Famous Financial Faux Pas: Prenuptial Mistakes, Spending Problems, Tax Evasion
As Chris Rock previously stated, “Rich is some (bleep) you can lose with an insane summer and a drug habit.” Simply because one might be good at being profitable doesn’t indicate that they always has the intelligence to save, invest and grow that money. The financial mistakes of some celebs enhance what can occur when you mismanage your money.
Listed below are five popular faces, their monetary faux pas along with the lessons they learned.
After 1 year of marriage, the top-earning pop artist divorced Russell Brand. Since there was no prenuptial agreement between the couple, Katie stood to lose 50% of her money. As reported by Forbes, Katie Perry raked in $44 million, while hitched to Russell Brand and without an agreement overwriting California’s 50/50 divorce laws; her ex was entitled to receive 50 % of that amount or approximate $20 million. Luckily for Katie, Brand made the decision not to go after his share and they settled “peacefully.” But was neglecting to sign a prenup truly worth the danger?
A prenuptial or postnuptial contract just isn’t romantic, however, it can prevent misery and save you time should you face divorce, particularly if you don’t agree with your state’s divorce rules. For instance, in California, a “community property” state, without prenup the divorce laws need couples to equally split possessions which include savings, real estate and debt attained in the course of the marriage.
The ‘House of Lies’ celebrity is probably not capable of qualifying for credit in the near future. Kristen Bell’s Los Angeles 2.5-acre property fell into foreclosure at the beginning of 2012 and was sold off for a reported $500,000 not exactly the amount she paid for it. Although the busy celebrity doesn’t seem to be having difficulties about money lately, a foreclosure isn’t a simple stain to remove from your credit records and could keep her from getting credit in the future. The truth is, as outlined by FICO, a foreclosure will stay on your credit record for seven years.
The lesson: Don’t purchase more property than you could pay for (make an effort to keep regular payments to a maximum of 28% of your earnings). And be much more careful if you have ever-changing salary being a freelancer, business owner or, in this situation, Hollywood celebrity.
Most states begin with a “reasonable distribution” in which a judge looks at several criteria — such as each partner’s salary and if one partner had been a stay-at-home parent — to reach the decision on who gets what and what amount. In 2011, 73% of divorce lawyers reported a growth in pre-nups over a five-year period. And since women earn more, they are requesting them in huge numbers.
To spend money that isn’t officially yours, a hunger for luxury and some misfortune is what mainly encouraged the Grammy Award winning R&B artist to bankruptcy court — a second time. Although Toni Braxton appears to be making a monetary recovery, she has experienced cataclysmic difficulties with debt and overspending.
In 1998, she declared bankruptcy as a consequence of what she states generously existed off of the sums of money presented to her as a loan from her record label. The issue was that she needed to reimburse the music label all associated costs, which includes clothing, travel and music videos and was left with not much eventually. Braxton informed ABC News, “What takes place is they offer you a loan on the following music label after which the following record. So you basically stay in debt, in a way.” Although her global sales totaled $170 million, Toni claimed she received only a $1,972 from her first recording deal.
Her monetary troubles didn’t disappear. In 2010 Toni stated she was $50 million in debt, forcing her to file for bankruptcy once again. This time around, she reported a terminal medical diagnosis that caused her to be unable to perform and continue with her self-funded concert series. Eventually, she was in the place to settle her case through paying only $150,000.
The lesson: A life based on credit, is prone to fail. And a disability associated with medical issues will often be all you need to destroy your financial existence if you don’t have enough insurance.
Regardless of how rich you become, you’re in no way above the law and definitely not when it requires paying taxes. Nevertheless, businesswoman and hotel empress Leona Helmsley was able to stay away from paying taxes for a long time until she was eventually charged and transported to jail.
As reported by the New York Times, a judge sentenced Leona Helmsley to four years imprisonment, where she only served 18 months. She has also been instructed to pay a $7 million fee, along with $1.7 million in back taxes.
Tax evasion is not unheard of in the world of celebrities. Celebrities Nicholas Cage and Wesley Snipes, together with family doyenne Martha Stewart, have apparently been required to pay fines for neglecting to pay enough taxes.
Lending cash to loved ones can transform into an unpleasant situation, particularly if its funds you, as the provider, can’t manage to lose.
Long time ago “Days of Our Lives” soap star Deidre Hall lent her clothing advisor and her loved ones some $800,000 to assist them in coping with difficult times. Hall stated she used her retirement plan to get most of the money and once her friend did not pay her back fully she had taken them to court. The two parties reached an agreement in the middle ‘90s.
Allow this to be advice that financial loans to family members don’t often get repaid fully. Wise to consider the money being a “gift” you could never get back In case you do choose to go down the road of lending to family or friends, use an effective written agreement to set down the terms and conditions of the contract, such as both your names, the total lent and information on how and when the borrowed funds should be paid back. At SimpleForms and RocketLawyer you are able to get free templates for promissory paperwork. And for $30, LoanBack and LendingKarma will enable you to create an agreement and poke borrowers through email to make payments.
Schedule Your Free Financial Planning Session with Our Award Winning CFP
Samuel Rad is an award winning fee-based Financial Planner with Affluencer Financial Advisors in Los Angeles, California. Mr. Rad has multiple licenses in the investments, real estate and insurance fields. He has spent a considerable amount of his career lecturing at universities and companies, on financial topics such as financial planning, retirement planning, and estate planning. He currently lectures at UCLA and West Los Angeles College.