Vrakas CPAs, Here Are Your Articles for Wednesday, April 26, 2017
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What Dead Celebrities Can Teach Us About Estate Planning

 

You may want to live like a celebrity, but you shouldn't die like some famous people who left a mess for their heirs.

Dying Intestate

You'd think that the rich and famous would care about who inherits their riches when they're dead and gone. But oddly, many celebrities have died intestate, which means they never made out a will.

Howard Hughes' $2.5 billion estate was eventually distributed among 22 cousins because he died without a will. Prince's $300 million estate is being fought over by family members because he didn't name heirs. Jimi Hendrix, Bob Marley, Pablo Picasso and Michael Jackson all died without wills, making their estates battlegrounds and subject to huge estate taxes.

In fact, a 2009 Lawyers.com survey revealed that only 35 percent of Americans had a will. So instead of making a plan for their wealth after death, most Americans don't ensure that their estates are distributed in a specific way that can avoid federal and state estate taxes.

Failing to update a will

Life continues to unfold even after you've signed a will. You could add children, subtract a spouse or have a falling out with your best friend. So even if you go to the trouble of drawing up a will, you must update it whenever life changes.

When singer Barry White died in 2003, he was reportedly separated from his second wife and living with his girlfriend of several years. Because he never changed his will, the estranged wife inherited everything, while his last love got zip.

Disregarding taxes

You don't stop paying taxes after you die. If you don't plan correctly, your heirs may have to sell part of their inheritance to pay for federal and state estate taxes.

"The Sopranos" star James Gandolfini died with a $70 million estate and a will leaving only 20 percent to his wife. Consequently, about 80 percent of his estate was subject to state and federal estate taxes that could have amounted to 55 percent of his fortune.

Tax planning could have reduced the tax burden for Gandolfini's heirs. He could have drawn up a marital trust that would have taken advantage of the marital tax exemption — you can leave your entire estate to a spouse tax free — and protected his two children too.

Forgetting about personal items

When thinking about your estate, it's easy to overlook personal items that could be worth a lot of money and become the subject of family battles.

For example, Robin Williams' family fought over his collection of film memorabilia.

To avoid such fights, make sure you bequeath personal items in your will. If you want your son to get your baseball card collection, make sure you state that explicitly in your will. If you want your daughter to get your Lexus, write it down and include the bill of sale so no one can dispute that you had already given the car away before your death. We can help if you have any questions.

 

 

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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