Aretha Franklin recently passed away at 76 due to advanced pancreatic cancer. Last week, the media reported that the Queen of Soul died without creating a will or trust. Her four sons filed in Oakland County Probate Court and her niece, Sabrina Owens, asked to be appointed as the estimated $80 million estate’s personal representative. According to her long-standing attorney, Don Wilson, he had requested that Franklin establish a trust numerous times, but she never got around to creating one.
Unfortunately, Aretha Franklin is far from the first notable individual to pass without establishing a will or trust, including many celebrities and musicians. Sadly, the truth is that two-thirds of all estates in the United States are administered without any estate planning. In this week’s article, we cover the three biggest lessons we can learn from Aretha Franklin’s estate. Hopefully, her passing will serve as a reminder that having a plan in place is necessary to ensure that your family and loved ones will be cared for in accordance with your wishes.
- Having No Will or Revocable Living Trust Will Expose You to a Long and Expensive Probate Process
Probate is often a lengthy and expensive process. However, it is made longer and more costly when the deceased dies intestate (without a will). Without a will, family members are left guessing about what the deceased person would have wanted, and they may not all agree. These conflicts can create delay and rack up legal bills. The probate process is also public, so all details about the estate, assets, and debts will be memorialized in public record. Last week’s media report that Franklin did not have a will indicates that her estate’s probate proceedings will be no different. All of the singer’s assets will be open to the public, exposing the family to additional stress during an already difficult time.
Because assets are only distributed to heirs at the close of probate, a lengthy court proceeding means that the heirs are left without support for the duration of the probate process, and the longer and more complex probate is, the more costly the process will be. In Franklin’s case, her estate may end up paying up to $4 million dollars in probate-related costs. A revocable living trust could have saved Franklin’s estate from going through the court process entirely, would have saved the estate millions, and ensured her assets were kept private.
- No Estate Plan Means Huge Estate Tax Implications
Without an estate or wealth plan in place, Franklin’s estate may be severely impacted. The estate exceeds the exemption threshold for gift and estate tax under the 2018 Tax Cuts and Jobs Act, so her heirs will likely owe a good chunk to Uncle Sam. Although the new law signed by President Donald Trump in December doubled the estate tax threshold from $5.6 million to $11.2 million, it is expected that the state and IRS will get about half of the remaining value of Franklin’s estate. With legal fees and court costs coming out of the heir’s remaining half, there may be very little left to distribute at the end of the probate process to Franklin’s four children.
- Estate Planning Is Even More Important If You Have a Child with Special Needs
Franklin was survived by four grown children, one of whom (Clarence, 63) has special needs. For those with special needs children, following in Franklin’s steps footsteps could mean your loved one may wind up losing government benefits. A special needs trust, which is not subject to probate court, lets you contribute funds for your child’s benefit while enabling him or her to continue getting benefits — such as Medicaid and Supplemental Security Income — which require recipients to have no more than $2,000 in assets and limit their income. Although this may not be as important to the Franklin family given the size of the estate, Franklin might have been able to protect her son’s inheritance and provide for any care and assistance he may require by creating a more comprehensive estate plan before her passing.
If Aretha Franklin’s mistakes make you worry about your own situation, feel free to contact us at 770-933-9009 to discuss creating an estate plan that is right for you and your family. You don’t need to be worth $80 million to have a lot to lose, and your loved ones will be grateful for the effort you put into protecting their futures.