Everyday people are not the only ones who fail to plan future strategies for their assets. Famous people with great wealth including musicians and reclusive billionaires have been guilty of inadequate estate planning.

A past skiing accident caused the death of a man known for his political clout in California almost as much as he was recognized as the ex-husband of singer Cher. Sonny Bono died with no will or trust. Bono’s failure to plan placed his $1.7 million estate in the hands of a probate court. The three-time married politician left behind a complex and family struggle for his assets.

One of the wealthiest people ever to ignore estate planning needs was Howard Hughes. Hughes was worth $2.5 billion at the time of his death in 1976, a respectable sum even by today’s standards. Hughes had no will. Shortly after the aviator’s death, a mysterious handwritten will was found in a church office. The will was eventually discredited. The Hughes fortune took more than three decades to settle. In the end, billions were divided among 22 relatives.

Funk musician James Brown was guilty of procrastination. The singer had hoped to improve the lives of impoverished children through a $100 million trust. What the “Godfather of Soul” didn’t anticipate was the legal tug-of-war that would ensue among family members. The singer had at least three wives and nine sons. The last woman in Brown’s life claimed to be his fourth wife with Brown’s tenth son. The self-proclaimed widow and her child were not mentioned in James Brown’s will. The will had not been updated since before the couple’s marriage.

Never created and outdated legal documents are estate planning mistakes common to the great and humble and the rich and poor. Poor financial planning and updating can force estates of every size into probate, where court fights and expenses can quickly deplete assets meant for heirs.

Source: wealthmanagement.com, “Lessons of the Rich and Famous . . . in Death,” Jim Moniz, Dec. 24, 2012

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Life improvements are almost always the subject of New Year’s resolutions. The declarations to get fit, change relationships and improve career or financial prospects that are sincere on Dec. 31 often become diluted or forgotten by spring.

Estate planning experts in California encourage consumers to consider commitments that last beyond a lifetime. Living wills, medical directives and trusts are integral elements in well-rounded estate plans.

Unless death is sudden, most people reach a point in life when they are incapacitated either temporarily or permanently. Accident or illness may physically or mentally disable a person of any age. Slow, cognitive decline is common for the elderly.

Without a plan to give directions or pass decisions to a trusted party, relatives and medical personnel may be helpless to act on your behalf. A living will contains your medical choices. A designated health care surrogate becomes your voice for decisions you can no longer make.

Within these documents are choices you have made. The health-related documents can be as detailed as a person wishes. Without these estate planning documents or the naming of a health care proxy, a judge who knows nothing about you may decide how to proceed.

Experts note that many individuals who create estate plans forget to update them regularly. Every account, insurance policy or retirement plan includes a beneficiary. If the last time you verified a beneficiary was before a family birth, death or divorce an update is overdue.

Assets meant for heirs, including minor children, may be placed in trusts. A revocable trust and the assets within it can remain in the control of the person who establishes the trust until incapacity or death. Control then passes to a designated trustee who manages and distributes assets according to pre-set instructions.

A vow to protect and update personal health care and financial choices is a resolution that will outlast the year and may benefit generations.

Source: forbes.com, “Three Resolutions For The End Of Life,” Carolyn McClanahan, Jan. 1, 2013

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California estate plans often include trusts that have dual roles. Assets in revocable living trusts benefit individuals during their lifetimes and reward beneficiaries when the trust creator, also known as a settlor, is no longer alive.

For financial control reasons, many individuals choose to retain the roles of settlor, trustee and beneficiary when a revocable living trust is initiated. Taking all three positions at once is legal although; on occasion, a settlor will name other individuals as a trustee or beneficiary.

A trustee who is not the settlor usually remains bound to instructions from the trust creator. After all, the settlor has the option to change, defund or discontinue a revocable trust at any moment during a lifetime.

Trustees sometimes encounter situations when settlor or beneficiary desires conflict. What kind of power does an independent trustee have? Estate planning and legal experts say decision-making powers are conditional.

Other than perform duties according to settlors’ wishes, trust managers must also realize when instructions are mandatory. Trustees may choose to adhere to a settlor’s guidelines, even when a settlor’s incapacity interferes with trust decisions.

