In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, breaks down the critical topic of estate planning and why having a will is essential for protecting your legacy. Many people put off drafting a will, assuming they have time or that their estate isn’t complex enough to require one – but history shows that failing to plan can create unnecessary legal battles, tax burdens, and family disputes.
Key highlights of the episode include:
• The real-life consequences of not having a will, featuring case studies on Prince, Abraham Lincoln, Pablo Picasso, and Sonny Bono.
• How probate works and why it can take years to settle an estate without a clear legal plan.
• The impact of estate taxes and why high-net-worth individuals could lose up to 50% of their wealth without proper planning.
• The roles of trustees, guardians, and corporate trustees in managing your estate effectively.
• Practical steps to ensure your assets are distributed according to your wishes.
Your will isn’t just a legal document, it’s a conversation about the future of your wealth and your family’s well-being. Don’t leave it to chance. For additional insights and to learn how PAX Financial Group can help guide your estate planning journey, visit http://www.PAXFinancialGroup.com.
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Transcript:
Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. And you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. So, I was recently updating my wills, you know, I hadn’t updated them in a while.
And, you know, we had a couple kids at the time when I first wrote our will and I didn’t write it personally, but went to an attorney who wrote it, and then subsequently, you know, life just got busy, like most of us. And we looked up and we had four kids, and we had amassed some wealth. And the tax code had changed and some of the people that were in our wills that needed to do things had gotten older, and just a lot has changed.
I mean, my son is 19 now, so there was just a lot in there. So, my wife and I decided to get our wills updated and I thought, you know, I might as well kind of share my thoughts on this idea of having a will. And I want to do it with you guys by sharing four stories, because I’ve had conversations and a lot of presentations about wills over the years, and it’s like just one of those things like, I know I need to go to the dentist.
I appreciate you preaching to me, but I don’t want to hear it. And that’s how it felt. So, I just thought I’d maybe frame this will conversation up through the life of four people and to make it interesting, at the very least. And the way I think about a will, and all the legal documents that come with that is that there is going to be a meeting about your money.
There’s going to be a meeting with or without you. So, the discomfort of a conversation around a will today far outweighs the inheritance of confusion that you could leave to somebody that ultimately results in brothers and sisters no longer speaking to each other. And I’ve seen this too often over the last 20 years. So, let’s look at some of these examples.
And I’ll start with Prince, or the artist formerly known as Prince, the iconic singer and songwriter musician. He passed away in 2016 at age 57, and due to an accidental overdose, he had amassed about $156 million net worth and never had a will. Nor did he set up an estate plan. So, as you would imagine, it was not easy to figure out where all the money goes.
And you think about a judge that’s appointed to facilitate this process. This is known as the probate process. I mean, he has no direction, so he’s going to have to use his judgment and rely on precedent and try to understand who’s entitled to what. And there’s certainly a formal process that, you know, Prince wasn’t the first time that somebody died without a will.
But every family and situations unique. I mean, Prince didn’t have a spouse. He didn’t have children. He had six half siblings. And all of them are raising their hand saying, I get something. And so, this probate court process, as you would imagine, took a while, not a couple of months, not a couple of years. It took six years.
And, you know, one of the valuable things that you have that’s, you know, has to be considered now is this intellectual property and these music catalogs. I mean, there’s a lot of value to that. In fact, a lot of people are buying these as investments from artists. And so, this 156 million, I don’t know how it finally settled out, but I do know that it was chaotic.
And there’s something that’s important and relevant to this. It’s relative to this. And that’s the estate tax. So, I don’t remember what the 2016 estate tax is. You could look that up. But in 2017 there was the Tax Cuts and Jobs Act that was passed, that act expires in 2025. And so those people that have estates that are around 14 million, anything above that, this is for individuals not married, anything above that is subject to 40%, about a 40% estate tax, the federal estate tax that doesn’t include state inheritance taxes, which Texas doesn’t have one, but other states do.
So, as you can imagine, Prince having 156 million, whatever that threshold was at that time, and we’re talking about tens of millions of dollars, being taxed. And so, with the expiration of the TCJA in 2025, I think it’s important for all of us to take a look at our estates specifically if you’re close to that 14 million and that, by the way, that includes your house and that includes life insurance policies.
I know we say life insurance is not taxable. It’s not generally subject to income tax, but it is used in the federal estate tax calculation. Because Prince hasn’t done any planning of the 156 million, it was actually 50% of his estate went to state and federal taxes. Can you imagine? I mean, anyways, it’s a lot to digest to think that somebody who had worked so hard and taken so much risk and was talented, that half of his wealth went to the federal government.
Let’s go to the next example. And this one’s for you, my attorney friends, a lot of attorney friends, I see you and I tell you, attorney friends, that you need to get your wills done. You know it. You just keep putting it off. And so, I’m nudging you here. And probably one of the most famous attorneys of all time did not have a will.
That was Abraham Lincoln. He died without a will. And he, like I said, he was an attorney, was assassinated in 1865. He died, what’s called intestate, which is without a will unexpectedly. And so, then you have to go to the probate court. Now, I’ve never been involved in the probate process. That’s what attorneys do. But from what I understand, Texas probate process is pretty friendly.
But I would imagine if you’ve got assets that are, you know, a lot of assets and then assets in other states, it can be pretty difficult. And especially if you know a little bit about history. Mary Todd, she suffered from a lot of depression. And, you know, with these financial and legal issues, that were part of the probate process, I can’t imagine that didn’t do damage to her.
