PROCRASTINATION--And 2 Other Silent Estate Planning Assassins
The recent stories across the Internet about the status of Heath Ledger's estate is an opportunity for the rest of us to rethink our estate plans. Besides the recently reported news about a lawsuit with an insurance company over a life insurance policy in his name, is the reports that Heath Ledger's daughter stands to inherit all of his wealth (if statements made by his father hold to be true into the future). Similar accounts have been reported in the local Desert Sun.
Previously, I thought the events surrounding Anna Nicole Smith's death made the ultimate fact pattern for law professors to stump law students for generations to come (well at least for a couple of years, right?). Law school professors love to give a complex hypothetical that allow students to show off their knowledge of various legal issues and how different issues interplay with each other. The entire saga of the Anna Nicole Smith estate is such a complex matter that its facts may have launched a thousand exams.
Then sadly comes Heath Ledger. His passing involves a complex fact pattern of legendary proportions.
Some of the complex issues include: a foreign born movie star died at a young age (28), in a New York apartment, his will was executed in a foreign jurisdiction (Australia), the will was executed before the birth of his daughter in the United States, and reportedly a multi-million dollar life insurance policy is the issue in a case initially filed in the California Superior court (and has since been moved to a federal court). Whew! This is a loaded fact pattern, but the situation is one in which his family members currently find themselves.
From the Internet sources, it sounds like the family members will attempt to resolve issues with a positive outcome. Although only time will tell if that remains the situation.
Ultimately, the issues surrounding how his wealth will be distributed bring three mistakes of estate planning to the limelight: 1) Not updating your estate plan, 2) Inadequate estate planning, and 3) Danger of no estate planning.
Truly, the events surrounding Heath Ledger are very sad, however it provides a catalyst to discuss 1) the various events that might occur in your own life that requires an update to your estate plan; 2) the pitfalls of an inadequate estate plan; and 3) if you don't have an estate plan, then the reasons why there is no time like the present to plan, even if you think you are too young to have an estate plan, or even not rich enough.
1) The following life events or external occurrences should prompt a re-examination of your estate plan: birth or adoption of a child or grandchild (or any person you want to provide for if a direct descendant or not), marriage of a key player in your estate plan (yourself or a beneficiary) death of a key player in your estate plan (spouse, partner, and/or beneficiary), divorce of a key player in your estate plan (yourself or a beneficiary), change in financial holdings (such as closing financial accounts with one institution and reopening them in another), changes in real estate holdings, changes in tax laws, business transactions (starting a business, acquiring a business, or closing a business), and there are many more minor occurrences that would cause a prudent person to review their plan. Mr. Ledger did not update his estate plan at the happening of probably the most significant event in a person's life (in relation to estate planning)--the birth of a child.
2) The latest reports on the Heath Ledger estate exemplify the problem of an inadequate estate plan. As stated it appears that discussions surrounding his daughter and other family members are going well, however a complete estate plan would not leave everything to chance. A complete plan provides specific instructions, as to desired guardians over the financial aspects of his estate, how funds should be distributed to his daughter, in the short-term and long-term. A complete estate plan would express his intent, and wouldn't keep the courts and loved ones guessing what to do next. And for a movie star, only having a will would generally qualify as an inadequate estate plan.
3) Heath Ledger's story also dispels some myths about estate planning, such as "I am too young to have an estate plan." Reportedly, Mr. Ledger was only 28 years-old when he died, and also reportedly his will was executed about 5 years prior to his death; making him about 23 when he first executed his will. It is to his credit that he had done any estate planning whatsoever, given his young age. Also, some people think they may not be rich enough to need an estate plan--this is where some other options come into play, such as the option of life insurance. For example, if you are a relatively young parent, that has not accumulated much wealth, then life insurance might be a strong option to help out loved ones if you die unexpectedly, like in an accident. Of course this is not something us parents like to think about, but nonetheless planning needs to be done. It is far better to do something than to have nothing in place.
In the end, PROCRASTINATION is the killer of estate plans--don't let it happen to you!
