The recent deaths of several high-profile celebrities, perhaps most notably Michael Jackson, have again thrust the issue of celebrity estate planning into the limelight.  Oddly, the general public's fascination with celebrities does not seem to diminish after they have passed away. Instead, interest will often intensify post-mortem, particularly when the celebrity's estate is surrounded by controversy or litigation.

The deaths of Michael Jackson, Anna Nicole Smith, Heath Ledger and New York socialite Brooke Astor are examples of this phenomenon, as in each of these situations, uncertainty regarding the ultimate disposition of assets has received extraordinary media coverage as observers pore over the most salacious and scandalous elements.    Though the media is prone to sensationalizing each story to capture the public's interest, common themes do emerge when wealthy celebrities pass away.

It's clear that while the stories may all be tragically unique, the contributing factors remain relatively consistent.  Collectively, these cases obviate the need for a unified approach to wealth management that balances short- and long-term lifestyle concerns against the desire to effectively transfer wealth and preserve legacies.  

Celebrities Without Estate Plans
Celebrities differ from other segments of the high-net-worth community in that they do not typically come from financially sophisticated backgrounds. In addition, they often amass their wealth virtually overnight and at relatively younger ages. Moreover, the careers of many celebrities are limited in their duration. In addition, estate-planning conversations require celebrities to confront their own mortality, which can be a difficult topic to broach, especially for younger individuals still focused on developing a personal brand. In fact, roughly 35% of celebrities are "focused on the business side of their careers," according to a study commissioned by Rothstein Kass and conducted by Prince & Associates, Inc. Survey results were based on intermediary-based sampling by 203 entertainment attorneys representing 1,015 celebrities and were published in February 2008. Celebrity participants were at least 25-years old and with reported net worth of at least $10 million.

In light of these circumstances, one might expect that the lack of estate planning is one of the most common reasons for controversy in a celebrity's estate. For example, Jimi Hendrix, DJ AM and Steve McNair all reportedly died intestate, or without a will. When a celebrity, or anyone for that matter, dies without a will, the celebrity's assets are distributed according to the laws of intestacy, which vary from state to state. Unlike the estates of most people, the ongoing control and administration of a celebrity's estate assets-such as creative works and the celebrity's likeness-is critical since they  can very often continue to generate significant revenue long after the celebrity's death.

The estates of Bob Marley, John Lennon, Elvis Presley, Jim Morrison, Kurt Cobain and Marilyn Monroe are but a few examples of this phenomenon.  Without an estate plan, a celebrity is unable to ensure that the proper individuals are left in control of their estate and legacy.  All too often, the result of a celebrity dying without an estate plan is years of litigation and feuding before an administration is finally agreed upon, which can cost the estate and its heirs a fortune.  Courts generally take an individual's right to devise his or her estate very seriously and-assuming the individual has legal capacity and the absence of fraud, duress or other wrongdoing-will seek to honor the individual's post-death wishes.  Therefore, simply having an estate plan is a first step to avoiding controversy.

Fortunately, high-profile failures to establish an estate plan may have helped to educate other celebrities. Nearly 80% of celebrities do, in fact, have an estate plan in place, according to the Rothstein Kass/Prince & Associates survey.

Outdated Estate Plans
Merely executing a will or implementing a more comprehensive estate plan is not a sufficient means of avoiding controversy. Rather, a celebrity must revisit and update that estate plan on a regular basis in order to account for life-changing events, such as marriage, the birth of a child, divorce, remarriage or a significant change in wealth.  Over 90% of celebrities report that they are wealthier since their estate plan was established, with nearly 65% reporting a "life-changing event" during that period, according to the survey. For example, both Heath Ledger and Anna Nicole Smith died with wills that were executed before the birth of a child. As you can imagine, this can cause enormous problems within an estate because the celebrity's will, although outdated, is generally still valid.  Therefore, it is very easy for a celebrity to inadvertently exclude a loved one, including a child or spouse-although many states entitle a spouse to an "elective share" of a deceased spouse's estate-from inheriting anything from the celebrity's estate.  The result is usually a challenge to the validity of the will by the disinherited child or spouse, which can be costly and last for years. 

