Who said movies are bad for you? Whoever said sitting down and watching a movie does you no good doesn’t know what they’re talking about.
Certain movies can act as an amazing looking glass into the real world. Gone With the Wind taught a whole generation of little girls how to be classy ladies. The Wizard of Oz taught movie-goers to have courage, follow their heart, and always use their brain.
The latest on the list of movies that can teach you a thing or two is Knives Out. This movie gives unparalleled insight into the world of estate planning.
Estate planning is an important part of any person’s life. However, it’s often overlooked. A lot of this has to do with the way we view death.
Death is a touchy subject. Nobody likes to talk about it and that’s understandable. Even if someone is terminally ill, they’ll avoid conversations about passing on or what’s going to happen when they’re gone.
Unfortunately, there are legal matters that need to be taken care of before a person dies. That’s the purpose of estate planning.
Let’s dive into the subject of estate planning. We’ll tell you all you need to know and enlighten you with some key lessons from the movie Knives Out.
Let’s get going!
The definition of estate planning is the act of managing a person’s assets in the event of their incapacitation or death. When people pass away they usually own at least one house. They may also have other valuables or family heirlooms in their possession at the time of their death.
Other assets that make up an individual’s estate are any stocks, artwork, life insurance, pensions, etc. that a person may own before passing.
The goal of a good estate plan is to outline their wishes for these belongings before they die. It’s also a plan that will determine how the family is going to settle estate taxes.
A person may want to set up an estate for several reasons. One reason is they may have a large amount of wealth they’re looking to preserve. This is the case for the plot of Knives Out, but we’ll cover more on that later.
Another reason is that the person may have a family that he or she wishes to provide for. This could be a child and spouse or an indirect family member like a next of kin. Regardless of the heir, proper estate planning will ensure that they have what they need for the future.
A good estate plan will help a person accomplish several different goals. One of the biggest is minimizing the amount of estate taxes the deceased and their family will have to pay. Your estate plan will also establish guardians for any living dependents.
Estate plans also serve to appoint an executor for the estate and make any change to the beneficiaries of personal financial vehicles like 401(k)s and IRAs. Wealthy individuals may also have their estate dictate charitable contributions for the years following their death.
Finally, the estate will also handle funeral arrangements and set up a Power of Attorney to handle other assets and investments.
Before we get into how Knives Out can teach us about estate planning, we have to get a better understanding of what estate planning entails.
Every estate is different, but there are a few steps everyone should take when forming their estate.
The best place to start is to take an inventory of your assets. You also should take inventory of your debts.
Make a list of all of your current accounts. Include the financial institution as well as the contact information of whoever you deal with at that particular company.
Your family is going to need to know who to contact, and who has the most information, when the time comes for them to fulfill the wishes in your estate plan.
Keep this master list in a secure, central location. Tell your family members where it is so they can access it in the event of your passing. In addition to important contact information, add any important documents you have to this file, as well.
The goal of estate planning is for you to control what happens with your assets when you die or become incapacitated.
It also outlines a plan of action for the rest of your family to take regarding your assets and debts.
In the event of incapacitation, this may include a means for providing income for your family and any care that you may need during this time.
One of the biggest reasons people come to us for estate planning is to provide for family members. No one can predict the future, but you can make sure your family is set up for whatever the future may throw at them.
Your plan should include financial resources, as well as naming a legal guardian, for any children or dependents currently under the age of 18. This is especially important if you have children and decide to remarry. In this instance, your assets wouldn’t automatically pass to them.
This is why you need to convey your final wishes in an estate plan. You’ll also need to outline your wishes for the care of any dependents that require special needs. This needs to be done very carefully so they can receive the assets you want them to receive and still qualify for government assistance.
Make sure your heirs get the assets you want them to get.
Work with a professional to structure your estate plan in a way that minimizes your taxes but still allows you to meet your goals.
Many people use permanent life insurance and trusts as a way to protect themselves while still carrying out their estate plan.
You need legal documents in place to make sure your wishes are followed. This can include assigning beneficiaries on life insurance or retirement accounts. It can also include a formal will.
It’s helpful to work with an attorney at this point in the process. They can help you develop a plan for the disposal of your assets, make sure all physical belongings like cars and houses fall into the right hands, draft a living will expressing your wishes, and appoint Powers of Attorney for financial and health issues.
You need to appoint someone to act on your behalf if you’re unable to do so. These individuals will be a trustee for your assets, guardian for your dependents, or a personal representative for your estate. They also need to be aware of their appointments and agree to them.
You should also give them access to your original estate planning documents. Family members, bankers, attorneys, or personal friends can all be fiduciaries of your estate.
