21 May Anna Nicole Smith’s Poor Estate Planning Gives Daughter Free Rein on Derby Day
Anna Nicole Smith’s daughter, Dannielynn, has reached the age of majority, leaving her in full control of the money she inherited from her mother. It is often recommended by estate planning attorneys that inherited assets be held in trust (i.e., for education, maintenance or support) until an age (i.e., 25 or 30) when the child is likely to be more mature in handling funds (i.e., the trust is used for their benefit although they are not in control of the funds).
Larry Birkhead, who was granted custody over Dannielynn since a court determined he was the biological father, has tried to keep her out of the spotlight – with one exception, the Kentucky Derby, which they annually attend. Now that she is in full control of the millions she inherited, it is unknown if she was “chomping at the bit” to make a bet on Derby Day or if she relied on “horse sense”.
Until she was 18, the inherited funds were held in trust managed by Birkhead and Anna Nicole Smith’s lawyer, Howard Stern.
Anna Nicole Smith was known for being the Playboy Bunny who at age 26 married a Texas oil billionaire, J. Howard Marshall, when he was 89. After he died a year later, she had a lengthy legal battle to claim part of his estate. The case went up to the U.S. Supreme Court where Smith was unsuccessful. However, Smith’s estate is worth an estimated $3–$4 million dollars.
Anna Nicole Smith’s will in 2001 was flawed in numerous ways resulting in years of litigation also. Her will left everything to her son, Daniel. It also specifically stated that all unknown or future children are disinherited as she didn’t want others to claim that she is the mother of other children. There was no contingency if Daniel predeceased his mother. Daniel predeceased his mother by a couple of months (accidental drug overdose) and Anna Nicole never revised her will before her death in 2006. Dannielynn was 5 months old when Anna Nicole passed.
Anna Nicole made these estate planning mistakes:
- No contingent beneficiary
Whenever you name a beneficiary, there should be contingency in the event that the beneficiary predeceases you. In fact, most wills or trusts should name an ultimate beneficiary if every beneficiary predeceases you. - Revisit the Plan when there are major life-changing events
Whenever there is major life-changing event (marriage, birth, death, disability, divorce, etc.), your plan should be revisited. - Privacy
Since Anna Nicole Smith was a public figure, she may have been better off using a living trust, which is private. - Contingent trust and name guardian if beneficiary is a minor
A contingent trust could have been created if a beneficiary is too immature to handle funds. Dannielynn was 5 months old when her mother died (in her case, the court appointed trustees until she was 18). Anna Nicole Smith’s son died of a drug overdose. Even if he survived her, an inheritance to him without considering his drug issues would have been ill-advised. Also, a guardian should be named if a child is a minor.
It is unknown whether Dannielynn bet (or how much) at the Kentucky Derby since she had free rein over her money due to reaching the age of majority.
What we do know is that Anna Nicole Smith’s estate planning was fundamentally flawed. This is straight from the horse’s mouth.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.