> Outdated estate planning documents can be as dangerous as not having an estate plan at all.
> A proper estate plan should provide significant asset protection and oversight for your beneficiaries.
> A change in your family or financial situation should trigger a call to your estate planning attorney.
Following her death on February 11, 2012, Whitney Houston’s Will was filed in Fulton County, Georgia. Surprisingly, Houston did not have a Trust in place at the time of her death, so her estate has been administered by the probate court in public view. As discussed in the April 2012 newsletter, Houston’s Will left her entire estate to her only child, Bobbi Kristina Brown, who had not been born at the time the Will was signed, was 19 years old at the time of her mother’s death and died on July 26, 2015, at the age of 22. Bobbi Kristina had been on life support for six months after being found unresponsive in a bathtub—the same way her mother was found.
In addition to not taking advantage of available estate planning options that would have allowed her family to avoid probate and a very public estate administration, it was unfortunate that Houston failed to update her estate plan after her divorce from Bobby Brown, leaving it unclear whether she intended to leave him a share of her estate.[1]
Houston’s Outdated Will
Signed in 1993 and updated in 2000, Houston’s Will directed her estate to be held in a testamentary trust and required the trustee to distribute 1/10 of the trust estate to Bobbi Kristina at age 21, another 1/6 at age 25, and the balance at age 30. Since Bobbi Kristina failed to survive the distribution of Houston’s estate, the assets will pass to the remainder beneficiaries, which are Houston’s mother and two brothers. Shares were also left to Houston’s father, John R. Houston, who passed away in 2003, and her husband, Bobby Brown, whom she divorced in 2006.
Contingency of Remainder Beneficiaries
Houston’s failure to update her estate planning subsequent to her increasing fame and wealth, the birth of her daughter and her divorce is surprising.[2] Following her daughter’s death, Bobby may fight to get a share of the remainder of the estate. His share was left to “my husband, Robert B. Brown.” Despite the fact that New Jersey law clearly states that a divorce revokes any disposition of property to the former spouse, Brown may argue for his share.[3]
Although he is unlikely to succeed, it should have been recommended to Houston that she update her estate planning to accurately reflect her wishes following her divorce. Given the widely-reported animosity between the two families over Bobbi Kristina’s treatment, status and leaked photographs, litigation is likely over many issues before Houston’s estate is finally settled—litigation that could have been avoided with an updated, thorough estate plan.
Ages of Distribution Relative to Size of Estate
Houston’s Will directed the trustee to distribute the entirety of Bobbi Kristina’s inheritance to her by the age of 30. Studies have shown that most inheritances are exhausted within 24 months of receipt, with reported averages ranging from 8 to 18 months. The decision to allow a 30-year old to inherit a $20 million estate outright and free of any trustee oversight is inadvisable, to say the least.[4]
Utilizing a Third-Party Trustee
In addition to having an estate plan that would properly serve her family and financial situation, it would have been advisable for Houston to name a third-party trustee to oversee the distributions to Bobbi Kristina and subsequently divide remaining assets among family members. By naming her mother as executor and her brother and sister-in-law as trustees, Houston’s family members were placed in an uncomfortable position.
By utilizing a third-party trustee, the creator of the trust (the grantor) can ensure that the trust will be administered in accordance with the terms of the document, which, when drafted properly, should reflect the grantor’s wishes and provide direction for most foreseeable situations.[5] Additionally, a third-party trustee is less likely to succumb to personal pressure if he or she feels that a distribution is not in the beneficiary’s best interest. This protection can be invaluable when the grantor is no longer around to provide that protection and oversight themselves.
Lessons for Families and Estates of All Shapes and Sizes
While Houston’s estate amplifies the need for proper estate planning, these lessons are applicable to families and estates of all shapes and sizes. Married or single, first marriage or second, children or no children, small estate or large—everyone has wishes for their family and assets and can benefit from a thorough discussion to assess the potential pitfalls in the administration of their estate. By taking the time to have a conversation with your estate planning attorney, individuals and couples are usually alerted to issues that had not been considered. Failing to consider and address these issues in your estate planning only increases the likelihood of unprotected assets, family conflict and litigation.
[1] For additional discussion, please see Probate—What It Is and How to Avoid It.
[2] For additional discussion, please see Reviewing Your Existing Estate Planning Documents.
[3] NJ Rev Stat § 3B:3-14 (2013). Houston’s Will was executed in New Jersey.
[4] For additional discussion, please see Estate Planning to Keep Your Children Motivated.
[5] For additional discussion, please see Choosing the Right Trustee for You and Your Family.