Celebrities aren’t immune to making estate planning mistakes: whether it’s having no estate plans, having overly simplistic wills, failing to remove (or add) beneficiaries from their estate plans, not putting promises in writing, or paying an extra $15 million in estate taxes. David Bowie, Prince, Phillip Seymour Hoffman, Patrick Swayze, and Joan Rivers are just a few of the stars who posthumously went through estate planning disasters.
These stories are tragic and unfortunate, but they are at least cautionary tales and much-needed reminders to the rest us about the importance of communication: with your family members and other beneficiaries, your estate planning professional and financial advisor, and the courts.
Communication is Key:
#1 - Future Heirs and the Courts
The more clearly you communicate your intentions — both to your future heirs and to the courts — the smaller the chance for mishaps to occur when the inheritance is distributed. You should have a well-drafted will and keep it up-to-date.
#2 - Your Children and Grandchildren
Communicate to your children, preferably before they marry, the outlines of your estate plan and their part in it. Bear in mind that in virtually every state, assets that are inherited — even if during the course of the marriage — are considered separate property and are not subject to division in the event of divorce.
However, this brings up another important point. Your children — and grandchildren, if they are old enough — need to understand the importance of keeping inherited property separate and not commingling the assets, either intentionally or inadvertently. If the inherited assets are owned in the child’s name only, they are probably appropriately segregated. But if they are held in an account jointly owned by the child and a spouse, they are commingled and much harder to prove as separate property during a divorce proceeding.
Another scenario involves using separate property to purchase or improve marital property, such as a house that is held in the names of both spouses. When inherited assets are used this way, they become commingled, since both spouses share ownership of the home.
Alerting your children to these pitfalls can help them maintain inherited property separate from marital property, ensuring they retain full ownership.
#3 - Your Estate Planning Professional and Financial Advisor
To protect inherited assets from the claims of creditors, ex-spouses, and other persons, your estate planning professional can give you advice about the different types of trusts and your will’s terms.
This is where a candid, detailed conversation with your estate planner and financial advisor can lay the groundwork for a solid estate plan that gives you peace of mind, knowing that the benefits you want to provide for your heirs will be granted according to your wishes.
Need more tips about how to protect your family and other beneficiaries’ interests after your passing? Reach out to Triada Advisors today.