In my course of work, I always get request from clients who wants advice on investments and insurances. But when I mentioned about estate planning, they thought that it is only for the ultra rich and hence do not wish to seek advice on this subject matter. Most of the time, I will reject such cases if I feel that estate planning is an important component especially those with children, foreign wives and dependents with special needs.
Why do I reject the case entirely when I can still charge for developing the insurance and investment plan? One of the main reasons is because of the reputation risk that I may have to bear in the event sometime bad happens. For example, in the event of death, my client is not around to tell his or her family members that I did not do the estate plan and hence cannot be held responsible when the properties in London ends up with the UK government when it should be given to the children.
Another common objection of doing an estate plan is that it is too expensive. It is true that it is an expensive exercise but that has to be compared to potential risk at stake if an estate plan is not done right.
In this article, I will cite three celebrities who did not do a proper estate plan. Likely they did not do a proper estate plan because of not wanting to spent money on it or like many others - procrastination. But the real reason could be because they did not know that estate planning requires the help of a professional financial planner familiar with estate planning.
Diana, Princess of Wales
The first case study is Princess Diana. She was the former wife of Prince Charles. Princess Diana died in 1997 in a car accident widely believed to be the fault of overzealous paparazzi. Her networth at the point of death was $55 million[1].
Princess Diana had a will[2] which left her estate to her two children – Prince William and Prince Harry. She did it right by creating a testamentary trust as the monies will only be release to them at age 25.
Princess Diana’s mistake is that she did not update her will to include her ‘godchildren’. She made her intention known through a ‘letter of wishes’ which stated that one quarter of her estate is to be given to her 17 godchildren. The court ordered that the letter of wishes was not enforcement[3].
My comments: The letter of wishes appeared to be a DIY will written by her without any professional advice. As a result of DIY, 55/4 = $13.75 million of her estate did not go to the intended beneficiaries. Sounds familiar? You probably DIY your own will right?
Michael Crichton
Michael Crichton is a famous author. He is most well known for being the author of Jurassic Park. He died at the age of 66 in 2008[4]. His networth was $175 million[5].
When Michael Crichton died, his then married wife Sherri Alexander was six months pregnant. The unborn son was not included in his will. Alexander sued to include her son in the will. Eventually the court ruled that the unborn son could inherit[6]. Of course, the lawyers are also the beneficiaries through their expensive legal fees.
My comments: In Singapore, the unborn child is not automatically included in the will unless specifically mentioned. All my male married clients’ will does have an inclusion for the unborn children. I will even go into such details just to make sure that will is watertight. That is why my fees are not low.
Elvis Presley
Elvis Presley does not require introduction. He died at 1977 leaving behind $10 million of estate. Unfortunately he did not have a proper estate plan resulting in a shrinkage of his estate by a whopping 73% in taxes and fees! His heirs only received less than $3 million[7]!
My comment: Because of globalization, taxes need to be taken into account when doing an estate plan. One out of two of my clients have properties overseas. Many of them invest in ETFs overseas and also invest through their private banks located in many parts of the world. If you are buying overseas properties or investing in ETFs or stocks outside of Singapore, your estate may be subjected to significant inheritance tax. Recently, there have been many property cooling measures in Singapore which could have a significant tax impact in property transfers at the point of death. Don’t Rock and follow Elvis’ footsteps!
Final remarks
You can see that these celebrities also made many estate planning mistakes. It is often assumed that the rich will be willing to afford to pay for fees to get things right. But they also make the same mistakes as everybody such as:
- Not willing to pay to get professional advice. DIY own plan.
- The estate plan was not detailed enough.
- Not proactive to protect the estate from the unwanted beneficiary (the taxman).
I hope this article helps to create more interest in financial planning which estate planning is part of it.
By the way, effective from 1 June 2014, I no longer offer Will wiring as a standalone basis. Will writing is a tool under estate planning. I may or may not use a will as a tool for estate planning as it depends on the clients’ needs. Estate planning is part of comprehensive financial planning.
The withdrawal of offering will writing on a standalone basis is to align the manner which I offer my professional services as I feel that it is important for clients to consider seeking advice as their primary objective with products purchase as secondary concern. “Will writing” is like a product. Everytime I write an estate planning article, I will get people contacting me to have their will written. If you are thinking of doing so, please don’t write to me. Instead, consider comprehensive financial planning.
[1] http://www.celebritynetworth.com/richest-politicians/royals/princess-diana-net-worth/
[2] http://edition.cnn.com/WORLD/9803/04/diana.will/
[3] http://www.telegraph.co.uk/news/uknews/1421408/Dianas-former-chief-aide-challenges-executors-over-bequest-to-godchildren.html
[4] http://www.celebritynetworth.com/richest-celebrities/authors/michael-crichton-net-worth/
[5] http://www.celebritynetworth.com/richest-celebrities/authors/michael-crichton-net-worth/
[6] http://wealthmanagement.com/estate-planning/richest-rich-ten-celebrity-estate-planning-mistakes#slide-5-field_images-581421
[7] http://news.morningstar.com/articlenet/article.aspx?id=137725
Like this article? Subscribe to my newsletter below for more.
What do you think? Leave a comment.