A trustee may go against a settlor’s instructions when the settlor has been judged incompetent by a physician and a court. A legally incompetent settlor loses the ability to revoke a trust. A certificate of incapacity does not require the trustee to oppose the settlor’s desires automatically.

The California Supreme Court will review a case next year that involves trustee responsibilities. A decision made by a lower court absolved trustees from having to ask about a settlor’s competence. The court felt that trustees should not be liable for inquiring about the complicated issue.

Legal advisers also note that trustees do not have to follow beneficiary recommendations during a competent settlor’s lifetime. Beneficiaries may not bring lawsuits against a trustee after a settlor’s death because the trustee failed to heed the beneficiaries’ advice.

Source: lakeconews.com, “Estate Planning: May a trustee follow a living settlor’s bad instructions?” Dennis Fordham, Dec. 15, 2012

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A California attorney who specializes in helping clients formulate effective estate plans understands the usefulness of wills and trusts, but the average individual may be less familiar. Conversely, an estate planning attorney cannot decide an individual’s desires concerning end-of-life medical care, beneficiaries’ worthiness or assets to pass on after death.

Those personal choices are up to an estate owner. An individual’s last wishes can be actualized by employing legal advisers to craft documents like living wills and trusts. In order to achieve the desired results, it is necessary to understand what these documents accomplish.

Although they have similar names, a will and living will are separate legal documents with unique functions. A living will pertains to and gives direction regarding the medical care of an incapacitated, but still living individual. A health care proxy can be assigned as an aspect of this to appoint a trusted person to make medical decisions in the event the individual is incapacitated.

Conversely, a will takes effect only after the death of the person who created it. Wills are formal directions for the distribution of a deceased person’s assets. Wills also resolve other legal issues like guardianship.

Living or revocable trusts are loaded with assets that benefit a person who is alive. The contents of the living trust may be changed or revoked during a trustmaker’s lifetime. This means that it is possible for a living individual to be a trustmaker, trustee and the beneficiary of a living trust, all at the same time. Then, upon the trustmaker’s death, the assets within the trust would be managed by a named trustee on behalf of designated beneficiaries.

While this is a very high level overview of how some key aspects of estate planning function, there are still many other issues that can be addressed and unique needs that can be tailored to an individual. To learn more about how best to utilize these documents in planning for health, long-term care and the care of loved ones after an individual’s passing, it is best to consult with an experienced estate planning attorney.

Source: theepochtimes.com, “Living Will vs. Living Trust,” Arleen Richards, Dec. 5, 2012

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Individual Retirement Accounts are investments designed to provide income during the later years of life. What happens to IRAs or the unused portions in them after death? Ideally, a Los Angeles estate planning expert will ensure that the IRA or remaining sum benefits heirs.

Ignoring or misunderstanding IRA distribution rules can cause unnecessary taxation during life and financial headaches for beneficiaries. IRA owners must be aware when to begin taking distributions and how much to withdraw to avoid tax implications.

An IRA distribution becomes mandatory on the first day of April after the account owner turns 70 ½ years old. A minimum amount must be taken from the account annually. If not, the government imposes a 50 percent “accumulations” tax on the difference between what was distributed and what should have been withdrawn.

A calculation involving a life expectancy figure is used to decide the yearly amount that must be withdrawn from an IRA. It doesn’t matter how many IRAs a person owns or which IRA is tapped for distributions. As long as the minimum amount is removed from any of the total number IRAs, the government will not tack on the excess tax.

Qualified designated beneficiaries of IRAs are people including relatives and non-family members. Some trusts, but not all, also may be named as qualified designated beneficiaries.

The life expectancy calculation is reworked for a qualified beneficiary or, in the case of qualified trusts, according to the life expectancy of a trust beneficiary. Charities, the majority of trusts and estates are not qualified designated beneficiaries, which have a “ghost” life expectancy limit or five years to remove money from the inherited IRA account. The full withdrawal date depends on the status of the account at the time of the original owner’s death.

