Woe The Weak-Willed Celebrity

Revocable trusts offer the most flexibility for young clients such as these, Bond says.

“It doesn’t make sense to lock them into something that’s not revocable,” he says. “They don’t know what the following year is going to look like, they’ve got several more chapters to write in their lives, and their lives are going to change a ton, so definitely some kind of revocable trust.”

Another important estate-planning tool that is often overlooked because of the negative connotations attached to it is a prenuptial or postnuptial agreement. They “are not only applicable to the demise of the relationship through a divorce, but also because of death, so it very much is an estate-planning tool,” Bond says.

For example, if a prenuptial or postnuptial agreement specifies that 60% of all marital assets go to the male and 40% to the female upon dissolution of the marriage, and the male dies leaving an estate valued at $10 million, the spouse would automatically receive $4 million. The remaining $6 million would fall into the trust of the deceased spouse and that document would determine how the balance is managed and distributed.

Such an arrangement simply lays out “a clear plan as to how assets will be valued and divided if the partnership is dissolved, no matter the cause,” Bond says.

Plan Early, Revise Annually
Regularly updating an estate plan is just as important as having one, attorneys say.

No matter the age, the head of a wealthy family has responsibility to ensure a smooth succession, Bond says. That means taking into account not just how estate assets are managed and to whom they will go, but also planning for enough available liquidity to ensure a smooth transition from one generation to the next. While an estate’s assets may be valued at tens of millions of dollars, it may not have $10 million in cash on hand to settle a tax bill. That may require selling off assets, possibly in a buyer’s market, to cover the payment.

“Most of the time, estates are tied up in assets that are very valuable but not necessarily liquid,” Bond says. “Even if someone has most of his net worth tied up in real estate, if you’ve bought or sold a house you know [the sale] doesn’t happen overnight.”

Reviewing an estate plan annually with a team of advisors will yield the best results for wealthy families and their future generations, Fishkind says.

“Compared with lack of planning and follow-up and paying unnecessary amounts of money in the form of estate taxes or litigation fees, the choice
of which route you want to take is easy,” he says. “It’s just a matter of looking at the different paths and choosing the right one.”