The Greed Report: Not a billionaire? You still need an estate plan

What would you do with $100 million? For members of the Scripps family, heirs to a media fortune, the answer was really quite simple. Spend it.

And spend they did, in ways few of us could imagine.

Luxury cruises around the world. Family outings — to strip clubs. Melissa Scripps, part of the fourth generation of the Scripps family, purchased Queen Elizabeth II's coronation chair and Queen Victoria's nightgown. And she passed along her free-spending ways to her only son, Michael, who developed a taste for war memorabilia and guns, and married a stripper.

"There was never a problem with the spending when there was money to spend," said Michael's attorney, Michael Dezsi.

The tab for the 1999 strip club outing alone — which included Melissa, Michael, Melissa's brother and a friend — came to $90,000, according to court testimony. In an interview with CNBC's "American Greed," a former girlfriend of Michael's recalled receiving gifts of diamonds and pearls — when she was 14.

But when the money began to run out, it triggered a family feud — chronicled in the latest episode of "American Greed" — that saw mother and son turn on each other, landed one family member in prison, and left a name once associated with entrepreneurship and philanthropy forever tarnished by scandal.

Believe it or not, it also provides a wealth of lessons for the rest of us, according to New York attorney Michael Ettinger, who says estate planning is not just for the wealthy.

"Estate planning is an unfortunate choice of words because one of the words is 'estate.' So people assume I don't have an estate, I don't need an estate plan," he told "American Greed."

"Estate planning is really death planning," he said. "Everybody needs it in some form or another. It doesn't need to be sophisticated necessarily, but everybody needs a plan."

In fact, Ettinger, who has specialized in estate planning for the past 25 years, says don't be too quick to look down on the Scripps family. Chances are your family has a few dysfunctions of its own.

"The general population have sons and daughters who have alcohol problems, drug related problems; they have social problems, bipolar. They have borderline personality disorder. They have financial problems. They have bankruptcy. They have bad marriages," he said.

A good estate plan takes all of that into account while still keeping your assets in the family and shielding them from the government — "getting your assets to whom you want, when you want, the way you want, with the least amount of taxes and legal fees possible," Ettinger said.

Estate planning is not always complex, and it need not be costly. Many firms do not charge for an initial consultation.

Thy will be done

Among the most common misconceptions is that a last will is enough to protect your assets when you die.

"Wills are obsolete as a form of estate plan for seniors, because wills take effect at death," Ettinger said.

But with life expectancies higher than ever, the challenges of protecting your assets begin much earlier.

"We live an average of 31 years longer than people did just a century ago, and what's happened is the rate of disability has skyrocketed so much they say that now about half of us will have a period of disability before we die," Ettinger said.

That means a good estate plan should insure that the cost of long-term care does not consume all of your assets, which would happen well before a will would come into play.

"For an estate plan to be effective, we believe it has to have a means or a method to protect the assets from a nursing home," Ettinger said.

One way to do that is by purchasing long-term care insurance. The IRS considers the premiums for qualified plans to be medical expenses, which means you may be able to deduct them from your federal taxes. Many states offer tax breaks as well. And because benefits paid under the policies generally are not taxable, long-term care insurance can help you avoid the increasingly common scenario in which a nursing home lays claim to all of a patient's assets until Medicaid kicks in. Check with your tax advisor to be sure.

In trusts we trust

Estate planning experts are increasingly advising clients to use trusts — a legal arrangement that directs where your assets go should you die or become incapacitated. One type of trust allows you to use a portion of your assets to pay for your care while the rest is donated to the charity of your choice — shielding your funds from the taxman.

After you die, a trust can allow the relatively seamless transfer of your assets — your money, your home, etc.—to your loved ones without going through probate, the lengthy process of validating a will that can keep your assets tied up for years.

"No one can act under a will until a court has determined that the person who signed the will was of sound mind, memory, and understanding," Ettinger said. "Wills have to go to court to settle, and trusts don't."

Trusts can be tricky. The financial and tax implications can vary depending on your situation and your state.

They also are not necessarily for everyone, so consult a qualified advisor, and get more than one opinion.

Other vital estate tools include a so-called living will or health-care proxy, who directs your health decisions if you are unable to make them; and a power of attorney, which specifies who will be in charge of your affairs when you no longer can.

Who's in charge?

Determining who should have power of attorney is crucial. Ettinger generally starts the process with an extensive interview.

"You have to spend quite a bit of time on this because you have to get the client relaxed enough to let down their guard and tell you what's actually going on in their family," he said.

Some people decide to give joint power of attorney to two family members — a son and a daughter, for example — so that one can be a check on the other. Another option is to give joint power of attorney to a family member and a lawyer. "The lawyer can wear the black hat. We don't mind," Ettinger said. Or a bank or trust company can be in charge.

"Once you understand the family dynamic, the estate planning tends to fall into place. We say sometimes the job is 95 percent social work and 5 percent legal. Because the legal part we know how to do, it's the social part that we're spending a lot of the time on," Ettinger said.

The Scripps family probably should have spent more time on the social part as well. Melissa Scripps' own attorney acknowledged to "American Greed" that at the time his client inherited the family fortune, she had never held a real job, and had no formal education beyond high school.

Perhaps a bit more estate planning might have prevented a century-old legacy from exploding in an epic family feud. And while most of us will never have Scripps-size fortunes to worry about, it's probably a good idea to pay a little attention to our own legacies as well.

See the outrageous story of a great family gone oh-so-bad on an ALL-NEW "American Greed," Thursday Sept. 22 at 10 pm ET/PT only on CNBC Prime.