of Evan H. Farr, P.C.
Fairfax Estate Planning: 703-691-1888
Fredericksburg Estate Planning: 540-479-1435
Rockville Estate Planning: 301-519-8041
DC Estate Planning: 202-587-2797