ARE BUSINESS PEOPLE BETTER AT PLANNING THEIR ESTATES THAN CELEBRITIES
In short, yes. We read regularly of “disasters” in the estate plans of celebrities. Think Michael Jackson, James Gandolfini, and Philip Seymour Hoffman, to name a few. In each of those situations, we have seen headlines and indeed, copies of the wills, in which intimate details are included, such as distributions made to close friends, the non-inclusion of individuals that we thought would be included (such as siblings, parents, and children), and perhaps most glaringly, tax problems.
We do not read of these kinds of problems with respect to people who made their money in business. It is difficult to even think of the last time a business person is mentioned in the news. This, despite the fact that every day, people with great wealth pass away. Why do we not hear about those estates? Because they did their estate plan properly. A correctly formed estate plan includes a combination of one or more trusts, wills, powers of attorneys, and other legal devices that allow for the transfer of wealth without making it public.
The problem with many celebrities is that they don’t like to hire qualified estate planning lawyers to work on their estate plans. For example, in the case of Mr. Hoffman, apparently a real estate attorney (friend?) prepared his will, which promptly became public upon his demise, and began the firestorm of publicity critiquing it. In his particular estate matters, there was also a trust for his son, which was apparently well thought out (partly because it is not public, as most trusts are private).
Additional problems arise in the estates of celebrities, like Michael Jackson and James Gandolfini, where millions of dollars of taxes are required to be paid, which could have been dramatically reduced, were the issues given attention prior to their deaths. While there may, in fact, be taxes paid even with a trust, the matter remains private That’s because, unlike wills, trusts do not go through a probate proceeding, which can become a public spectacle. For regular people, the millions of dollars of taxes at stake are not as important as privacy. Because of the $5.25 million exemption for estate taxes, people can pass large amounts of money to their beneficiaries without any tax consequences. Over 95% of the population fits that bill. However, if there is wealth that is passed without a trust, even if there is a will, a probate proceeding is typically required. In probate, parties are invited to make claims against the estate, the will is made public, and the world knows all the business of the estate. While the world does not care about the business of most of us, it is still an issue that is intensely private. If you are concerned with privacy, it is important to consider the proper formation of an estate plan.