What We Can Learn From Their Errors
With all the millions some celebrities have, you’d think they would be able to afford good estate planning advice. But too often after celebrities die, we learn that they made some simple blunders that trigger years of court battles or cost their heirs millions of dollars. Here are eight actors, athletes and entertainers who have passed away — and what we can learn from them financially.
Prince Rogers Nelson
Mistake: Not having a will. The April 2016 death of entertainer Prince wasn't just shocking because he was only 57 years old. Many people were surprised the "Purple Rain" singer had no will. Now a Minnesota judge is deciding how to distribute Prince's estimated $300 million estate among six siblings. Other potential heirs have surfaced, too, including a federal inmate claiming to be Prince's son. Not preparing a will is a basic mistake. "But it's estimated that 60 percent to two-thirds of adults in America don't have a last will and testament, so Prince isn't alone," says Andrew Mayoras, a trust and estates lawyer and coauthor of Trial & Heirs: Famous Fortune Fights! , a book on high-profile estate battles.
Mistake: Not updating the will. Songstress Whitney Houston had a will when she drowned in February 2012, but it was quite outdated. Drawn up a month before the 1993 birth of Houston's only child, daughter Bobbi Kristina Brown, the will was never revised — not even as the singer's fortune climbed to $20 million. Bobbi Kristina was 18 when her mother died, and under the will's terms was to receive 10 percent of the estate — $2 million — when she turned 21 and the rest later. By not updating her will, Houston failed to consider whether her daughter was mature enough to handle millions of dollars, Mayoras says. Even "$50,000 all at once to a 21-year-old could be too much," he says. Bobbi Kristina got the $2 million but not the rest of her inheritance. She died in 2015, also as a result of drowning and drug intoxication.
Mistake: Not finishing planning. Sopranos actor James Gandolfini was reportedly worth $70 million when he died in June 2013 of a heart attack in Rome. His will provided for his widow, daughter and two sisters (his son from his first marriage was provided for in other ways). But Gandolfini didn't use proper tax planning. The result: The estate ended up paying federal and state estate taxes at a hefty rate of 55 percent. Gandolfini made a will before leaving on vacation but did no planning beyond that, Mayoras says. "For many people, not just celebrities, a simple will isn't enough," he says. "There are a lot of estate taxes that could've been avoided if he'd done better estate planning, including creating a trust."
Mistake: Making oral promises. Actor Marlon Brando had an estate plan for his $100 million fortune when he died in July 2004. Problem was, his written plan excluded certain oral promises he allegedly made to his long-term housekeeper, Angela Borlaza. She filed two lawsuits claiming she was illegally kicked out of Brando's California home. The former maid said the house was a gift to her from Brando. The actor, though, never completed the paperwork to transfer the deed to give Borlaza legal ownership. In court, she sought $627,000 — the market value of the house — plus $2 million in punitive damages. The case settled for $125,000.
Mistake: Failure to fund a trust. Superstar Michael Jackson's death in June 2009 touched off a string of ongoing court battles over his estate, now worth $600 million. One of Jackson's biggest estate planning missteps was creating a trust — and then failing to fund it. Absent a properly funded trust, Jackson's beneficiaries have wound up numerous times in probate court, the estate is still open, and all things concerning it are subject to court approval. "Probate court is public, more expensive, time-consuming and more prone to fighting," Mayoras says.
Mistake: Inadvertently omitting a child. After actor Heath Ledger died in January 2008, reports surfaced that he had failed to update an old will created before his daughter was born. As a result, Ledger's entire $20 million estate went to his parents and three sisters. "A will should always have language that references any of your natural born children, adopted or stepchildren, and any offspring you may have in the future," says Stephanie Genkin, a certified financial planner in Brooklyn. Fortunately, relatives revealed in late 2008 that all of Ledger's money would go where he would have wanted — to daughter Matilda Ledger, whose mom is actress Michelle Williams.
Philip Seymour Hoffman
Mistake: Failing to use trusts wisely. Academy Award–winner Philip Seymour Hoffman was determined not to let his children turn into spoiled "trust-fund kids," so he chose not to create a trust. When he died in 2014, his entire $35 million estate went to the mother of his three children, Marianne O'Donnell. That might not have been so bad, except that Hoffman's decision meant his beneficiaries also inherited a whopper of an estate tax bill. Hoffman erred in thinking that trusts would automatically create entitled or lazy trust-fund kids, Mayoras says. Trusts can be customized, and Hoffman could have made specific stipulations about when, how and under what circumstances his kids inherited money — including a provision that the children work.
Florence Griffith Joyner
Mistake: Keeping a will's location secret. Olympic gold medalist Florence Griffith Joyner had a will when she died in September 1998. The problem: No one knew where "Flo Jo" kept it. It threw her relatives into an estate planning battle because they couldn't find her original will. And without the will, it took four long years to close her probate estate.