Nasty Fight Over Robin Williams' $50 Million Fortune Shows Importance of Estate Planning
The story of Robin Williams' 2014 suicide became even more heartbreaking last week, as his widow Susan Williams revealed new and shocking details about his battle with Lewy body dementia, a brain disease that causes hallucinations and severe anxiety.
The latest revelations brought the Williams tragedy back into the spotlight. It also raises a brutal question when it comes to money management: "What if your spouse dies unexpectedly?"
Human beings tend to shove unpleasant possibilities into the back of our minds, but you shouldn't ignore any scenario that can dramatically affect your net worth.
The case of Robin Williams is particularly instructive. The suicide of the beloved comedian and actor was sad enough. The backstory about his struggle with depression and alcohol and substance abuse (and now, we find out, brain disease) only makes it more painful for his millions of fans around the world.
But when money came into the picture, the story got even worse.
Williams' death was so unexpected, his heirs had to scramble to make sense of his will. The Oscar-winning actor left behind three kids from two previous marriages and a widow, Susan Schneider Williams. The four engaged in a bitter legal battle in court, trying to divide up the spoils.
Although the dispute over the estate, estimated at more than $50 million, has been settled , Robin Williams' widow has said it was very painful. At stake were not only a chunk of the dough that Williams amassed during his 40-year career in movies, television and theater, but also a valuable cache of clothing, collectibles and memorabilia. High-priced lawyers combed through homes, safes and piles of papers to try and figure out exactly what the late Williams really intended.
And this occurred even though Williams had made a will and had signed a prenup with his wife. So view this sad Hollywood tale as a wake-up call: you must prepare very carefully for the sudden death of your spouse -- and you must start today.
How difficult would it be for you to create an inventory of your assets? Track down the deeds and titles to automobiles and real estate as well as personal income tax returns and life insurance contracts. Do you have a will? Is it updated? Having a will and knowing where it is can save you a lot of the needless hassle of going through probate.
According to the polling firm Harris Interactive, 55% of adult Americans don't have wills. If your spouse leaves no will or you simply can't find one, your spouse will have died "intestate," which means that all assets not jointly owned will be probated.
Probate is the legal process of transferring assets in an estate. The process includes paying final funeral expenses, estate debts and taxes, creating an inventory of assets owned at death, and lastly, disbursing remaining assets to heirs as specified by state law.
Closely examine beneficiary designations on your family's assets. This is an often-overlooked step.
Many survivors are shocked to discover that beneficiary designations on financial assets -- checking, savings, retirement funds, etc. -- trump any will. This means that, upon proof of death, financial assets are automatically transferred to the designated beneficiary of record, even if a will specifically states that all assets should be left to the spouse. This fact often leads to intense family conflicts that wind up in court.
Your 10-Point Checklist
Prepare ahead of time, by considering the following list now:
1) The first challenge to confront is logistical. In a crisis, you don't want to find yourself scrambling from the start. Could you find all of the crucial documents vital to your family's financial future and security? Do you know where they are? Do you even know what they are? Perhaps your family's financial papers are littered about the house in various locations, or in someone else's house or office. Are they in a file cabinet, in a box in the attic, in a safe deposit box at the bank? Find them and put them in a central location that you, your spouse and your adult children can easily access.
2) Order at least a dozen certified death certificates from the funeral home. Each financial institution that you must deal with will require an original copy. Get your copies ordered and ready.
3) Contact all income sources about your spouse's death. They need to know right away, preferably from you. Those you should contact include his/her employer, his/her pension fund, managers for all Individual Retirement Accounts (IRAs) and 401(k)s, insurance companies, health insurers, banks and brokers.
4) Immediately notify the U.S. Social Security Administration of your spouse's death, to get whatever retirement or survivor's benefits to which you are eligible. The earliest you can receive Social Security survivor benefits is age 60. As the surviving widow or widower, you can collect a survivor's benefit as early as age 60. After your spouse dies, you will keep getting the your or your spouse's benefits (whichever is larger), but not both.
5) A surviving spouse living in the same household is entitled to receive from the Social Security Administration a one-time lump sum payment of $255 upon the death of the spouse. Married couples can maximize the highest earning spouse's benefit by delaying collection of that spouse's benefit until age 70, thereby creating a de facto form of life insurance.
6) Determine survivor/orphan eligibility for your children. If you are a survivor and have children under the age of 16 in your household, you may collect Social Security survivor benefits for yourself and orphan benefits for your children.
7) Since you're probably the beneficiary listed on your spouse's IRA, you have the right to switch it to a "spousal IRA." Depending on your age, IRS rules governing a spousal IRA enable you to either continue receiving income payouts, or delay receiving payouts and creating a "stretch IRA," allowing tax-deferred growth for future years.
8) As the surviving spouse, you may be entitled to continue receiving your husband or wife's pension income, if he or she had picked "joint annuity" payout. Regardless, depending on the rules, you might have to accept a lower rate. Ask a financial adviser to help you explore your options.
9) Put your death payouts to work, tax free. All death benefit payouts from your spouse's life insurance are tax free to the beneficiary. Consider investing these payouts for future income.
10) Protect your identity. Now that your spouse is gone, you're even more vulnerable to identity theft. Sophisticated thieves often steal the identities of the deceased. Change all personal identification numbers and passwords related to banks, mutual funds, credit, ATM and debit cards, as well as all other computer security systems that govern your investments and finances. Cancel all jointly held credit cards and apply for brand-new ones, solely in your name.
No one likes to think about death, but family survives long after an inheritance is either spent or stashed away in the accounts of beneficiaries. To make sure your estate is in order, consult one of the major brokers, such as Charles Schwab, T.D. Ameritrade, or T. Rowe Price.
Although Robin Williams had a will and had signed a prenup with his last wife, the best way of avoiding a nasty legal battle like the one his family went through is to plan ahead thoroughly.
One of the best ways to plan ahead is to invest in stocks with double-digit yields on which you pay no taxes. For a list of stocks that will give you steady, tax-free income for a lifetime, click here.
John Persinos is editorial manager at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.