Sometimes we have the opportunity to learn from the mistakes of others. While the lives of Hollywood stars may be very different from those of average Americans, sometimes we can learn from their mistakes. In this blog entry, I discuss two (of several) important lessons everyone can learn from Whitney Houston’s Last Will and Testament.
Whitney Houston died earlier this year having signed a will that she created in 1993. The will left everything to her 19-year-old daughter, Bobbi Kristina, through a testamentary trust (a trust created upon one’s death). The trust distributes 1/10 of its assets outright to Bobbi Kristina at age 21, 1/6 at age 25, and the rest at age 30.
Lesson 1: The Rotisserie-Oven “Set-It-and-Forget-It” Estate Plan Leads to Problems.
Whitney created her will in February 3, 1993 and updated it with minor changes in 2000. Now, her daughter is set to receive a large distribution when she soon turns 21. Reportedly, Bobbi Kristina has struggled with substance abuse for years and reports indicate she may have turned back to drugs following her mother’s death. Bobbi Kristina will now gain control of a significant inheritance when she is “old enough” but not yet mature enough to handle it.
Bobbi Kristina was only seven when Whitney last updated her will. How many parents see their seven-year-old as a potential addict? Unfortunately, when Bobbi Kristina showed signs that she had a substance abuse problem, Whitney did not update her estate plan to match the changing needs of her loved one.
Failing to update one’s estate plan as circumstances change is a key mistake many make. People often think of estate planning as a box to check off—like the Rotisserie-oven infomercial—“set it and forget it.” It is fairly common for estate planners to meet with clients whose will or trust was last updated nearly twenty years ago. Whitney’s death and her daughter’s circumstances should remind us to update our estate plans at least every few years.
Some estate planning attorneys are creating a different relationship today with their clients to make it easier for client estate plans to adjust as the client’s circumstances change over time. As an example, our firm now has a Client Care Program that offers clients many benefits, including free word-processing changes so that estate plans stay current.
Lesson 2: Protect the Inheritance You Leave to Your Beneficiaries
Many estate plans use similar age-based outright distribution patterns to those found in Whitney’s will. The distribution pattern is based on the idea that with age, our loved ones become more mature and old enough to handle their inheritance. Unfortunately, this perception overlooks a very important reality—bad things sometimes happen to good people.
When Bobbi Kristina receives an inheritance distribution outright, it will become instantly reachable by her current and future creditors, addictions, lawsuits, and a future divorce. Even if Bobbi Kristina was mature enough to handle her inheritance, why not protect her inheritance from the bad things that can happen to even mature loved ones?
Whitney could have left the money in trust for her daughter’s benefit while protecting it from the risks to which personal assets would normally be exposed. In Arizona, you can even allow your beneficiaries to control and use the money for their health, education, maintenance, or support at a certain age yet still protect it from creditors, lawsuits, and a future divorce.
Regardless of the size of the inheritance, leaving it outright (with no will or a simple will) or distributing the inheritance outright at certain ages leads to the same result—the money is usually gone very quickly. Bobbi Kristina stands to receive millions when she turns 21 in less than two years. How long before the money is gone or spent in a way Whitney would not have wanted?