How to Mess Up Your Plan

We talk a lot about good planning and how to do it, but sometimes it helps to learn lessons from the mistakes of others, and try not to fall into the same traps. History can be a great teacher, and those of us in the business hear lots of stories and see lots of examples of planning done well and poorly. Confidentiality dictates that we keep our client situations private so, fortunately for us, many celebrities lend their fortunes and families into the spotlight and can be used to identify common errors in planning.

That being said, please understand that there is no intention to criticize the plans of another and what outside observers think would improve a plan may have been considered and discarded by the individual. It is more of putting ourselves into their shoes and asking would I have made a different decision.

For purposes of this article, we will focus on four primary areas to organize the common mistakes. So, to Mess Up Your Plan, here are the four:

1. Don’t Have One
2. Don’t Keep it Up-to-Date
3. Have the Wrong People Draft It
4. Have the Wrong People Administer It

1. Don’t Have One

Countless celebrities and famous historical figures have passed without an estate plan in place. There is never a good excuse for this, but I suppose it is more understandable among those who die young. Musicians Kurt Cobain, Jimi Hendrix, and Bob Marley, for example, all in their 20’s and 30’s, but nonetheless successful and commanding large estates including future earnings. Prince was a bit older and with a large estate, and yet still, no will.

Pablo Picasso had amassed great fame and fortune when he died without a will as had Howard Hughes. These situations lead to extensive and sometimes very long fights over estates and even heirs because the decedent never let their wishes be known. President Abraham Lincoln should have known better than to be without a will and Martin Luther King lived for years under threat, and yet did not legally express his wishes for the disposition of his assets. He was not a wealthy man, but his legacy and possessions have become very valuable. His Bible and a Nobel prize were fought over for nearly 50 years after his death. I appreciate that he had a Dream, I am just thinking perhaps he should have had a Plan as well.

2. Don’t Keep it Up-to-Date

Many people do draft plan but do not always keep them up-to-date for the changes in their wealth, their residence, their specific possessions or their family. As with many new parents, singer Whitney Houston apparently did think to write a will about a month before her daughter’s birth. Anticipating and updating documents at critical times such as these can make a big difference. In her case, however, she never updated the will as her daughter grew up and perhaps could have considered the effects of wealth on a troubled youth, who has likewise since tragically passed away.

Actor Heath Ledger also had a will written before his daughter’s birth and not updated afterward. Star athlete Florence Griffith Joyner drafted a will but no one knew the location of the will which was fought over for four years. Singer Barry White was separated, not divorced, when he died meaning his wife was still his wife and his girlfriend had no legal relation to him, leaving his estate in accordance with what was probably his previous, not current wishes.

Another way to not keep things up-to-date is not to think about taxes or expenses and where they would come from given that liquidity is very often a problem for estates. Joe Robbie’s family sold the Miami Dolphins due to a lack of liquidity in his estate. This is a very common dilemma for executors. Marlon Brando apparently made verbal promises to a long-time employee but never formalized it in a plan. Reporter Charles Kuralt likewise had property he desired to be passed to his mistress after his death, but it was not part of his formal estate plan. So, as situations and wishes change, the plan should be updated to reflect those changes to avoid years of legal fights.

3. Have the Wrong People Draft It

As you might imagine, the biggest culprit here is the DIY or Do-It-Yourself will. Cutting corners is often accompanied by a lack of quality. George Washington drafted his own will and named seven executors who took ten years to file the appraisals and forty-seven years to settle the estate.

Supreme Court Justice Warren Burger drafted his own will using all of 176 words. This is a guy you would think would know a few lawyers. Author Steig Larsson apparently left a will but it was found to be invalid under local law, leaving “The Girl with the Dragon Tattoo” and subsequent novels going to others without direction from him.

Actor James Gandolfini is often criticized in the analysis of his will, where many pundits say he should have used trusts to accomplish some of his objectives and substantially reduce the estate tax burden, but I always caution in large estates optimizing the tax outcomes is not always their goal.

In estates of Marilyn Monroe and Jim Morrison, many would argue that a trust would have better fulfilled their wishes. Both expressed their wishes in their will but the recipients then passed away themselves and the interests passed to people the original decedent probably did not care to enrich, where trusts can create life interests and continue on to others desired by the decedent.

4. Have the Wrong People Administer It

One’s choice of Attorney-In-Fact, Executor, Trustee and similar roles is sometimes the seeming cause of unnecessary problems due to conflicts of interest, and often self-interest. Musician Bob Marley’s wife Rita forged documents to increase her share of his estate and was caught.

Entertainer Michael Jackson had a well-designed estate plan in place but apparently did not fund the trusts he had created fully leaving far more of his estate in question and in the hands of family members who were not left as beneficiaries. The fighting over the estate continues and in a more public forum since probate is subject to public scrutiny.

In the Pritzker family, great American success story turned into a public feud in court when a Family trustee in effect “demoted” some of his children of a second marriage to the financial level of a generation lower. The other trustees resigned prior to this action, creating the impression they did not want to be involved directly in what would appear to be a breach of trust. This became public only because of the court case since the assets were held in trust.

Former First Lady Jacqueline Onassis left a detailed and well-designed estate plan but gave her children the option to fund CLAT (an effective tool for charitable giving and reduction in the value of the taxable estate), but not funding the CLAT meant more money for them directly.

Heiress Doris Duke famously named her Butler among others to settle the estate and to manage her foundation and he is described as a less than trustworthy person who went on to allegedly use the foundation’s assets for personal expenses.

Unfortunately, these are just a few of the many public stories that set examples of less than stellar results. Planning requires thought, effort, finding the right partners for the planning, drafting, funding, managing, and administration of the plan to ensure your client’s wishes are followed through faithfully.

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