Five Ways to Avoid Anna Nicole's Estate Drama

Now that Anna Nicole Smith's former boyfriend, Larry Birkhead, is raising their daughter, Dannielynn, you can expect the legal disputes surrounding Smith's death to melt away like snow in the Bahamas, right?

Joke, people.

In fact, Smith left behind enough unanswered questions and competing interests to keep lawyers wrangling into the next decade. The Playboy centerfold and widow of oil tycoon J. Howard Marshall II died in February 2007 at age 39 of a drug overdose, leaving behind her baby, three would-be daddies and a drawn out lawsuit for a share of her late husband's fortune. DNA tests showed Birkhead, a photographer, to be Dannielynn's father; Howard K. Stern, another paternity contender, was named executor of Smith's will, and Smith's mother is battling Birkhead for guardianship rights. Smith's son and only beneficiary, Daniel, died of a drug overdose a few months before his mother.

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What can we learn from all this drama? If you must live a messy life, clean your financial affairs up before you depart it. Here are five tips for tidying up your estate so that others don't have to.

1. Plan for contingencies. Smith's will, written in 2001, left whatever property she had in trust for her son. It specifically excluded unknown children, a provision that's more commonly used by men to protect against claims by heirs they're not aware of. Had Daniel not died before Smith, Dannielynn would have been out in the cold -- a development Smith probably would not have intended, says Joanna Grossman, a law professor at Hofstra University. "She was probably just thinking of her one son and wanted him to have everything." Instead, his death caused the will to lapse. With no will, state intestacy law made Dannielynn sole heir, a determination later affirmed by the court.

Tortured as those circumstances sound, they demonstrate a failure on the part of Smith's will to clarify her wishes and prepare for contingencies, which is, after all, the whole point of estate planning. You can avoid similar complications by building in flexibility -- including naming alternative beneficiaries and stating your intentions toward unborn children -- and revising the will as needed to include specifics, such as the name of a new child.

2. Appoint a guardian. Although Birkhead's situation has yet to be resolved (the final custody hearing will be held in June in the Bahamas), he has a big leg up in his custody dispute. It's the biological or adoptive parent who generally gets custody of the children if the other parent dies. Still, you should name a guardian in your will in case the other parent isn't available or you both die around the same time. Think that can't happen to two relatively young people in a single family? Look at Smith and her son.

If you're convinced that the other parent is unfit for custody, name another guardian, outline your reasoning and hope that the court agrees. Simply saying you prefer someone else doesn't cut it, says Grossman. "If there is a real live parent who has legal rights, your preference is not going to trump that." Because Birkhead passed both the DNA and fitness tests, says Grossman, "there's no justification for taking the child away."

3. Design your own funeral. Sure, you could leave the arrangements to your next of kin and leave it to them to argue over the details. Smith's mother, for instance, wanted to bury her in the family plot in Texas; instead, Dannielynn was awarded custody of the body, and Richard C. Milstein, Dannielynn's representative, had Smith buried in the Bahamas.

You can avoid the bickering by putting your funeral instructions in writing, preferably in a living will, which is more readily available to survivors than a regular will, says Martin Shenkman, an estate-planning lawyer in Teaneck, N.J. Have a lawyer write or review the document to make sure the terms are legally enforceable. And include the same instructions in your testamentary will, giving your executor the authority to cover funeral expenses out of the estate.

4. Legalize your love. Getting married for estate-planning purposes hardly constitutes a Hallmark moment, but it does entitle your surviving spouse to half the property you acquire during your marriage or to a significant share of your estate, depending on where you legally reside. You can't easily override those rights, in a will or otherwise, although your spouse can waive them. For Stern, a marriage license would have meant inheriting some of Smith's estate; as the boyfriend, he gets zip.

What if you're in a same-sex partnership? A number of states accord domestic partners some or all of the same protections as married couples; Massachusetts and California recognize same-sex marriages. No matter what your state or status, you can always name a loved one as beneficiary in your will.

5. Tie up loose ends. Ironically, Stern has since been appointed executor of Smith's estate, as well as a cotrustee, with one-time rival Birkhead of a trust set up for Dannielynn's benefit. Before you start enjoying that soap opera, make sure your own legal arrangements avoid potential conflicts. "Don't assume that it's just Hollywood types who have these issues," says Shenkman. "A lot of people have messy personal lives."