Celebrity and High Net Worth Estates; Complex Family Structures; the Competency Issue

The recent passing of Whitney Houston and Davey Jones has put the topic of celebrity estates in the news.

Frequently, celebrities quickly obtain considerable wealth as a result of their achievements and the adulation bestowed on them. Sometimes, a beneficiary of wealth becomes a celebrity because of the money they have inherited.

In some cases of sudden wealth, the subsequent hectic lifestyle required to meet the demands of success prevent these individuals from devoting the time required to properly deal with their new financial status.

We are not sure yet of the exact details of Ms. Houston’s will, but at that point it seems as if  a will she created when she was pregnant leaves her entire estate to her only child, Bobbi Kristina Brown, who is now-19-years-old.

A recent article at LAtimes.com, indicates a trust will manage the estate until Ms. Brown’s 30th birthday. The article also mentions that her will seems ironclad and the legal process involving it is moving forward quickly and uncontested.

In some cases, sudden wealth can be a burden for people who are not mature or capable enough to handle the responsibilities that come along with having a lot of money, so naturally we are glad to hear that a well-executed estate plan appears to be in place in this instance.

The size of Ms. Houston’s estate has not been determined, and given her many well-publicized trials and tribulations, it remains to be seen if Ms. Brown will actually be wealthy. Regardless, we are saddened at the tragic loss and sympathize with their entire family.

On our most-recent weekly radio show on KDOW 1220 AM, we discussed several other aspects of celebrity and other high-net-worth estates, which frequently involve complex family structures. If you missed this broadcast, you can listen to a podcast in our Radio Show Archive.

Of course, instant wealth is not limited to entertainers and athletes. These days, especially here in Silicon Valley, entrepreneurs and employees at technology companies that go public become millionaires over night. We expect that to be the case again soon when Facebook’s IPO takes place.

For anyone who may hit the jackpot when Facebook does officially go public, we suggest you create an estate plan as soon as possible and, if you are married, you should definitely include your spouse and immediate family members in the process, especially in a community property state like California, so there are no surprises that cause conflict when the plan is implemented.

What happens with your estate after you die will usually be much different that you envision when you write a will, so you need to carefully craft an estate plan with sufficient provisions to ensure that your wishes are met in the future.

Another issue we discussed on our most recent radio show is the competency of elderly individuals to make financial and estate planning decisions for themselves.

We often speak with an adult whose elderly parent wants to change a will and who questions that parent’s decision-making ability, especially if the change is suspected to negatively impact the child’s eventual share of the estate.

A high percentage of the death certificates we see these days are for people who were in the 90s, so obviously a lot of older people have the desire and right to adjust their estate plan based on the changes in the latter stages of their life, such as another marriage.

As we stated above, complex family structures are a prime cause of dissension in probate court, especially those involving children from a parent’s multiple relationships in or out of wedlock.

We cannot overstate that it is very important to spend sufficient time carefully considering how to properly structure your estate plan, and the appropriate provisions to include, before you actually write it, because your beneficiaries are going to spend a much longer time dealing with the after-affects of the plan than you will spend developing it.

In California, based on case law, a person does not need a lot of competency to be entitled to draft or revise a will. It may be difficult to prevent an elderly person from adjusting a will or an estate plan.

Steps do exist to have a person declared incompetent and in need of transferring their power of attorney to someone able to make good decisions on their behalf. To have someone declared incompetent, a qualified psychological examination is required.

Part of the examination will be to determine if a “brown-bag effect” – a combination of several medications that negatively affect a person’s memory or mental capacity – is hampering the person’s ability to perform routine tasks. Frequently, altering a medication regimen can help a person regain their previous levels of mental performance.

If an eldery person wants to make a minor change to will or estate plan, a competency evaluation may not be in order. It makes sense that an older person may want to alter their estate plan when major life events occur in a family, such as a marriage or birth of a baby, so it is should not be considered unusual for adjustments to be made to account for those events.

However, for intended major changes to a will by a very old person, a competency evaluation may be in order. The legal fees for a certified psychological evaluation can run from about $2,500 to over $25,000, depending on whether or not the physician will need to be available to testify in court.

Go to Radio Show Podcast ArchiveThe types of people who make good witnesses in a competency hearing include those who do not have a lot of contact with the older person, but who see them on a regular basis over a long period of time.

Accountants who prepares an elderly person’s taxes just once a year would be good witnesses, because they are trusted advisers who can see from a distance some distinct changes in well-established behaviors, such as when a person whose financial records have been very organized their whole life are now disorganized.

Local bank branch officers might also be good witnesses, because elderly people may frequently have conversations with them about their family situations, so the bankers may be able to shed some objective light on the behind-the-scenes family dynamics and finances.

We encourage a regular review of your estate plan, especially when major life events occur, so it should not be considered unusual when an older person wants to do that.

Naturally, an attorney has an obligation to serve a client’s needs – and the person who signs an official document, like a will, is considered the client.

We would like to believe that all attorneys would try to protect their older clients from making irrational estate planning decisions that do not seem to be in their own best interest or meet previously stated desires, but ultimately a person is entitled to change his or her mind and make an estate planning decision at any age, unless the state has declared otherwise.

If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.

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This entry was posted in Asset Protection, California Trust Law, Estate Planning, Estate Tax, Probate, Radio Show: Wealth Preservation and You, Trust Administration, Trusts & Estates. Bookmark the permalink.

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