Celebrity Estate Planning Gone Wrong

Celebrities would appear to have it all: large homes, flush bank accounts, and jet-setting lifestyles. But good estate planning does not appear to be one of the trappings of stardom. Maybe it’s because people who are surrounded by adoring fans and wealth might feel as though they will never die, and so they may not see a pressing need to make the appropriate arrangements.

However, it could also be that celebrities are prone to the same estate conservation mistakes as private citizens. We don’t often see the estate battles that arise when private citizens die, but celebrity estate planning mistakes usually make good tabloid fodder.

Gary Coleman, an Ex-Wife, and Health-Care Directives

The case of Diff’rent Strokes actor Gary Coleman is a lesson in updating your estate plan to reflect changes in your life. There is some question about his ex-wife’s decision to take Coleman off life support shortly after he suffered a head injury at home that caused him to fall into a coma. Her actions are made all the more interesting by two related developments.

First, in 2006, Coleman created a health-care directive that gave his then-wife the power to make medical decisions if he became incapacitated. Coleman apparently included a provision stating that he wanted his life “to be prolonged as long as possible within the limits of generally accepted health care standards.”¹ Yet Coleman’s ex-wife, who was with him in his home the night of his head injury and made the 911 call, made the decision to remove life support one day after he was admitted to the hospital with a brain hemorrhage.² It is unclear whether doctors advised her that Coleman, who had suffered from poor health for much of his life, had sustained injuries that were not survivable.

Second, Coleman took out a restraining order against his ex-wife on February 19, 2010 — months before his May 28 death — alleging the theft and destruction of his property, although he never served her with the order.³

Divorce does not nullify a health-care directive, and it’s unclear what Coleman’s true wishes were, given that his ex-wife continued to live in his home and was present the night of his fatal injury. Nonetheless, if you have been through a divorce, it’s wise to review your estate documents to ensure that they continue to reflect your wishes.

Where There’s No Will

World champion chess player Bobby Fischer, considered by many to be one of the greatest players of all time, made a wrong move when he failed to leave a will. Soon after his death in Iceland in 2008, several parties came forward claiming the right to inherit his estate. These included a long-time romantic partner, some American family members, and a woman in the Philippines who alleged that Fischer was the father of her nine-year-old daughter and that he maintained regular contact with the pair and sent gifts of money.⁴

Under Icelandic law, because Fischer didn’t leave clear instructions about who was to inherit his estate, claims for possession can come from any individual who can prove a familial connection — and every alleged family connection must be explored. On June 15, 2010, the Icelandic Supreme Court ordered Fischer’s remains to be exhumed for DNA testing to determine the validity of the paternity claim by the nine-year-old girl and her mother.⁵

Many of these complications could have been alleviated with a simple will. Instead, the person who truly has a right to Fischer’s estate has to fight for his or her inheritance against anyone who can make a viable claim, even if the claim is fraudulent, all while witnessing events and statements that may damage Fischer’s reputation and legacy.

Going to the Dogs

Sometimes when celebrities die, the problem is not that they don’t leave a clear and legal estate plan. It’s that their instructions leave everyone else scratching their heads — or the belly of a newly rich pooch.

Leona Helmsley, the so-called “Queen of Mean” who died in August 2007, left a $12 million trust fund for her beloved dog, Trouble. And instead of specifying in her will or trust documents exactly what should happen to the rest of her estate, valued between $5 billion and $8 billion, she left a “mission statement” instructing that her wealth should be used to provide care for dogs in general. She also granted her trustees the right to use discretion when deciding how to distribute her estate. Unfortunately, her instructions were not legally binding, which has placed some unusual pressures on her trustees.⁶

In 2008, a judge reduced Trouble’s inheritance to $2 million, and the difference went to her charitable trust, which it turns out may not be exclusively dedicated to the care of canines as Helmsley may have actually wanted.⁷ Helmsley’s trustees were said to be concerned that the outrageousness of her wishes for her legacy would cause a public outcry — indeed, the disclosure of Trouble’s bequest led to death threats against the dog, whose security needs alone cost the Helmsley estate $100,000 per year. Even if her estate turns out to be worth the more conservative estimate of $5 billion, it is still ten times larger than the combined assets of all the animal-related U.S. nonprofits reporting to the IRS in 2005.⁸

If Helmsley had been more specific in her legal documents, more of her wealth may have been distributed according to her wishes.

What’s It to You?

It can be uncomfortable even to bring up the topic of estate conservation, let alone develop a strategy and review it on a regular basis. But as you can see, failing to make adequate preparations is likely to affect your heirs and could possibly taint your legacy.

1–2) eonline.com, June 14, 2010
3) New York Post, June 22, 2010
4–5) Yahoo! News, June 17, 2010
6–8) The New York Times, July 2, 2008

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.