Unique Lifestyles
In addition to taking major life changing events into consideration, a celebrity's estate plan must also reflect the unique lifestyle that many celebrities maintain.  First, the success rate for marriages in Hollywood is extraordinarily low, and many celebrities will die having been married several times.  In addition, celebrities are more likely to have children from multiple partners and adopting children is an increasing trend.  The inheritance rights of children from prior marriages and adopted children must be carefully considered in conjunction with the celebrity's wishes. 

Celebrity spending habits are also eccentric. It can be shocking to the average person to hear about the amount of money that celebrities spend, and in such short periods of time.  Tabloids frequently publish photos of celebrities on a "shopping spree" with a headline about how the celebrity spent tens or even hundreds of thousands of dollars in less than an hour. Unlike much of the printed celebrity gossip, exorbitant celebrity spending is usually very real.  In addition, celebrities can be exceptionally generous, giving to charities as well as family and friends who supported them throughout their careers.

As a result, financial advisors and estate planners often find it difficult to control the spending of their celebrity clients and implement some form of budget. A celebrity's spending can leave the estate with enormous debt that needs to be repaid or refinanced.  Michael Jackson's estate is rumored to have inherited upwards of $500 million of debt from the late pop star.

Another problem unique to celebrities is the frivolous lawsuit.  Over half of celebrities report that they have been involved in unjust lawsuits and/or divorce proceedings, with over 80% indicating that these are areas of concern, according to the Rothstein Kass/Prince & Associates survey. Despite this common problem, under 30% report that they have an asset protection plan in place, which is somewhat astounding. Nearly 80% report that no one showed them how to develop such safeguards, which is an indication that many advisors are failing to convey the importance of asset protection.

Lack Of Integration
Celebrities dying without wills or with outdated estate plans, extraordinary lifestyles and spending habits and frivolous lawsuits are some of the more obvious problems that celebrity estates often face. However, even when a celebrity appears, at least on paper, to have all of his or her affairs in order, a celebrity's estate issues can still go horribly wrong. This is often because the celebrity or the celebrity's advisors, or both, fail to integrate the celebrity's estate plan in their day-to-day life.  
There is a common misperception that an estate plan takes effect only when a person dies and that it consists simply of a will and maybe a few trusts. While such an approach may work for the general public, the estate plan of a celebrity should be much more comprehensive and complex, and must be integrated into and implemented during the life of the celebrity.  First, where there are businesses that will continue to operate after the celebrity's death, including businesses that will have the continuing right to exploit the celebrity's likeness and image and/or original works, those businesses need to be structured and administered in a way that will not be interrupted by the celebrity's death.  This requires careful consideration of who makes decisions at the company level and the shareholder or ownership level. In addition, the celebrity may wish that family members or other individuals benefit economically from these businesses after his or her death but may not want those same individuals to be involved in the operation of the businesses.

The Celebrity Brand
Perhaps the most important asset in a celebrity's estate is the brand that the celebrity has created that is forever associated with his or her name, creative works and likeness and image. A celebrity's legacy can also be the most sensitive matter to deal with when it comes to estate planning because carrying on a dead celebrity's legacy is as much an emotional matter for surviving family members and loved ones as it is a business matter. To ensure a smooth post-death transition and to avoid disputes after a celebrity's death among family, friends, professional advisors, etc., it is critical that a celebrity's estate plan incorporates a governance structure that addresses the administration of the celebrity's legacy after death.   

Building A Team
One solution to the problems faced in celebrity estate planning is for the celebrity to build a team of professional advisors that can provide a holistic approach to managing the celebrity's professional, financial and personal affairs. Such a team can consist both of professionals with different varying expertise and family members or close-personal friends who understand the celebrity's individual wishes. In order for the team approach to work, however, members of the team must be in constant communication to achieve the greatest results.  In addition to providing a comprehensive approach to managing the celebrity's affairs-including the celebrity's career, finances, investments, charitable endeavors, estate planning, etc.-a team of advisors offers a diversity of opinions and views, which-as opposed to a single advisor's opinion-can lead to better decision making. Having multiple advisors also serves as a system of checks and balances, reducing the risk of wrongdoing by any one individual.

Rick Flynn is a principal and head of the Family Office Group at Rothstein Kass, a national CPA and business advisory services firm. Mr. Flynn can be reached at 212-997-0500 or [email protected].

Dan Scott is an attorney at Chadbourne & Parke in New York.  His practice consists of domestic and international estate, tax and wealth planning for high-net-worth clients, with a special interest in the planning needs of entertainers.  He can be reached at 212-408-5275 or [email protected].