26th Jun 2014
There are many people who wonder about the importance of estate planning, and why this is something that we hear so much about. Perhaps no story highlights the importance of estate planning better than the Cavendish family in Devonshire, England.
The Cavendish family owned thousands of acres of land, and had a family fortune estimated at 5.9 million pounds. In 1950, Edward Cavendish , who was the sole owner of the fortune, suddenly passed away from a heart attack before properly creating his estate documents. He was only 55 years old and in good health, and his unexpected death took not only an emotional toll on his family, but left an enormous financial problem for his family. At this time, the death tax was 80%, which meant that his family had to pay 4.72 million pounds from the estate with his passing. The family scrambled to sell thousands of acres of land, some of their homes, treasured paintings and other cherished possessions so they could pay. The family lost 80% of everything they owned because he did not have an estate plan.
Fortunately, the death taxes are nowhere near what they were in post-WWII England. However, this story is a great example of the necessity of a professionally drafted estate plan. You have worked hard to build your estate, and there is no reason for you to lose anything to taxes, the bank, or unscrupulous individuals. It is your property and you have the right to decide how it is managed when you have passed on. We understand that talking about these end of life issues with an attorney can be an uncomfortable situation, but we have seen that those who properly prepare their estates have a peace of mind knowing that their desires will be carried out when they are gone.
There are several aspects to estate planning, and each part can play an important role in the process of planning your estate. Below is a brief explanation of some of the common estate planning documents:
WILL- A will is a document that describes how your property will be distributed when you die. In a will, you can give anything that you own (anything from your car or home to your favorite set of china) to any person that you choose. Additionally, you can declare who you would prefer to have custody of minors in this document. You can also appoint somebody to complete your affairs after your passing. Many people think free downloadable wills or handwritten wills are sufficient, but these are not recommended. Your will should be specific and tailored to your individual needs and should be done by a professional that knows the ins and outs of estate planning.
TRUST– A trust is where property is held by one person, the trustee, to help another person, the beneficiary. A trust may be set up to become active when somebody passes, called a testamentary trust, or become active while one is still living, called a living trust (these are also commonly called inter vivos trusts or grantor trusts). Setting up a trust not only provides for the beneficiary, but also can minimize taxes lost on the estate. Trusts can also be set up to protect the beneficiary’s assets from creditors or divorce. There are many options for how to set up a trust, and it is very important to have a professional draft your trust, as any mistakes made in the trust can create tax problems.
POWER OF ATTORNEY- Power of Attorney is where one person, the principal, gives another person, the attorney (who does not need to be a lawyer) the authority to act on their behalf. For example, if you got sick and went to hospital, and had bills that needed to be paid, but did not have the ability to do it yourself, somebody would need to have power of attorney to act in your behalf. Without power of attorney, they would not be able to access your medical records, bank accounts, credit cards, or make any decisions on your behalf while you were incapacitated. However, with a power of attorney set up (which can easily be revoked, if necessary), the person who you chose to represent you would be able to perform these actions for you.
LETTER OF INSTRUCTIONS- A letter of instructions is a document that lists your preferences for funeral arrangements, obituaries, and other important things when you pass away. This document is not a legal document, but is a convenient way to list your possessions, your debts/credits, your accounts, insurance plans and other information which will help your loved ones after your death. For a free booklet containing a letter of instructions, contact our office.
Ten famous people who died without a will.
1. Jimi Hendrix
Jimi Hendrix died in 1970, however, the battle over his estate raged on for more than 30 years for one simple reason: Hendrix left no will regarding distribution of his estate. To complicate matters, the estates of musicians and other artists often continue to generate money long after their deaths.
2. Bob Marley
Like Jimi Hendrix, Bob Marley’s estate continues to generate significant revenue despite the fact that Marley died in 1981. Also like Hendrix, Bob Marley died intestate even though he knew he had cancer and lingered for nearly 8 months. His estate, worth a reported $30 million, had dozens of claimants.
3. Salvatore Phillip “Sonny” Bono
Granted, Sonny Bono “the politician” died an untimely death in a skiing accident in 1998, but why he died without a will is something we’ll never know. Instead of staying at home to grieve, his widow Mary Bono headed to the courthouse to be appointed the estate’s administrator. Ex-wife Cher showed up on the scene as a claimant in Bono’s estate and a “love child” surfaced soon thereafter making the situation even more difficult.
4. Stieg Larsson
Swedish author Stieg Larsson who wrote The Girl with the Dragon Tattoo among others, died in 2004. Like many others, Larsson died without a will and Swedish law dictated that Larsson’s estate was to be divided up between his father and his brother. His lifelong partner of 32 years, Eva Gabrielsson, received nothing, although the family did grant her ownership of the couple’s apartment.
5. Pablo Picasso
Pablo Picasso died in 1973 at the age of 91, leaving behind a fortune in assets that included artwork, five homes, cash, gold and bonds. Because Picasso died intestate and left no will, it took 6 years to settle his estate at a cost of $30 million. His assets were eventually divided up among six heirs.
6. DJ AM
DJ AM, whose real name was Adam Goldstein, died from a drug overdose in 2009. While his name might only be familiar to those of a certain age, he too made the mistake of not having a will. In Goldstein’s case however, since he had no heirs and was not married, disposition of his estate was fairly straightforward with his mother as the sole beneficiary.
7. Michael Jackson
Although a will was later discovered, immediately following Michael Jackson’s death in July 2009, his mother filed court papers claiming that Jackson died intestate. Like Hendrix and Marley, Jackson’s estate continues to generate money. In the year since his death, his estate generated over $242 million.
8. Steve McNair
NFL player Steve McNair had it all—fame, fortune, and a beautiful family. But when 36-year-old McNair was shot and killed by an alleged girlfriend, who is believed to have committed suicide after killing McNair, the truth came out—that he had, in fact, had a girlfriend and he never bothered to create a will.
9. Howard Hughes
Howard Hughes was an eccentric billionaire who died in 1976 at the age of 70. When he died, his will was discovered at the headquarters of the Mormon Church in Salt Lake City. The will, however, was proved to be a forgery in a Nevada court and his estate was divided among his 22 cousins.
10. Abraham Lincoln
Abraham Lincoln, the nation’s 16th president, has the distinction of being the first president to be assassinated (1865) as well as the first president to die intestate—despite being a lawyer himself.
Famous or not, everyone should have a will. It’s simple to do and it saves your family a lot of money and headaches. And, as illustrated by the stories above, you’re never too young—or too smart or too powerful—to have a will.