An Individual Retirement Account should work as hard as possible for as long as possible. Because of this, estate planners often discourage naming non-qualified designated beneficiaries — especially for tax free Roth IRAs.

Source: marketwatch.com, “Top 10 IRA-planning mistakes,” Robert Powell, Nov. 29, 2012

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Not every person requires a trust to complete an estate plan. Sometimes a will and powers of attorney cover everything necessary for an estate. In other circumstances, trust instruments are needed to ensure assets and heirs are protected from probate and, sometimes, even from an inability to manage inheritances.

All trusts are not the same. Their use in California estate planning depends on an individual’s needs and desires during life and following death. The most widely used trust is a revocable living trust, which can be altered as long as its author is alive.

The trust is stocked with assets and contains instructions about property distribution to heirs. The assets used to build a living trust are varied, from cash to stocks to real estate.

Estate planners recommend that assets are retitled when the switch to a living trust takes place. Making the change before death avoids the time and expense of a court action to move the assets.

Many people have estate plans that cover what happens to what they own after death. Revocable living trusts also give individuals the chance to secure finances and assets before death.

Illness, accident or age can cause incapacity. A revocable trust allows an individual to name a trusted person to step in when the ability to handle finances is lost during a lifetime. The trust also allows its creator the chance to assign a trust administrator to handle after-death affairs.

Privacy is a good reason for some estate planners to choose a revocable trust. Trust actions are not open to public inspection the way probate actions are. Only people affected by a trust are informed of its contents.

Finally, control of asset distribution comes with the establishment of a revocable trust. An assigned trustee can guide assets for an heir who is a minor child, unreliable or inexperienced with finances. The trustee manages assets for heirs who may not be able capable of doing the job themselves.

Source: fresnobee.com, “Revocable living trust has benefits,” Claudia Buck, Nov. 26, 2012

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Events like Hurricane Sandy make pet owners think about what would happen to a loved animal when owners were unable to care for them. Natural disasters and an owner’s incapacity or death can separate a pet from a human friend.

The ASPCA encourages pet owners to include the long-term care of pets in an estate plan through wills or trusts. Proper instructions for estate administrators can ensure that a pet lives with the right person and has enough funding to support feeding and medical attention.

ASPCA officials say an estimated 100,000 pets enter shelters annually because their owners have died or lost the ability to take care of them. The lost animals are often grouped with 3 to 4 million other unwanted pets in the U.S. that are euthanized every year.

More than 60 percent of American homes contain a pet. An ASPCA survey of 1,000 respondents found that just 17 percent of pet owners made legal plans for their dogs and cats. The arrangements could include leaving the pet – considered property by law – with a chosen guardian.

Sometimes owners establish a pet trust fund so that an animal’s financial needs are not a burden to the person who cares for them. Pet trusts are available in every state with the flexibility to include the name of a pet beneficiary, the details about the pet’s care and arrangements to finance the pet’s needs.

Pets may also be included in a will. Remember that wills are contestable and can stall in limbo until the matter is resolved. Unfortunately, pets listed as assets for distribution may be caught without a caregiver during that wait.

One of the easiest ways to let others know how you want a pet handled in the event of an emergency is a simple card. Keeping an “animal card” and storing a similar document with estate papers will give others information and a contact for the pet’s care.

Source: lifeinc.today.com, “Superstorm showed need for estate planning for pets,” Jacoba Urist, Nov. 12, 2012

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The man who played the proud, strutting, wealthy George Jefferson on The Jeffersons died last July. Sherman Hemsley, whose 1970s comedy show was filmed in Los Angeles, was never buried. A probate court had to decide whether the actor’s will was sound and funeral plans were delayed.

A legal dispute surfaced between Hemsley’s former business manager and an out-of-touch half- brother. Hemsley had just $50,000 in his estate at the time of his July 24 death. According to a will signed by the 74-year-old actor six weeks prior to his death, the estate was to pass to his ex-manager.

Hemsley had no surviving family members, at least until a relative showed up to challenge the will’s validity. A DNA test showed that the man who claimed to be Hemsley’s brother was related. The men had the same father and different mothers, but never communicated.

