• Riley Carbone Kern and Laurel Carbone Kern

Legendary Voice, Common Problems

This month, we lost one of the Greats. Thankfully, we and future generations will be able to dance and fall in love to her songs for decades - hopefully centuries - to come. Nothing but Respect for the Queen. By now, you may have heard that Aretha Franklin died "intestate," that is, without creating a will or other estate plan. There are a few outcomes we can expect from this:

1: The administration and division of her assets is going to be a public process, as it is for everyone - celebrity or not - whose assets must go through probate. In most states, probate is required for people who die intestate and even those who have a will as their only testamentary document.

2: For celebrities and for the rest of us, this process often results in contests, tensions, and disruptions in family harmony that could last generations. (See the unfortunate difficulties from Prince's probate, as a recent and cautionary example.) In Aretha's case, these difficulties are likely to last a long time since her estate includes copyrighted and licensed materials with continued royalties.

3: With an estimated net worth around $80 Million, she's going to have a pretty hefty federal tax bill. In her case, it could be $25 Million or more. Luckily, Michigan, like Oklahoma, has no state estate tax, which means her estate will only owe the federal government. But many who die intestate will be taxed at both the federal and state levels.

4: One of her beneficiaries has a special need. We won't take the time in this post to go into the problems that can happen when special needs beneficiaries inherit large assets without specific planning, but the big concern is either the loss of benefits or the need to spend inheritance quickly (and not necessarily efficiently or carefully) in order to re-qualify for lost benefits.

If you take away the mystique of celebrity, which with a legend like Aretha is nearly impossible to do, her situation is all too common. People die without planning all the time, and inevitably there are problems associated with public administration, family tensions, taxes, and asset protection for beneficiaries. Each of the four issues above can be addressed.

For instance, if Aretha had been our client (we would have been so freaking ecstatic!), we might have approached her situation this way:

1: Probate is simple to avoid. You can do it through beneficiary designation and/or through trust planning. For an estate like Aretha's, there's no question we would have recommended trusts, not only to avoid the public nature of probate but also to help solve the remaining problems.

2: It would be dishonest to say that trusts can help you avoid family disharmony. If someone in the family is suspicious or feels hurt or is greedy, they can make trouble whether or not there is a trust. The difference is that these disruptions can be handled and resolved privately. Often in trust planning, we do our best to anticipate possible disruptions to family harmony and plan ahead to recognize sources of tension and recommend possible resolutions in how the trust as administered.

3: Under the current laws, relatively few families are going to owe federal estate taxes. Many more may have to deal with state-level estate taxes. Reducing them, or eliminating them altogether, is possible with careful planning. In Aretha's case, the $25-ish Million her estate will pay in estate taxes could have stayed with the family and benefited them for generations. In some cases, when the estate doesn't own enough cash to pay the taxes, non-cash assets, often with significant sentimental value, must be sold in order to pay the bill.

4: When someone has a child with special needs, careful planning is critical. It is possible that a child can inherit significant assets - like real estate, life insurance, retirement accounts, brokerage assets, royalties - without threatening their means-tested benefits, which might include income streams or medical care or rehabilitation services or housing. The point isn't necessarily to plan in such a way that a child MUST stay on public benefits, but that the possibility of maintaining benefits, or future qualification without impoverishment, remains.

Take some time to listen to Think and Rock Steady and Chain of Fools and every other song you can get your hands on. Have a living room dance party in honor of the Queen. And then make an appointment with an estate planning attorney.

If you want to know more, we would love to talk with you about it. Best part, the conversation about how it could benefit you doesn't cost anything. Contact us at (918) 770-8940 or to set up a free consultation, either in person, video chat, or phone call. Disclaimer: Reading this blog post does not create an attorney-client relationship, and it is not formal legal advice. This is for information purposes only. Your best bet, always, is to speak with an attorney about your questions, assets, concerns, and needs.

(Image Credit: Billboard, page 9, 15 July 1967)

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