Now that we have a good idea of what estate planning is, let’s examine Knives Out and see what lessons it can teach us.
For those of you that haven’t seen the movie, we’re going to do a quick rundown of the plot. The movie begins with the death of a wealthy benefactor who lives alone in his mansion. The only other person that lives with him is a live-in caretaker.
His death brings his entire family together. However, before his death the family was estranged and dysfunctional. The only reason they came together is to see who is going to receive their father’s estate.
The movie has a classic “who done it” mystery vibe to it as the family begins to tear each other apart more and more over who inherits their father’s fortune.
We don’t want to give the ending away but eventually, someone ends up with the inheritance. But, it’s not who you’d think. The reason this person was able to receive the old man’s assets was because of his very smart estate planning.
Let’s look at some in-depth takeaways from the movie.
Everybody’s family has their messes. It’s part of what makes family, family. But, those messes can get even messier when money’s involved.
If you saw Knives Out, you know exactly what we mean. The entire family wanted to kill each other over their father’s inheritance. Unfortunately, similar situations can happen in real life.
Celebrity personality, Anna Nicole Smith, married a much older man named J. Howard Marshall. It wasn’t hard for most of America to tell that the only thing keeping this relationship going was the amount of money Anna stood to inherit when J. Howard passed on.
However, the joke would be on Anna. Since J. Howard married Anna later in her life, she was not included in the will. She stood to miss out on a lot of money so she decided to take action.
Anna Nicole and one of J. Howard’s sons decided to contest his will in court. Unfortunately for them, they weren’t successful.
Planning your estate can avoid so much future pain and agony. People avoid the subject because it can be morbid but you’re doing your family a disservice. Prince is a famous example of how a little planning can do a lot of good.
Prince, like most Americans, didn’t have a will. As a result, a large number of people came out of nowhere to assert their claim to part of his fortune.
Without a will in place, Prince’s estate was handled by the state probate court. Because of the lack of planning, and complications with heirs, his estate remains unsettled to this day.
Another takeaway from Knives Out is to make sure you have the right team of advisors. Things wouldn’t have worked out correctly at the end of the movie if the deceased hadn’t planned as he did. Hiring a strong attorney helped his wishes to be fulfilled.
Michael Jackson and Heath Ledger are two real-world examples of this. Michael Jackson created a trust for his estate but the trust was never funded. As a result, his estate went into probate court and remains unsettled. If Michael had a team of advisors, they could’ve helped him avoid the issue.
Heath Ledger made a will, but without a team to advise him, never made changes to it as his life changed. Upon his passing, his will ordered his assets into the care of his parents and sisters. His three-year-old daughter was left out of the will because it was made before she was born.
Fortunately, in this case, the family did the right thing and provided for Heath’s daughter out of his estate.
There’s a famous quote, “The only two things that are for certain in life are death and taxes”. Estate planning involves both. And, although you’re mourning the loss of a loved one, the taxman feels no remorse.
Estate taxes can be very high and, if not planned for, can wipe out a person’s estate. One notable estate tax case is the estate of the famous actor, Phillip Seymour Hoffman.
Phillip Seymour Hoffman’s untimely death was a tragedy for everyone. But, his children must’ve felt that tragedy the most.
To protect his children from becoming “trust fund kids”, Phillip Seymore Hoffman chose not to create a trust for his estate. He left his entire estate to the mother of his children.
Without a trust fund to shelter his wealth from taxes, the mother of his children was left to deal with a large estate tax bill.
Estate planning is not something to take lightly.
As you can see from the movie Knives Out, and the celebrity stories above, you need to have a solid plan in place. People think that celebrities have armies of the brightest attorneys and CPAs around them at all times.
Unfortunately, that’s not the case. If nothing else, the stories above should tell you that everyone needs to consider estate planning.
The team at SSC CPAs is here to help you with any of your estate planning needs.
Contact us at any time and we’ll be more than happy to answer any questions you have.
“SSC CPAs + Advisors” and “SSC” are the brand names under which SSC Advisors, Inc. and SSC CPAs, PA provide professional services. SSC Advisors, Inc. and SSC CPAs, PA practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. SSC CPAs, PA is a licensed independent CPA firm that provides attest services to its clients, and SSC Advisors, Inc. entities provide tax, advisory, and business consulting services to their clients. SSC Advisors, Inc. is not a licensed CPA firm. Our use of the terms “our firm” and “we” and “us” and terms of similar import, denote the alternative practice structure conducted by SSC Advisors, Inc. and SSC CPAs, PA. Advisory services provided through Wealthcare Advisory Partners, LLC doing business as SSC Wealth, LLC. Wealthcare Advisory Partners LLC is a registered investment advisor with the U.S. Securities and Exchange Commission.