Legendary singer Aretha Franklin recently passed away after a battle with pancreatic cancer. A few days after her death, it was revealed that Ms. Franklin had joined the very popular “club” of celebrity estate planning blunders. Ms. Franklin – with all her wealth, her illness, and professional advisors – failed to create an estate plan. Her attorney, Don Wilson, stated: “I was after her for a number of years to do a trust. It would have expedited things and kept them out of probate, and kept things private.” Apparently, Ms. Franklin did not fully appreciate her attorney’s prudent advice.
Dying without a formal estate plan is commonly referred to as “dying intestate.” If you do not have an estate plan in place, the state’s Probate Code has a “default” estate plan for you. It appears that in Ms. Franklin’s case, the Michigan Probate Code (Ms. Franklin was a resident of Michigan at the time of her death) provides that her share is to be divided into equal shares for her children. Often intestacy statutes provide that the default heirs will be the closest surviving blood relatives. While in Ms. Franklin’s case this might have been what she wanted, the default rules of a state’s intestacy laws do not always coincide with a decedent’s wishes.
Even if the intestacy rules do coincide with the decedent’s wishes and the “right” people inherit, probate can still present unfavorable situations. Probate is often a slow process because many aspects of the settlement of the estate must pass through the court. The court’s schedule is often overburdened and thus it can take several months to schedule a court date. Furthermore, probate is often expensive. In some states, such as Michigan where Ms. Franklin was a resident at the time of her death, attorney fees for probate are based on private agreement between the Personal Representative and the attorney. In other states, such as California, attorney fees for probate are set by statute and are based upon the gross value of the decedent’s estate.
In addition, the probate process is public. At some point, the whole world will know exactly what Ms. Franklin owned at the time of her death, the value of each asset, as well as the name and address of each heir. A trust-based estate plan would keep all of these details private.
With Ms. Franklin’s wealth, another missed opportunity was the ability to plan for estate and income tax to her heirs. It is very likely that her estate will be subject to much higher taxes than there would have been if a comprehensive trust-based estate plan were in place. With an estimated estate of $80,000,000, Uncle Sam will likely be very happy that Ms. Franklin ignored her attorney’s advice to execute a trust.
While it is generally advisable to avoid the unnecessary delay and expense of probate by executing a formal, trust-based estate plan, if you find yourself “stuck” with a probate, a knowledgeable probate attorney can help guide you through the arcane and nuanced process. As I explain to my probate clients, while the situation is not ideal, the assets will end up in the right hands. It just might take a little longer and be a little more expensive than it could have been. Probate does have a few positive features such as clear and articulated rules and procedures as well as judicial oversight. However, most people will agree that probate should be avoided whenever possible.
I have posters in my office entitled: “Estate Planning Mistakes of the Rich and Famous.” Ms. Franklin can now be added to the list. I often ask my clients, “What do all these celebrities have in common?” My answer: “They did not come to see me to do their estate plan!” Aretha Franklin included!
KRASA LAW, Inc. is located at 704-D Forest Avenue, Pacific Grove, California 93950 and Kyle may be reached at 831-920-0205.
Disclaimer: This article is for general information only. Reading this article does not establish an attorney/client relationship. Before taking action on any of the information presented, you should consult a competent attorney who is licensed to practice law in your community.