Edward D. Brown, Esq., CPA, LL.M and Alicia Garcia**, Law Clerk
When Aretha Franklin died without a last will or trust, she joined a long list of other celebrities who failed to have a last will or trust as well, including Howard Hughes, Prince, Sonny Bono, and Barry White. Without a last will, Franklin’s death left much uncertainty surrounding the future of her $80 million estate. Her wealth included royalties from songs as well as property. Now, rather than inheriting her wealth and possessions, Franklin’s loved ones will assume a large amount of confusion, added time, and costs in order to resolve the proper distribution of her assets. Given the value of her estate and the lack of a last will, Franklin’s attorney is concerned that it will become a hotly contested public matter in the probate court.
Whether or not you have an estate as large as Franklin’s, protecting and directing the ultimate disposition of your assets is important. Therefore, it is imperative to take the necessary steps to ensure that your wealth and possessions will be properly distributed. According to the American Bar Association, approximately two-thirds of the adult population has no last will or other estate planning documents.
What are the consequences? As is illustrated by Franklin’s case, things can get complicated and laws vary by state. Under Michigan law, Franklin’s four sons will equally divide her assets. However, this leaves her niece (to whom she was very close and who is serving as the executor) without any inheritance. When you do not execute an estate plan, like Franklin, your estate will go through probate court and the details of your account will be public record.
Each state has rules of “intestate succession” that direct who gets what when a person dies without having any last will. Therefore, in essence, if you have no last will, your state will write one for you (but you may not like the results).
Further, given that Aretha’s assets were not strategically allocated, the Internal Revenue Service generally will collect any back taxes that Franklin owed and will tax her estate at the rate of 40 percent with respect to the assets exceeding $11.18 million.
How to avoid this? Put it in writing. An attorney with the right experience and knowledge will assess your needs and can create a last will, trust, estate plan, or asset protection plan. By implementing necessary tax planning, you can ensure an efficient transfer of assets to your heirs without the cost and confusion of probate court.
It’s not just about the assets. Drafting estate planning documents includes important medical decisions, such as who will make medical decisions on your behalf if you are unable to and end of life care (life support, resuscitation, etc.)
Not all celebrities plan out their assets poorly. Take Burt Reynolds, a Hollywood icon who filed for bankruptcy after a messy divorce and a failed business venture. Despite this, Reynolds passed away with a healthy amount of assets and was still able to live in his Florida Mansion. By properly planning, Reynolds ensured he was able to pass with some assets to his name.
*The information in this article is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Greenspoon Marder LLP or the individual author(s), nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
**Not an attorney