Estate Planning and Celebrity Tax Consequences
Everyone needs estate planning. While each person's place in life, family status, and net worth may be different, one characteristic all persons share is mortality. Planning can help you minimize taxes, ensure that your property is distributed as you intended, and arrange for the care of your loved ones. Furthermore, estate planning is the only means available to ensure that your wishes are carried out, not if you die, but when you die.
The problem many of us face is that estate planning requires us to face the reality of mortality. Many people delay estate planning decisions for both emotional and practical reasons. Some people find contemplating their own mortality is too morbid of a process to engage in effective planning. Others are simply unaware of the value of their assets, the laws that govern distribution and guardianship, or may lack sufficient knowledge of the effects of estate transfer costs and taxes. But as we all know, no one lives forever. And unless we prepare ourselves during our lifetimes, the uncertainty will remain not only as to where our assets will end up when we die but how much of our estate will be passed along to our heirs.
And that puts us at greater risk of failing to properly plan for the unexpected. In addition to the risk of having your transfer wishes unfulfilled, perhaps even a greater risk of not engaging in estate planning is exposure to excessively high transfer costs in the form of transaction costs, probate fees and taxes.
As we can see from the chart below, estate planning can have a significant effect on the retention of wealth after costs and taxes. Let's take Elvis Presley, for example, who died with a ten million dollar estate but only passed along 27% of it to his heirs. In contrast, Gary Cooper, whose gross estate was half the size of Elvis', was able to distribute $664,000 more of his estate to his heirs.
| Name | Estate | Taxes and Costs | Net Estate | % Passed to Heirs |
|---|---|---|---|---|
| Henry Kaiser, Jr. | 55,910,373 | 1,030,415 | 54,879,958 | 98% |
| Walt Disney | 23,004,851 | 6,811,943 | 16,192,908 | 70% |
| Gary Cooper | 4,948,985 | 1,520,454 | 3,454,531 | 70% |
| W.C. Fields | 884,680 | 329,793 | 554,887 | 63% |
| William Boeing | 22,386,158 | 10,589,748 | 11,796,410 | 53% |
| Marilyn Monroe | 819,176 | 448,750 | 370,426 | 45% |
| John D. Rockefeller | 26,905,182 | 17,124,988 | 9,780,194 | 36% |
| J.P. Morgan | 17,121,482 | 11,893,691 | 5,227,791 | 31% |
| Elvis Presley | 10,165,434 | 7,375,635 | 2,789,799 | 27% |
So while we all face challenges of ensuring the financial objectives during our lifetime are carried out (i.e. retirement, insurance and education planning), we must not forget to plan for the distribution and retention of that wealth, because it can only go two places - to your family and loved ones or to the government.
Sources: "Estate Planning for Financial Planners (Fourth Edition)", Michael A. Dalton and Thomas P. Langdon
