Anna Nicole Smith Saga Highlights Need for Estate Planning
The lessons from the Anna Nicole Smith saga continue. The trial accusing two doctors and a boyfriend of illegally providing the former Playboy model with prescription drugs is underway, with the Los Angeles District Attorney's office contending the three defendants were aware of Smith's addiction but still chose to provide her with drugs.
The media circus is reminiscent of the frenzy over the battle over the estate of Smith's late husband, oil tycoon J. Howard Marshall. In mid-March, the U.S. Court of Appeals for the 9th Circuit ruled that Smith's estate would receive none of the $1.6 billion left by her late husband and an appeal by Smith's lawyers was denied in May.
In the three years since her death, the world has learned the implications of the fact that Smith was not aware of the plans for her deceased husband's estate. Smith's financial situation, both before and after her death, is a cautionary tale for all of us.
Careful estate planning can prevent confusion, chaos and drama for your family after you've gone.
Everyone Needs to Plan Their Estate
Marshall had not included Smith in his will and trust and had left a bulk of his wealth to his son. After he died, Smith and Marshall's son, E. Pierce Marshall, battled over Smith's claim for half of her late husband's estate. Smith claimed that Marshall had verbally promised her half of his estate if she married him. But that promise was not in writing.
Most Americans fail to write it down when it comes to their last will and testament. According to a Wills & Estate Planning survey conducted in conjunction with Lawyers.com in December 2009, only 35 percent of adult Americans have wills, 29 percent have a power of attorney document and 18 percent have a trust.
Estate Tax Set to Come Back In 2011—with a Vengeance
This year, there is no federal estate tax. But unless Congress acts, the federal estate tax will come back—with a vengeance. On January 1, 2011, the estate tax likely will go up to 55 percent on estates valued at more than $1 million.
Even if you don't think you'll have a million-dollar estate at your death, it is worth doing some planning.
"Estate planning is not just for the wealthy," says Ted Sarenski, a CPA and personal finance specialist based in Syracuse, NY. You should begin planning their estate as soon as you own anything. It doesn't matter how many assets you have, Sarenski said.
The current economic climate has also led many Americans to put estate planning on the back burner.
The Lawyers.com survey found 71 percent of Americans believe that given today's economy, it is more important to focus on saving money for immediate needs than long-term planning for their estate.
But paying to ensure your legacy is likely worth the cost. Having a lawyer draw up the papers for a simple estate should cost between $500 and $1,000, says Eleanor Blayney, a consumer advocate with the Certified Financial Planner Board of Standards.
While that may seem like a lot, Blayney says you should view estate planning like a type of insurance and "the cost of doing nothing is far greater."
Just how much will it cost you to do nothing?
As Smith learned, a surviving spouse is not always granted all or substantially all of the deceased spouse's estate. In fact, what happens to your property will likely depend on where you permanently reside and which of your family members are living at the time of your death. Find out how each state will distribute your assets without a will at www.mystatewill.com.
Here are some ways to help make sure your estate planning goes smoothly:
Build Flexibility into Your Will
Always name alternative beneficiaries and state your intentions toward unborn children. Revise your will after major events in your life, like the birth of a child, a new home, marriage or divorce.
Blayney says you should review your estate plan every year to remind yourself where your estate stands.
Appoint a Guardian
If you have minor children, always name a guardian in your will in case the other parent isn't available or you both die.
If you believe the other parent if unfit for custody, list your reasons why and name another guardian, says Sarenski, who also chairs the American Institute of Certified Public Accountants' PrimePlus/Elder Care committee.
"Courts prefer to give custody to biological or adoptive parents if the other parent dies," he said.
Plan Your Funeral
Put your funeral instructions in writing and be as specific as possible.
"You don't want family arguing because you have not left instructions," Blayney says. "We're all going to die. You're just addressing an event that's going to happen in all of our lives."
Be Honest and Open
Talking to your loved ones about your wishes is one of the most difficult but important conversations to have. If you plan on appointing someone to make decisions after you've died, it's important to check with them first. Some people don't want that responsibility, Blayney says.
"If you discuss things ahead of time, you have time to work through it with everyone and, hopefully, solve any disputes," Sarenski says.
Explaining why you allocated certain items to certain people can prevent disagreements after you've gone.