Is it ever to early to create an estate plan?
Unfortunately, Los Angeles experienced a devastating moment when news of Kobe Bryant, a 41-year-old legendary basketball star for the Los Angeles Lakers, was in a tragic helicopter crash that not only took his life but the lives of his 13-year old daughter Gianna and seven other people. The family Kobe has now left include his wife of 19 years Vanessa, three additional children, his father Joe Bryant, and mother, Pam Bryant.
Considered to be one of the greatest basketball players of all time, Kobe helped bring five championships to the Los Angeles Lakers during his professional career that lasted for a span of 20 years. Kobe also made additional earnings through endorsing brands such as Coca-Cola and Mercedes-Benz.
Although he was a well-known basketball player, Kobe Bryant expanded his empire becoming a successful entrepreneur. His business interests varied from a sports drink called BodyArmor, to small startups, and a $100 million capital investment fund. In 2018 he won an Academy Award for his animated short film “Dear Basketball,” and was a publisher of books for young adults. At the time of his death, according to Forbes, his net worth was $600 million.
Why creating an estate plan early in life is necessary
It’s still too early to know much about Kobe’s estate but if Kobe did indeed plan ahead and created an estate plan his financial wealth should be protected for the benefit of his family and his business partners – with as little as possible in federal estate taxes.
A federal estate tax is a tax applied to the value of Kobe’s or any person’s estate when they die. It is generally based on the net worth of the decedent – the value of their assets minus the amount of any liabilities.
A federal estate tax is due for anyone who dies in 2020, as Kobe did, based on the value of the deceased person’s assets – if the estate is worth $11.4 million or more. The amount of a person’s estate that exceeds the exemption amount of $11.4 million is taxed at a staggering 40%. The exemption is doubled to $22.8 million for couples who file joint estate tax returns. The exemption applies to estate and gift taxes.
Furthermore, this means that for Kobe Bryant, if his estate is worth $600 million, he could potentially owe upwards of $230M to the federal government in estate taxes – most of which could be avoided with some smart front-end planning. That’s not including potentially millions more in probate and attorney fees. Kobe was a savvy businessman so one can only hope he had a good plan in place to avoid this result.
A few estate planning strategies
Examples of estate planning methods that can help ensure probate avoidance, reduce estate tax obligations, and ensure family harmony include:
- Retitling assets so that they are held jointly with a spouse or owned by a trust for probate avoidance.
- Updating beneficiary designations on retirement accounts and life insurance policies to avoid having the estate as a beneficiary.
- Creating trusts and other gift-planning strategies to benefit the people you love and avoid estate taxes.
- Creating business succession plans through wills, trusts, partnership agreements, stock ownership, and other business strategies. Succession plans do more than help reduce tax obligations. They also help ensure that the wishes of people like Kobe are protected and that the people Kobe wanted to run his business interests would be given that opportunity.
- Utilizing LLCs and other business entities to control but not own assets in your name.
Now that Kobe is deceased, his wife Vanessa should immediately speak with an estate planning attorney to protect the assets she will receive and already owns and ensure guardianship is delineated for her minor children in the event of her death. In addition, the family must also cope with the possibility that the families of the victims could bring a wrongful death lawsuit against Kobe’s estate since he owned the helicopter at the time of the crash.
Speak with an experienced estate planning attorney today
Unfortunately, no amount of money can ever replace the loss of a husband, a father, a businessman, and a curious soul. Kobe’s untimely death is a reminder that planning can often help optimize the amount and method by which assets pass to loved ones and minimize the claims of tax agencies and creditors. Estate planning also includes making tough choices about guardianship for minors, advance healthcare directives, and business succession plans that dictate who will run the business and who will benefit from the business assets and/or income – after the business owner dies.
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*This article was shared courtesy of Yasir Law Firm in Arizona.