Learning from the Queen of Soul’s Estate-Planning Mistakes
As has been reported elsewhere, legendary soul singer Aretha Franklin died August 16, 2018, without an estate plan in place. As such, her estimated $80 million estate will be divided according to the laws of her state of residence, or where real property is located. According to her entertainment attorney, Don Wilson, Aretha was a very private person. Unfortunately, her entire financial world will be made public as the process known as probate runs its course.
Probate is the first step in the legal process of settling the estate of the deceased, many details of which become part of public record. Although having a valid will at the time of her death would not have allowed her estate to avoid probate, it would have provided direction regarding how her assets should be divided. As it stands, Michigan state law will require Aretha’s estate to be divided evenly between her four sons. We don’t know, and the courts won’t care, whether she had intentions of directing some assets to charity, splitting the estate among her children based on their needs, gifting specific property to individuals, etc.
One of the downsides to limiting your estate planning to a basic will is that a will may be contested, thereby delaying the estate settlement process. Trusts, on the other hand, are subject to contract law, making them more difficult to contest. Additionally, trusts avoid probate, which, in the case of Ms. Franklin, means most of her financial affairs would have been hidden from view. A trust would have also given her more control over the ultimate distribution of assets. For example, her eldest son has special needs, which might have led her to keep his assets within a trust to support his care, whereas her other children might have the wherewithal to manage their proceeds. Estate planning is especially important when dealing with children facing special needs, substance abuse, a lack of maturity, and even heavy spending habits. Some trusts even provide protection from creditors or divorce proceedings, and can be designed to support multiple generations.
Aretha Franklin’s estate planning mistakes struck a chord with me, as I have a family friend whose brother recently died without much planning. As a single father, he left his son and daughter, barely legal adults, his modest estate as an outright distribution. Unfortunately, due to their age and what some might describe as lack of maturity, they have quickly fallen victim to the fate of many lottery winners, including the sudden appearance of new “friends” who helped them squander their inheritance on lavish dinners and bar tabs, pricey electronics at home, and fancy cars in the driveway. Had their father incorporated a trust in his estate planning—with an independent trustee to oversee distributions to his children—they might have maintained sufficient assets to supplement their income into the future. Sadly, this doesn’t seem to be the case.
Planning for one’s death is a morbid affair, and it is understandable why people delay addressing the need—in fact, a 2016 Gallup poll (conducted two weeks after Prince’s untimely death), found more than half of Americans do not have a will. However, doing nothing and leaving it up to the courts can lead to any number of undesirable outcomes, including large tax burdens for your heirs, improper distributions to unintended beneficiaries, having no say in what happens to family heirlooms or other prized possessions, and family quarrels. Comprehensive estate planning is the only way to safeguard your possessions after your death, and it has the priceless benefit of giving your loved ones one less thing to worry about during an incredibly difficult time.