Queen of Soul should’ve made time for estate planning
Q: Aretha Franklin supposedly died without a will. Who will receive Aretha’s assets?
A: Absent a will or a trust, every state has written laws that outline the individuals who are entitled to your assets at your death. Known as the “laws of intestacy,” each state decides for you who receives your assets through the probate process when you fail to properly create an estate plan. In Aretha’s specific case, since she wasn’t married at the time of her death and died without a will or trust, her estate will likely be split equally between each of her four children. However, in high-profile probates, it is not uncommon to have additional family members, “friends” or associates come forward claiming to be beneficiaries or creditors of the estate.
Q: Will Aretha’s children or her estate have to pay an estate tax?
A: Yes, it’s likely that her estate will owe taxes to the federal government. Although 99 percent of citizens won’t owe an estate tax at their deaths, those with assets in excess of the federal exemption level, currently at $11.18 million, will pay a 40 percent federal tax on assets over that amount. On a positive note, neither Michigan nor Oklahoma have an estate tax at the state level anymore. Various news outlets are reporting her estate to be worth an estimated $80 million. If this number is accurate, her federal estate tax, due within nine months of death, would be about $27 million.
Q: Who will be in charge of her probate and estate? A: When individuals create wills and trusts before their deaths, they can select the individuals to be in charge of their wills (known as personal representatives/ executors) or their trusts (known as trustees). In Aretha’s probate, state law outlines a priority order of individuals who have a right to that position as well as a list of factors that will make them ineligible to serve. In Oklahoma, if she wasn’t married at the time of her death, one or more of her children would be in the priority position to serve. To add to the problem, if she owned assets or properties in other states or foreign countries, multiple probates may be required.
Q: What will happen to Aretha’s son, Clarence, who has special needs?
A: Without a special needs trust established for a child with disabilities, the outright distribution of assets to him at the conclusion of the probate likely will disqualify him from ongoing governmental aide. Moreover, depending on the severity of the special needs and the situation, individuals can easily be influenced or the funds can be spent inappropriately. Even worse, probates in Michigan and Oklahoma are public information. Beneficiaries and distributions often easily are found through online court records. After a public probate, I often see individuals who are targeted by scammers or criminals who prey on the information they have discovered about their targets. The risk and public nature of the distribution of probate assets is completely avoidable with the use of a trust.
Q: When should Aretha have completed her estate plan? A: People often have a misconception that there’s no need for estate planning until they are ill or elderly. I tell clients every day that, “it’s not if, but when.” There is a 100 percent chance that you are going to die and need an estate plan. Whether you are 25 with young children or 95 years old with great grandchildren, proper planning allows for the avoidance of probate, the decrease or elimination of estate taxes, and the private and controlled distribution of assets. With Aretha’s long bout with pancreatic cancer, it’s surprising that her advisers didn’t encourage her to complete a plan. However, I see that sense of immortality everyday — whether you are an average working class individual or the Queen of Soul. Bottom line, she should’ve taken the time to complete her P-L-A-N-N-I-N-G.