What happens ultimately, if there’s no will, then the court has to appoint administrators. And, this administrator was David Davis, who handled all the legal proceedings and so, like I said before, a will is not just a document, it’s actually a conversation. And so, I think this is a great example is, you know, taking the time out and having a conversation about your money.
Now, it may be uncomfortable, but that discomfort far outweighs the inheritance of confusion that you’ll leave behind where people just don’t speak to each other anymore. And, you know, you do a lot as a person to leave a legacy of values. And that can all be destroyed if this isn’t constructed in the inheritance or the will or whatever it is and doesn’t have to be a lot of money too, isn’t constructed thoughtfully.
Lincoln’s estate was, you know, doesn’t seem like a lot of money, but it was about $85,000, which in today’s dollars is $1.5 million. And it took years to settle. Could have been easier. So, the next one I would like to talk about, number three. We got four of them. So, the next one is Pablo Picasso.
Now this guy, I didn’t realize how wealthy he was, but he was worth hundreds of millions. You know, the Spanish artist? Yes. He did not have a will. And he died in 1973. No clear heirs. Picasso had multiple lovers, children, grandchildren. But he never, ever wrote a will. And so, his estate took about six years to resolve and about $30 million in legal fees, which is about $150 million today.
The people that won here were the, as you would imagine, the lawyers, the accountants and the French federal government, which took a big chunk to cover death taxes. So, a lot of times we hear about death taxes, inheritance taxes and estate taxes, and they’re used synonymously. If you get nuance, there is differences.
But we’ll just call them all death taxes here. But the French government charged a death tax, which is a ton of money. In fact, they had to pay it off. The state had to pay off with some art because they didn’t have liquidity. And I mean, you can imagine there was conflict, intense disputes over money, property and his legacy.
You know, I think about this and, you know, some of us can certainly do wills online. And there’s, I think, Mama Bear Legal Forms. There’s LegalZoom, there’s a lot of solutions. And I don’t totally discount those solutions. And they may be fine for a lot of people. And if your estate isn’t overly complex, that could be a great option.
But I was talking to an attorney the other day, and they said that they get a lot of business from people who set up their wills online and didn’t do things the right way. And so there can be just some little things that may be problematic, like not having independent witnesses or notaries. And so, just want you to know that you can certainly do it online.
But, if you have multiple kids or if you have different marriages and, you know, any significant money then I do think taking some time out and, it’s going to cost a little bit more money, but having an attorney write it up and that person can kind of be a thinking partner in that, like lean on their experience.
I think that’s really helpful. And so yes, it’s a little money, but I get a little nervous by mistakes that could happen on the online forms. Not terribly opposed to it, but just, be considerate there. At the end of the day, Picasso, kind of going back to Picasso here. They did pay off the federal government, the French government, with several of his masterpieces.
And so, the problem is, you know, then the masterpiece is, I don’t know, they’re scattered all across the world. They did create a museum in Paris, with some of the masterpieces. So, I guess that was a good thing. Okay, last one. A lot of you may or may not know this person. Bono, Sonny Bono.
And I think, obviously, if you think like me, it’s Bono and Cher, right? Famous singer, actor, politician, didn’t have a will. And he died suddenly in a skiing accident. For those that remember it, he was 62 years old. Never had a will, no clear legal plan. His wife, Mary, was forced to go through the lengthy and expensive probate process, to decide how the assets were going to be distributed.
And then, of course, he has somebody come up and says, hey, I’m, an illegitimate son, and I want some money. And then, of course, Cher sues because she has royalty for music. So, then the legal battles and the cost, the court time and, ultimately, Mary ended up getting most of the estate. But it could have been completely avoided if Sonny had a will.
And it reminds me, when you put your will together, you know that the judge is ultimately kind of the traffic director. But you do want to think about people who play roles in this. And one of the things that we had to think about, especially when you have young kids and this one’s the tricky one, is who’s going to be the guardian of the kids, because there’s two major roles that you want to think about.
There could be more than that. There’s probably three. When I think about it like an administrator, a trustee and a guardian. But the Guardian is the one I think about, like who’s going to take care of the kids, and then the trustee is who’s going to take care of the money. And I generally prefer having them separate. And the trustee do I want an individual or do I want a corporate trustee?
And so if you ever wonder about that, talk with your advisor at PAX. We have a couple of corporate trustees that we like to work with. Yes. There’s money involved, but when you use a corporation like a bank or somebody to be the trustee, there’s just no emotion involved. Versus if you were to use your aunt or uncle, or sister and brother, there’s just emotions and, you know, could burden them.
So corporate trustees, yes, they cost money, but it’s something to consider. So having, you know, again, the judge is going to direct traffic there, but having the Guardian and trustee figured it out is important. And, you know, unfortunately, you know, Bono was a victim of not having a will and a lot of chaos and a lot of people fighting.
And like I said, I’ve said it several times now, you know, this idea of having a will is really more than a will. It’s having a meeting about where your money goes when you die, and there is going to be a meeting with or without you. And so, this discomfort of having a meeting now with you being present, is well worth it because the idea of having a meeting without you is you leaving a legacy of confusion that could destroy family relationships.
And so that’s why I really want to encourage you to take some time out, work with your advisor and kind of coordinate with an attorney to, you know, have a thinking partner to think about what type of legacy you want to leave. And an inheritance is what you leave to someone. So that’s the financial side.
But a legacy is what you leave in someone. And I think that can be spelled out really well with your will. So, I hope that helps today. Those are very interesting case studies. There’s a lot of them out there. I don’t want that to be you. Remember you think different when you think long term. Have a great day.
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