Why You Need a Comprehensive Estate Plan…
A recent headline read “Battle Over Anne Heche’s Estate Settled” when it should have read “Yet Another Celebrity Dies Without an Estate Plan.” Anne Heche was a well-known actress who died unexpectedly following a fiery car crash in August 2022. Anne left behind two sons, one of whom is 20, the other of whom is 13, and no estate plan.
Her case was tragic and the results were completely avoidable in many ways. Because Anne failed to create even a basic Will, her estate will distribute in accordance with the laws of intestacy in California, through a public probate process, instead of in a private manner. In addition, California statutory law will determine who will receive her estate and how they will receive it. Anne’s 20-year-old son petitioned and ultimately won the right to administer his mother’s estate, despite several claims brought by the father of Anne’s 13-year-old son.
While Anne’s older son has won this battle, the settlement of his mother’s is far from over, especially since he will undoubtedly have his work cut out for him administering his mother’s estate. Anne’s death illustrates yet another of the many reasons why it is vitally important to have an Estate Plan, regardless of your age or level of wealth, especially when young and minor children are the anticipated beneficiaries.
Anne could have avoided this result by creating a comprehensive estate plan. A comprehensive estate plan often comprises a Last Will and Testament, a probate avoidance Revocable Living Trust, along with a Financial Power of Attorney, Health Care Power of Attorney, Living Will, and a HIPAA Waiver Authorization. These legal documents are state specific and provide financial and health care protection for our clients during their lives, in order to avoid a Guardianship proceeding in the event an illness, injury, or incapacity. These legal documents also ensure that that right property, passes to the right party, at the right time, upon the passing of clients.
When a comprehensive estate plan is properly structured, assets which distribute to beneficiaries can be protected as well from the potential claims of a beneficiary’s creditors, predators, and divorcing spouses, ensuring assets stay within the family blood-line. During life, an estate plan provides specific instructions regarding who is responsible for making specific decisions, if the client is unable to make those decisions due to a temporary or permanent illness or incapacity.
In the event of passing, the client’s estate planning legal documents specifically provide the names of the fiduciaries, including one or more executors and trustees, who are financially responsible regarding the distribution of estate and trust assets, to whom the decedent’s property will be distributed, and when and how the property will be distributed to the beneficiaries of the estate and trust.
If the client executed a Revocable Living Trust, then the terms of the Trust Agreement would allow the decedent’s estate plan to remain private, since unlike a Will, Trusts are not subject to the probate process in any state. In this case, a public fight over who would distribute Anne’s assets could have been completely avoided and have remained private.
If Anne had executed only a Will, then her Will would have been required to be admitted to probate upon her death in order for the executor to collect her assets. As a result, all of her assets, along with the terms of her Will would have been subject to public scrutiny.
However, her Will would would have allowed her to select one or more financially responsible individuals to administer her estate, rather than letting the local court decide who would administer her estate.
While Anne may have designated her oldest son to serve as her executor, who now holds that responsibility, it is entirely possible that she would have selected another family member, friend, or professional corporate fiduciary, with more maturity and experience to handle the settlement of her estate and deal with such matters.
If Anne had created a comprehensive estate plan, she could have included provisions to protect her children, utilizing at Trust-Based Plan. Instead, all of her property will distribute outright, in one lump sum to her older son, and a Guardianship account will need to be established for her younger son, until he attains the age of majority, at which time her youngest son’s share will be distributed outright to him.
For example, a Trust-Based Estate Plan could have provided a lifetime trust for the benefit of each son, which would have provided continuing asset management, divorce protection, asset protection, and estate tax protection for them.
Because Anne failed to create any estate plan whatsoever, as noted above, her eldest son will receive his inheritance outright. As a result, that will allow him unfettered access to the funds, and will not provide him with any protection from the potential claims of his current or future creditors.
Her youngest son’s inheritance will end up in a Guardianship account administered by someone else, potentially with significant court oversight. If Anne had taken the time to create an estate plan, she could have decided how she wanted each son to receive his inheritance, and who would be responsible for distributing the assets to her sons.
By failing to create a comprehensive estate plan, Anne deprived her sons of these benefits and saddled them with many undesirable consequences at a time when they should have room to grieve their mother’s untimely death.
By creating a comprehensive estate plan, with a competent estate planning attorney, the mistakes in this case can be avoided for your own family.
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