Blog Author: Stephen C. Hartnett, J.D., LL.M. (Tax), Director of Education,
American Academy of Estate Planning Attorneys, Inc.
Aretha Franklin was known as the “Queen of Soul.” She was a singer, songwriter, civil rights activist, and so much more. Aretha was a great recording artist, with a career spanning many decades. She received honorary degrees from many prestigious universities, like NYU, Princeton, and Yale. She received the Presidential Medal of Freedom in 2005. In fact, we all owe her much “R-E-S-P-E-C-T,” just like the song for which she’s most famous.
Aretha died on August 13, 2018, at age 76, without any will or trust. In other words, she died intestate. There are many implications for her family.
First, state law will decide how her assets are divided. Aretha died in Michigan, so the intestate succession laws of that state will control. Here is a link to the applicable statute. Since she was not married at her death, her assets would be divided among her four sons, Clarence, Edward, Ted, and Kecalf.
Second, her estate will go through a very public process to transfer title of her assets, called “probate.” This process will happen in her local probate court, in Detroit, Michigan, where she lived when she died. People will know how much she had in assets, reportedly about $80 million. That means that the public will know how much each of her four sons will be inheriting, approximately $20 million. This could be anything from embarrassing, a nuisance, or even dangerous. They could be targets of fundraising efforts, scams, or more nefarious schemes. It’s doubtful Aretha wanted to impose that hardship on her sons. She probably never knew what they’d face if her estate went through a public probate process.
Third, the assets will be inherited by each of them outright. This may not be the best way. For example, one of her sons might have asset protection concerns. If Aretha had left his share in a discretionary trust with a third-party trustee, the assets could be protected from creditors. But, since the assets will be going outright, creditors would be able to reach the inherited assets.
Fourth, since the assets will be inherited by each of them outright, they could be comingled with other assets and not protected from being divided with a spouse upon divorce.
Fifth, since each son will be inheriting about $20 million, they might face an estate tax at their death. The current exclusion is $11.2 million but gets halved if they die after 2025. Aretha could have left their assets in a trust which was at least partially protected from inclusion in their taxable estate at death. $2.8 million could have been sheltered from estate tax for each child. This oversight alone could cost each son over $1 million in estate taxes at their death.
Aretha’s estate could be tied up in the probate process for many years. And her lack of foresight in planning her estate could cost her children millions. Proper planning could have addressed each of these concerns, saved her children millions, and kept her affairs private from prying eyes.
The Litherland Law Firm is a member of the American Academy of Estate Planning Attorneys. If you would like to learn more about the importance of estate planning, we invite you to attend one of our free estate planning seminars.
- Roth IRAs Can Be a Great Planning Strategy: Basics - October 27, 2021
- Reasons an Estate Plan Could Be Challenged: Part 1 – Formal Requirements - January 24, 2020
- Estate Tax Exemption Amounts to Increase - November 6, 2019