Estate Planning Mistakes of the Rich and Famous
One of the aspects of being a celebrity is the impression that you “have it all.” Unfortunately, while fame does usually bring financial security that can last generations, recent cases have shown us just how many stars make huge mistakes when it comes to estate planning. Many of these blunders were preventable with some simple estate planning documents used by those of us who aren’t worth hundreds of millions of dollars. Here are some recent examples of mistakes made by some of the biggest stars on the planet.
As if the death of iconic singer Prince in April 2016 wasn’t shocking enough, the aftermath of his death revealed a major secret that left people in shock. The Purple Rain artist died without a will or any estate plan whatsoever.
When someone dies without a will, the formal term is dying intestate, which provides for a fundamental framework for distributing assets to heirs defined by law. Without any formal legal guidance from the deceased, the division of Prince’s estate, which is estimated to top $300 million, will be decided through the court system in his home state of Minnesota.
But even deciding who should administer the estate is a battle, because whoever is in charge of the process will have considerable authority to proceed how he or she sees fit. The administrator will likely be entitled to additional money for their work. For example, several million dollars in unpaid taxes on Prince’s properties required some last-minute wheeling and dealing by the estate to preserve the assets; these situations will create substantial work for the estate administrator.
Then there is the issue of dividing the assets among the musical icon’s heirs. With six known siblings and a federal inmate who claims to be Prince’s son, the legal headaches caused by bickering heirs could drag out for years.
The Queen of Soul also died without a will, creating many of the same issues previously discussed regarding what happens when a celebrity dies intestate. As the details of her financial situation emerged after her death, it became clear that Aretha Franklin’s estate has a wide range of messy issues that must be resolved before settling the estate.
One of the problems is the seemingly simple task of determining the value of Franklin’s assets. When an artist with numerous songs and publishing rights that will continue to earn income for the foreseeable future, the IRS requires a complicated valuation process designed to assign a future value to any income from assets like image rights, music royalties, and publishing credits. The law in Franklin’s home state of Michigan provides for a postmortem right of publicity, which means that her heirs can protect Franklin’s likeness or image from unauthorized use and capitalize on it in the future.
Aretha Franklin’s debts are another serious matter. According to court records, a long list of people claimed they were never paid, including former managers, dentists, accountants, lawyers, limo drivers, and tax collectors as well as a songwriter, a dressmaker, a music arranger, a moving company, a landscaper, a home inspector, and even the guardian for her mentally ill son.
The problem is that these debts are not centralized in any valid form. Anyone who Franklin owed money to can file a claim with the estate and those claims must all be settled before the estate can be closed. It is a virtual certainty that scam artists will file false claims to get their hands on Franklin’s estate, which means someone will have to go through all of them to try and determine what is legitimate and what isn’t. Sorting out the mess of creditor claims could take a long time and cost the estate quite a bit of money, but it has to be done.
Finally, there is the issue of how to protect the interests of one of Franklin’s adult children, who reportedly has special needs. It is likely that a guardian will need to be appointed by the Court, which is another legal process the estate will need to attend to before distribution.
When Nirvana frontman Kurt Cobain committed suicide at age 27 he was at the height of his popularity. His unexpected, tragic death left behind a wife (Courtney Love) and a young daughter (Frances Bean), but no will or other estate planning documents.
Reports suggested Cobain was in the process of drafting a will at the time of his death because he was considering a divorce from wife Courtney Love. Sadly, his failure to follow through before his death set a chain of events into motion that Cobain was likely trying to avoid.
Cobain’s lack of an estate plan meant that Love, whose bouts with addiction and mental health issues were well-documented, was the intestate heir to Cobain’s estate. She assumed sole control over considerable assets, including rights to Cobain’s image, his publishing, and licensing rights, and all of his performance royalties.
After Cobain’s death, Love joined former Nirvana members Dave Grohl and Krist Novoselic to form a company to handle any Nirvana-related projects; however, it didn’t take long for this partnership to disintegrate. After Love sought to disband the company for financial reasons, the two former bandmates claimed she lacked the mental capacity to be involved and requested a psychiatric examination to expedite her removal.
But Love was just getting started. She filed lawsuits against the managers of Cobain’s estate alleging they stole $530 million in cash and real estate. The suit went nowhere, and Love accused her lawyer of conspiring with the other side as part of a payoff scheme.
Cobain’s daughter Frances Bean went to court for a restraining order against her mother in 2009, resulting in Love losing custody of her daughter along with control of a trust fund established by Cobain’s estate managers. Estimates suggest that Frances inherited a total of 37 percent of her father’s estate.
Meanwhile, Love continued to dispose of valuable estate assets for cash, including Cobain’s share of Nirvana publishing rights and licensing rights to Cobain’s image. The remainder of the estate, valued at an estimated $450 million, still generates income for Love and her daughter, but it’s hard to deny that Love’s actions cost the estate considerable income that could have been protected had Cobain prepared a will or otherwise planned his estate prior to his death.
Too many people ignore the need to establish an estate plan before it’s too late. Even celebrities, who have significant assets, financial advisors, and attorneys, often neglect to prepare even the basic estate planning documents. The result is a long, drawn-out process resulting in emotional distress and conflict for heirs who the deceased presumably wish to spare from such a mess.
Whether you are an international singing sensation or you limit your vocal performances to singing in the shower, you need to speak with an expert professional about your estate plan. At Magee & Adler, we work with all of our estate planning clients to formulate a custom estate plan designed to fit everyone’s individual needs. For more information, contact our office at 562-432-1001 and schedule an appointment with one of our experienced attorneys.