As I’m sure you’re already aware, the Queen of Soul, Aretha Franklin, died on August 16th at the age of 76 from Pancreatic Cancer. On August 22, 2018, CNN reported that Aretha Franklin had no will or trust to direct her $80+ million-dollar estate. She left behind four sons, one of whom is reportedly a special-needs person.

Aretha died in her home state of Michigan. Because of that fact, her probate estate will be handled according to the laws of Michigan’s probate statute. When a person dies without a will or a trust, that person is said to have an intestate estate. The law therefore looks to the statute in that state to find out who will inherit the deceased persons property. In Aretha’s case, because she was an unmarried woman at death, her estate will be inherited equally among her four children.

Reportedly, Aretha’s personal attorney, Dan Wilson, for nearly 3 decades implored her to set up a trust to protect her children but she never got around to it. This sounds a lot like another sad case, the Prince estate, all over again.

In addition to the complications of court involvement, now all of her personal financial affairs will become public record in the Oakland County probate court in Michigan. The state will also likely end up paying 3 to 5 times as much or more to settle the estate in open court than it would have in a private trust administration.

Although the exact value of Aretha’s estate is yet to be determined, experts estimate the value to be close to $80 million. Some of the value will most certainly be from her song copyrights and other intellectual property tied to her name and likeness. That is often times difficult to accurately value. We’ve seen that same scenario play out in the Prince and Michael Jackson estates where the IRS argued vehemently for a much larger future value for future royalties and intellectual property rights value in order for the IRS to secure a larger estate tax payment.

But assuming that the reported $80 million estate is fairly accurate, and Aretha had not used up all of her $11,180,000 federal estate tax exemption, her estate will owe the IRS approximately $27,528,000 by May 16, 2019. It’s currently unknown if she has sufficient liquidity in her estate to fulfill the estate tax liability. Attorney’s fees, executors’ fees, asset appraisals, accountings, etc. will certainly drive that number up substantially as well.

One of the other sad points about all this is that Aretha reportedly had a special needs child. Not having the proper special-needs provisions in a trust can cause all kinds of problems for her child and for other family members. He may be in certain government assistance programs that once he inherits, he will no longer be able to participate in. In the life of a special-needs person this can be traumatic. Also, whether or not this child has adequate skills and capacity to manage a large inheritance could be a big problem. There just is no substitute for good advance planning.

With regard to her other three children, she could have done some nice asset protection planning to protect them from creditors, predators and divorcing spouses had she set up a trust and included some special language to create continuing trusts for their benefit. Not to mention that she could have saved the estate millions if she would have engaged in more advanced estate planning.

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