How to Avoid Whitney Houston’s Estate Planning Mistakes

Join Our Mailing List

Look at Money Scripts

By Rick Kahler MS CFP® ChFC CCIM

Since the death of singer Whitney Houston, I’ve seen several articles from attorneys and financial advisors about the errors in her estate planning. They have summarized three areas where it was badly flawed:

1. Lack of privacy. Ms. Houston had a simple will that was subject to public probate, rather than a living trust that would have kept her affairs private. Anyone with thumbs and access to the Internet can see a copy of her will.

2. Lack of protection from claims, con artists, and circumstances. The estate, estimated to be worth over 20 million dollars, was left to Ms. Houston’s daughter, Bobbi Kristina Brown. A vulnerable young woman just barely of legal age will receive three huge payouts over the next decade and become a multi-millionaire by the time she’s 30. A trust could have given her some limits and structure, as well as providing for advisors to help her learn how to manage her wealth and protect herself from predators.

3. Lack of tax planning. The federal estate tax of 35% on anything over $5,120,000 will apply to the estate, so Uncle Sam will take around a third of it off the top.

Estate Planning – How Time Flys By

Unfortunately, this lack of skilled estate planning isn’t all that rare among wealthy people; or even some medical professionals. So, here are a few of the money beliefs that may be behind inadequate estate planning:

  1. “Complicated estate planning is for rich people, and I’m not rich.” This may especially apply to owners of small businesses – like some doctors – who don’t have a particularly high income or lifestyle but whose land or businesses may be worth several million dollars. Yet good estate planning advice is especially important for them, because their heirs aren’t necessarily aware of or prepared for a substantial inheritance.
  2. “The financial advice that was good enough when I was just starting out is good enough now that I’m successful.” A tax preparer, accountant, or financial advisor who is highly competent with small individual or business matters may not have the knowledge necessary for more complex estate planning. Seeking out different financial advisors as your income and net worth grow is no different from consulting a specialist rather than a general practitioner if you have specific medical needs.
  3. “When you can afford the best, you’ll get the best.” Trying to save money by hiring bargain-basement financial advisors is almost always a mistake. It can also be a mistake to assume that someone who charges top-tier fees will always have top-tier skills and integrity. Even if a financial planner or other professional has a reputation as an advisor to the wealthy, it’s still essential to verify that the person or firm is right for you. Ask for references and be willing to ask hard questions about compensation, investment philosophy, and services. Make sure you are a client, not a customer. Work only with financial advisors who, like accountants or attorneys, have a fiduciary duty to put your interests first.
  4. “I know how to make money, so of course I know how to manage money.” Many highly educated and skilled professionals are high earners but don’t necessarily have the knowledge to manage their earnings well. In order to know whether the advisors you hire are competent, it’s important to learn the basics of investing and money management. Look for advisors who don’t set themselves up as “gurus” but are willing to teach and to work in partnership with you.

Assessment

When it comes to financial advice, it isn’t enough to find someone who will “make you feel like a million dollar bill.” It’s more important to find advisors who will help you take good care of all your dollars.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

Our Other Print Books and Related Information Sources:

Health Dictionary Series: http://www.springerpub.com/Search/marcinko

Practice Management: http://www.springerpub.com/product/9780826105752

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Hospitals: http://www.crcpress.com/product/isbn/9781439879900

Physician Advisors: www.CertifiedMedicalPlanner.org

Product Details  Product Details

3 Responses

  1. Mr. Kahler,

    Interesting article.

    I have both of Dr. Marcinko’s handbooks. They are indeed an excellent place to start reviewing this important issue. Very physician focused.

    Thank you.

    Dr. Isidore W. Morganstern [IWM]

    Like

  2. Estate Tax Debate

    The Senate this week has been discussing action on tax bills by both parties. The Middle-Class Tax Relief Act of 2012 (S. 3412) is supported by Senate Majority Leader Harry Reid (D-NV). Minority Leader Mitch McConnell (R-KY) and Senate Finance Committee Member Orrin Hatch (R-UT) support the Tax Hike Prevention Act of 2012 (S. 3413).

    The Middle-Class Tax Relief Act would extend most of the 2001-2003 tax cuts. Tax rates will increase to 36% and 39.6% for single persons with incomes over $200,000 and married couples with incomes over $250,000. For those individuals, the capital gain rate would increase from 15% to 20%. Most other provisions of the 2001-2003 tax cuts will be extended for the balance of taxpayers.

    Sen. Reid stated, “Right now, we have a very clear picture of what we want to do: make sure that people making less than $250,000 don’t get a tax increase.”

    McConnell responded, “There’s some uncertainty we could remove by indicating sooner rather than later that we’re not going to let anybody’s taxes go up at the end of the year.” His Tax Hike Prevention Act would generally extend the provisions of the 2001 and 2003 tax bill.

    The estate tax provisions of both bills are also under discussion. The original White House budget proposed a $3.5 million estate exemption and 45% estate tax rate for 2013. The initial draft of the Middle-Class Tax Relief Act followed the White House model. However, in an apparent effort to increase total revenue from the bill, that provision was deleted. If no provision passes, then the estate tax exemption returns to $1 million (with indexed increases) and the top estate rate would be 55%.

    The Tax Hike Prevention Act supported by Sen. McConnell extends the $5 million exemption (with indexed increases) and 35% estate tax rate.

    Source: Children’s Home Society of Florida Foundation

    Editor’s Note: Your editor and this organization take no specific position on these comments. The probability is that neither bill will pass prior to the election. Both parties are now creating negotiating positions for the November tax bill. These efforts to introduce specific legislation are useful in understanding the negotiating positions of both parties.

    Like

  3. Ten Trouble Spots for Estate Planners

    As a doctor and financial advisor myself, I know that asset protection and estate planning by non-attorneys can be both lucrative and potentially troublesome.

    So, try to avoid these 10 often-made mistakes, especially when working with medical professionals or other HNW individuals:

    1. Over-qualifying for the marital deduction by failing to use a bypass trust.
    2. Give the surviving spouse unlimited access to a bypass trust rather than an ascertainable standard.
    3. Not coordinating the titling of probate and non-probate assets.
    4. Not giving the surviving spouse an annual income QTIP interest, thereby losing the marital deduction at the first death.
    5. Not reviewing boilerplate language used by attorneys that may not apply to the particular client situation.
    6. Not transferring ownership of life insurance to irrevocable trusts.
    7. Not converting gifts of a future interest to a present interest.
    8. Not funding testamentary trusts after the client’s death.
    9. Not ensuring that donors don’t retain ownership interests in assets gifted.
    10. Not using a generation-skipping trust where children are already wealthy.

    Dr. David E. Marcinko; MBA CMP™
    http://www.CertifiedMedicalPlanner.org

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: