Celebrity Mistakes on Forbes.com

This was really interesting. I just hit some of the highlights but you will find the full pictorial article included in the link at the bottom.

Marlon Brando
Angela Borlaza, actor girlfriend, claimed Brando gave her the house she lived in. She settled with the executors of his estate for $125,000. She also claimed Brando promised her continued employment with a company he owned, and settled that claim out of court.

Leona Helmsley
When she died in 2007, Helmsley will left most of her $5 billion estate to charity, created a $12 million trust for her dog, Trouble, and completely cut out two of her four grandchildren. The two grandkids sued her estate, claiming she wasn't mentally fit to create her will and trust. The case settled, with Trouble getting $2 million, and the two grandkids sharing $6 million.

Brooke Astor (you know this story if you have been following my blog).
In October 2009, socialite Brooke Astor's son Anthony Marshall was convicted of fraud and grand larceny relating to his handling of his late mother's estate. The 14 counts of which a New York jury found Marshall guilty included misusing his power of attorney over her financial affairs by giving himself a retroactive $1 million raise for managing her finances.

Ted Williams
In his will, baseball's Ted Williams said he wished to be cremated. But his two children from a second marriage produced a grease-stained note saying he wished to be put in biostasis after his death, and they froze his body after his death in 2002. His eldest daughter fought to have his body unfrozen and cremated, but gave up the fight when she ran out of money.

Heath Ledger
When actor Heath Ledger died at age 28 in 2008, he had a will, but it was written three years before he died, prior to his relationship with Michelle Williams and the birth of their daughter, Matilda Rose. The will left everything to his parents and sister. When Ledger's uncles raised fears that his father wouldn't properly care for Matilda Rose, Ledger's father said he would.

Princess Di
At her death in 1997, Princess Diana left a detailed will, naming her sister and mother as executors. She also wrote a separate "letter of wishes" asking her executors, at their discretion, to divide her belongings among her sons and her 17 godchildren. But instead of getting stuff worth an estimated 100,000 pounds, each godchild got only a small personal item.

Chief Justice of the Supreme Court Warren Burger
Mr. Burger died in 1995 with a $1.8 million estate and a will he typed up himself. His family paid $450,000 in estate taxes, something that could have been avoided. His executors had to pay to go to court to get approval to complete administrative acts, such as selling real estate, that typically a well-drafted will would have allowed without court approval.

Jimi Hendrix
Mr. Hendrix died at age 27 in 1970 without a will. Under state law, his dad, Al, got everything, leaving his close brother Leon with nothing. Al built Hendrix's musical legacy into an $80 million venture, but in his own will cut out Leon and his family, in favor of his adopted daughter through a later marriage.

Doris Duke
Tobacco heiress Doris Duke, who died in 1993 with a fortune estimated at $1.3 billion, named her butler as executor and as trustee for a huge charitable foundation. After the butler's lifestyle and spending habits were called into question, he was removed from his duties by a probate judge, then reinstated by New York's highest court. A settlement agreement created a board of trustees to manage the foundation.

Full article can be found at:


http://www.forbes.com/2009/11/24/princess-di-heath-ledger-brando-personal-finance-investment-guide-2-09-celebrity-estate-mistakes_slide_2.html

Roth Conversions

All of a sudden my mailbag is full of articles about Roth Conversions. While this may be a good idea, be careful, it certainly isn't for every client. Let me start with some background.

The benefit of Roth is you can withdraw earnings tax-free AND you do not have to take minimum withdrawals upon reaching 70 1/2. Traditional IRAs did not have this benefit, and to be frank, I have been assuming all along they were going to take this gift horse away.

Beginning next year higher-net-worth individuals who earn $100,000 or more in a year will be eligible to convert their traditional IRA to a Roth IRA. Previously, it was only those under this limit AND married couples filing jointly. No more in 2010.

Now, higher net earning individuals and business owners that do not want to withdraw the money and would like to be able to pass it along to their children or grandchildren income tax-free will get their wish. Everyone on board? Not so fast.

A Roth conversion is expensive. There's a big up-front cost. Converting $20,000 some taxpayers could owe $5,000 to $7,000 in taxes for the 2010 return, depending on their income tax bracket. You could convert all the money in your IRAs or part of it, depending on your tax situation.

A high net worth person who converts $100,000 from a regular IRA to a Roth IRA could owe $35,000 in taxes based on the highest tax bracket for 2010. Plus, if that person is younger than age 59 1/2 , they're likely looking at a 10% penalty of they take the money out of a regular IRA specifically to pay the tax. Next year, only, you can pay the tax over two years BUT based on your tax rates for each year. If Congress takes no action, current federal income tax rates could jump to 39.6%, up from 35% in 2011.

Therefore, to decide whether it is worth the conversation, you need someone that can run the numbers based upon your reasonable expectations. You are looking to see if it is cost efficient to pay the tax now to save on taxes later. If you may need the money within 15 years and you expect your income tax rate to be lower in retirement, conversion may not be such a great idea.

My best,

Jim