Quick quiz – What do Michael Jackson, Prince, Heath Ledger, Amy Winehouse, Chadwick Boseman and Avicii have in common? Yes, they are all famous people who died unexpectedly at a fairly young age, but they have something else in common – a failure to complete estate planning for their assets, making life much more difficult for the loved ones they left behind.
It is always surprising to find out that a famous person with significant assets (and plenty of advisors) did not create a good plan for these assets after their death. We wonder:
- Why did Michael Jackson create a trust and then not put any assets into it?
- Why did Heath Ledger fail to update his will when his daughter was born, accidentally disinheriting her?
- Why didn’t Chadwick Boseman create a will as he was dying from cancer?
- Why didn’t Prince, Amy Winehouse and Avicii create wills to make their plans known for their large fortunes?
A bigger surprise for some younger adults is to learn that they also need to do estate planning, even though they are not rich and famous (at least not yet). To help increase understanding about estate planning, three of Warner’s attorneys have provided answers to typical questions.
Who Needs an Estate Plan?
Haley: You do not need to be old or wealthy to need an estate plan. Everyone over age 18 needs the health and financial power of attorney documents that are created during estate planning. Additional planning is needed for parents (to name guardians for children) and those who own a business, have significant assets or have valuable items like investment portfolios or cryptocurrency. People with pets or digital assets (like social media or photo accounts) may also need this planning.
Why Do I Need an Estate Plan?
Danelle: It is important to put a plan in place to handle an unexpected event that incapacitates you (temporarily or permanently) and to make sure that, in an emergency, your needs are handled by the important people in your life. Without power of attorneys in place, it takes time and court proceedings before someone is appointed by the court to act on your behalf.
What Is Included in an Estate Plan?
Sara: This planning creates some very important documents that every adult needs.
- Patient advocate designation (PAD) – No one can legally make medical decisions for you in the event of an accident or a medical emergency (not even your parents, spouse or child) without authorization from a PAD form or from the probate court. In an emergency, a PAD avoids court, saving your loved ones time and money.
- HIPAA form – This form lets you choose who can have access to your medical information.
- Durable power of attorney (DPA) – This document gives someone you have chosen the legal authority to pay your bills and manage your financial affairs if you become incapacitated or if desired for your convenience.
- Will – This document tells the state (and others) who you want to receive your property after your death, and who should manage the probate process (your personal representative). It also indicates who you wish to have guardianship of your children (and perhaps names a second person that you want to manage the money you left to the children).
- Trust – If you have young beneficiaries, significant assets or an unusual family situation, you may wish to create a trust to hold some of your assets. Assets in a trust are managed by a trustee, so the probate court is not involved in managing and distributing these.
When Should I Do Estate Planning?
Haley: Ideally, you should have the PAD, HIPAA and DPA in place by age 18 and before you move away from home. You should look at these after life events like marriage, children or divorce and make updates as needed. Once you have children, significant assets or an unusual family situation, you should create a will or trust to distribute your assets at your death.
What If I Don’t Create a Will?
Danelle: If you die without a will, any items for which you have signed a beneficiary designation form (like retirement accounts or bank accounts) will pass directly to the named beneficiaries.
For the rest of your property that has no beneficiary and no joint owner, the court and state law essentially create a will for you. The court chooses a personal representative, or executor, to pay your debts and sell/distribute your remaining property to your heirs under state law. The process can take months or even a year before anyone sees any of your money.
Your money and property will be distributed based on your state’s succession laws which may not line up with what you would have done for those you love. For example, in Michigan, if you are single, childless and a parent is alive, everything goes to your parent and nothing will go to your siblings, significant other, friends, charities, etc.
How Do I Create an Estate Plan?
Sara: Reach out to any of Warner’s trusts and estates attorneys. We are happy to help you create an estate plan that is customized to your needs and gives you peace of mind.
