Lesson 4. Make Sure You Use The Right Planning Tools Based On Your Individual Needs.
Whitney Houston would be “So Emotional” if she could see the result of her poor estate planning. Not all beneficiaries are created equal. Not all estate planning tools provide the same benefits. For example, leaving assets to disabled individuals or minor children requires special planning like the creation of special needs trusts and the appointment of guardians. Additionally, there are important differences between how probate and non-probate assets factor into your estate plan. Whitney Houston would be “So Emotional” if she could see the result of her poor estate planning.
Let Whitney Houston’s untimely death and poor Estate Planning be a lesson to all parents – would you want your 18-year-old child to suddenly inherit your entire estate outright? Most 18-year-olds are not responsible or stable enough to handle any large amount of money, let alone a multi-million dollar estate, but that’s exactly what is happening to Bobbi-Kristina Brown. Bobbi-Kristina is likely the sole beneficiary of Houston’s estate and will likely be entitled to control the assets outright since she is an adult in the eyes of the law.
Bobbi-Kristina may not be viewed as competent to handle such a large estate – if this is the case, members of Houston’s family (who may stand a chance at inheriting some money) could go to court and have Bobbi-Kristina declared incompetent to manage her finances and seek a guardianship/conservatorship over her. This would allow those family members (potentially Bobby Brown) to essentially control Houston’s assets. Houston could have better protected her daughter and her estate by drafting an age-terminated trust for the benefit of her daughter and appointing a responsible trustee to manage the trust until she reached a predetermined age (usually 25 or 30 years old). In Houston’s case, a properly funded living trust would have offered her the added benefit of privacy as trust documents are not normally available to the public, unlike Wills, unless there is a dispute in court.
Michael Jackson should have “Remember(ed) the Time” he created a trust for his children so he could have properly funded it. Jackson had the foresight to understand that estate planning was more important, especially where his minor children were involved. Jackson established a trust for the benefit of his children, who are significantly younger than Houston’s. However, Jackson failed to complete what he started and the trust was left unfunded and contained no assets at the time of his death, thereby defeating the primary purpose of establishing the trust in the first place.
Lesson: Estate planning requires the individual to think about their end goals and really, honestly, evaluate their heirs. For example, if you plan on leaving money to a minor, someone with special needs, someone with an addiction, or someone with a spendthrift personality, special tools can be used to protect your assets as well as the beneficiary’s interests. Your estate planning attorney should be fully aware of any concerns you may have for each beneficiary so that they can ensure the proper tools are implemented.
Follow along in our Four-Part Series! Check out all of the parts below!
Part 4 HERE!
Part 3 HERE!
Part 2 HERE!
Part 1 HERE!