Estate Planning

No one will forever.  Therefore, we must plan in the event of our death how we will distribute our assets to our loved ones and or charities.  An estate plan may include a will, a health proxy, spring power of attorney, a living will, life insurance, a revocable trust, and a irrevocable trust.  Depending on the amount of assets you own, you may wish to consider a trust.

How James Brown could have used some sound estate planning to benefit  his family?

James Brown died on December 25, 2006 with an estate that should have been worth over $40 million. His advisors told him to make a will and also an irrevocable trust for his property and business assets. In truth, James Brown should have probably reviewed his estate planning documents at least once a year to make sure things were correct and relevant as he intended.  James Brown probably did not expect that many of his personal belongings and properties would be apart of a legal battle and tied up in probate.  James Brown may have needed not just a last will and testament but to also transfer his real estate property and other non-personal assets in a living trust. A properly set up trust may have protected and preserved James Brown’s assets for his family and saved them from a bitter legal battle in probate.

The definition of probate is a state court proceeding that settles the estate of a person and determines who should get their assets. As a result of probate and some bad decisions from advisors, million of dollars may be paid by James Brown’s estate in taxes, legal fees, appraisal fees and accountants. Worse yet, James Brown’s family may have to sue his former trustee, David Cannon for misappropriating $7 million from James Brown’s estate.

Lessons to be learned from the estate planning of James Brown?

A good estate plan can save your family a lot of money and protect them from costly legal fees and may reduce any delay caused by legal challenges in probate court.

A will is a good start to estate planning.  It is strongly suggested that you get a licensed lawyer in your state to draft your will and execute it.  Many people may choose to write their wills by using an online program but if something goes wrong or you need to ask a question then you should consult with a competent estate planning attorney.  You should review your will at least once a year to make sure there are no significant changes (e.g. death of a beneficiary, divorce, etc.)

Probate does not have to be very time consuming or expensive.  Many probate courts have simplified forms and lowered fess for small estates.  However, if you have millions of dollars and many relatives as was the case for James Brown then you probably want to find ways to minimize potential legal battles in probate court.

By only having a will, a probate of your estate cannot be avoided. A living trust is a legal way to pass your wealth on to your loved ones and future generations without going through probate if assets are properly transferred to the trust. A living trust is a special type of trust that allows a person to control their assets while still alive and pass their assets to their loved ones upon their death.  A living trust does not have any special tax advantages but may be useful to transfer certain assets without going through probate court such as real property and cash accounts.  Life insurance policies are important estate planning tool that can allow an individual to transfer wealth to their loved ones upon their death and this transfer usually does not go through probate (i.e. life insurance policies are contracts that usually have a beneficiary or beneficiaries).