Whitney Houston: Estate planning lesson in a sad, untimely death

Feb 19, 2012 @ 12:01 am

By Liz Skinner

Whitney_houston_estate
+ Zoom
(Photo: Bloomberg)

The premature death of pop star Whitney Houston should serve as a concrete reminder to financial advisers to make sure that wealthy clients properly fund the trusts that they have set up for their heirs and that they update estate documents every few years.

“Celebrity stories like this are a great educational tool to share with clients and highlight what should be done, what was done wrong and what was done right,” said Andy Mayoras, a Michigan estate planner.

At this point, it is too early to say what kind of shape Ms. Houston's estate was in when she died.

But the six-time Grammy winner, who died Feb. 11 in a Beverly Hills hotel at 48, had a will that names her only child, 18-year-old Bobbi Kristina Brown, as the main beneficiary, press reports quoted a family friend as saying.

“At the very least, hopefully, a revocable living trust was set up and, even better, a series of trusts that are funded by the estate's assets,” Mr. Mayoras said. “Would you want your 18-year-old daughter to inherit everything in a lump sum?”

Along with setting up insurance policies to fund the trusts, Ms. Houston should have updated her will, any trusts and her insurance beneficiaries after her 2006 divorce from R&B singer Bobby Brown, Mr. Mayoras said.

Ms. Brown is the only child from their relationship, though Mr. Brown reportedly has five other children from different relationships.

LIFE EVENTS

Along with divorce, any life event such as the birth of a child, a move across state lines or remarriage should spark an updating of estate documents, Mr. Mayoras said.

Even without such changes, a wealthy client should review those documents every three to five years to account for new real estate or business ventures and to make sure that all assets are funded, said Mr. Mayoras, who co-wrote “Trial & Heirs: Famous Fortune Fights” (Wise Circle Books, 2009).

The estate planning that celebrities and high-net-worth clients require is complex and time-consuming, and that is often why it isn't done, advisers said.

Celebrities are used to having things done for them, and they don't want to devote the time to reviewing their situation, said Jeremy Kisner, president of advisory firm SureVest Capital Management, which has some celebrity clients.

The planning also requires stars to make hard decisions about whom to support — and with how much — as well as how to deal with estate- or tax-planning changes that may require them to give up some control and flexibility, he said.

“I find that especially with celebrities, they start the planning but never actually finalize it. This type of planning isn't just done over a lunch meeting,” Mr. Kisner said.

A number of music industry stars have died without completing a will. That list includes Sonny Bono, John Denver, Jimi Hendrix and Bob Marley.

Ms. Houston, the 20th-top-selling artist in the United States of all time, with 55 million records sold, hopefully realized the importance of proper estate planning as a result of the scuffle between her and her stepmother when her father, John Houston, died.

Stepmother Barbara Houston sued Ms. Houston in 2008 over a $1 million life insurance policy that Mr. Houston left to his daughter. Barbara Houston said the policy was supposed to pay off the money that John and Barbara had borrowed from Whitney Houston to buy their New Jersey condo.

The younger Ms. Houston, who held the mortgage on that property, countersued and asked for repayment of the mortgage with interest. In December, an appeals court judge ruled in the singer's favor because her stepmother didn't have any signed documents to prove the insurance policy was meant to cover the mortgage loan.

“You should never name anybody as the beneficiary of a life insurance policy unless you want that person to keep the money,” Mr. Mayoras said.

Details of the financial state of Ms. Houston — who signed a $100 million record deal in 2001 but also admittedly suffered with drug problems — are being closely held by the family, which buried the star Saturday. The cause of her death isn't expected to be known for a couple more weeks.

Regardless of its current value, Ms. Houston's estate is expected to gain from the giant boost in song sales since her death, the August release of a movie she filmed with Jordan Sparks called “Sparkle,” all future projects involving her unreleased recordings, as well as sales from other assets, including a Mendham, N.J., mansion reportedly on the market for $1.75 million.

“There were rumors that she was broke, but that will certainly change,” said Lynnette Khalfani-Cox, contributing editor to Moneyrates.com. “We can expect at least a seven-figure increase to her estate, maybe more.”

lskinner@investmentnews.com

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 17

Conference

Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

INTV

DOL fiduciary rule opponents and supporters sound off on Jan. 1 deadline

Senior reporter Mark Schoeff Jr. and managing editor Christina Nelson discuss the latest batch of comment letters on the regulation, this round focused on timing of the full implementation date.

Latest news & opinion

Emerging issues affecting financial advice

The profession will need to adjust to enormous shifts in the socioeconomic environment in the coming decade.

Cetera broker-dealers to pay back $3.3 million to clients overcharged for mutual funds

Over an eight-year period, the B-Ds failed to properly supervise sales charge waivers to clients in retirement plans and charitable organizations.

Fiduciary advocates press CFP Board for specifics on standards changes

Meanwhile, few brokerages and their trade associations, which blasted the DOL's fiduciary rule in comment letters, are responding to the CFP Board's proposal.

Big gains attract new money to emerging markets, but should investors stay?

An estimated $6.7 billion has flowed into emerging-market stock funds and ETFs so far this year, according to Morningstar.

Attorney blasts Finra after regulator loses insider trading case

Lawyer says it was 'slimy' of Finra to publicize the case while it was still being litigated.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print