The half-brother told the court that he wished to bury the actor in Philadelphia, Hemsley’s hometown. The business manager, Hemsley’s close friend, accused the relative of trying to make a last ditch effort to catch in on the George Jefferson fame.

A probate judge agreed that Hemsley was competent when he signed the will. The court was convinced by testimony from the lawyer who helped the actor draft the document, an attending nurse and a friend who said Hemsley had no desire to go back to Philadelphia.

The competence issue was the reason the half-brother could challenge the will. The relative’s biological connection had no bearing on the outcome of the case.

A person may use a will to designate anyone to handle a funeral and burial. Hemsley clearly indicated how he would like his estate handled — a wish probate did not dispute.

The decedent’s wishes were honored – an example of how legal claims can delay the execution of any will. Estate planners recommend signing a will when health conditions are indisputable to avoid asset distribution delays.

Source: forbes.com, “Court Ruling Finally Allows Body of Late Jefferson Star To “Move On Up“,” Danielle and Andy Mayoras, Nov. 12, 2012

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Events like Hurricane Sandy make pet owners think about what would happen to a loved animal when owners were unable to care for them. Natural disasters and an owner’s incapacity or death can separate a pet from a human friend.

The ASPCA encourages pet owners to include the long-term care of pets in an estate plan through wills or trusts. Proper instructions for estate administrators can ensure that a pet lives with the right person and has enough funding to support feeding and medical attention.

ASPCA officials say an estimated 100,000 pets enter shelters annually because their owners have died or lost the ability to take care of them. The lost animals are often grouped with 3 to 4 million other unwanted pets in the U.S. that are euthanized every year.

More than 60 percent of American homes contain a pet. An ASPCA survey of 1,000 respondents found that just 17 percent of pet owners made legal plans for their dogs and cats. The arrangements could include leaving the pet – considered property by law – with a chosen guardian.

Sometimes owners establish a pet trust fund so that an animal’s financial needs are not a burden to the person who cares for them. Pet trusts are available in every state with the flexibility to include the name of a pet beneficiary, the details about the pet’s care and arrangements to finance the pet’s needs.

Pets may also be included in a will. Remember that wills are contestable and can stall in limbo until the matter is resolved. Unfortunately, pets listed as assets for distribution may be caught without a caregiver during that wait.

One of the easiest ways to let others know how you want a pet handled in the event of an emergency is a simple card. Keeping an “animal card” and storing a similar document with estate papers will give others information and a contact for the pet’s care.

Source: lifeinc.today.com, “Superstorm showed need for estate planning for pets,” Jacoba Urist, Nov. 12, 2012

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Many people believe that having a will is all that is needed for a proper estate plan. The reason for that belief may be a lack of knowledge about other estate planning tools like the revocable living trust.

Wills take care of asset distribution to beneficiaries upon the death of the will’s creator. Revocable living trusts function before and after death with control of the trust terms in the hands of the document’s originator. A trust that is revocable is one that may be changed or revoked during the document creator’s lifetime. Once the originator of the trust dies, the terms within the trust are solidified and cannot be altered. Provisions within the trust will direct the flow of assets.

Trusts are frequently used in estate plans to preserve assets that might otherwise end up in probate. People who crave privacy also depend upon trusts to keep estate matters among a trusted few individuals including trust beneficiaries, heirs and trust administrators.

Beneficiaries of assets may not be capable of caring for them at the time the assets are given. A trust allows its creator to dictate conditions for the release of trust assets.

Money for children may be placed in a trust until they are old enough to use it responsibly. That provision may hold true for minors as well as young adults who could be tempted to spend and squander the assets they receive.

A trust may also be employed to aid an individual in the event of incapacity. A person who is alive but financially incompetent is protected by a revocable living trust. A designated person can be named to help manage the trust during the creator’s life and beyond.

A supplement to the revocable living trust should include powers of attorney. This names an individual – or more than one – to decide financial and health matters in place of an incapacitated person.

Source: blogs.sacbee.com, “Do I need a revocable trust?” Claudia Buck, Nov. 5, 2012

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