Aretha Franklin Estate Plan Failure

Aretha Franklin will always be The Queen of Soul. But her body died last week after a long battle with pancreatic cancer. Aretha Franklin left behind no will or estate plan and she died at 76. Having no plan is actually a plan, its just not a good plan for the people we leave behind. Aretha Franklin’s estate plan resulted in her heirs paying estate taxes and ultimately will create a very public spectacle all the way to the courthouse.

Aretha Franklin’s four surviving sons have filed a document listing themselves as interested parties for her estate. Her niece also applied to the court to be appointed as executor of Aretha Franklin’s estate. An estate estimated to be worth about $80 million.

Aretha Franklin’s attorney, Don Wilson, was reported to have advised her to set up a trust, but she never did. “I was after her for a number of years to do a trust,” he said. “It would have expedited things and kept them out of probate, and kept things private.”

Other well known performers like Prince and Elvis have also died without an estate plan. James Brown, known as the Godfather of Soul, did have a will, and having no estate plan has left his estate unsettled even thought he died 11 years ago.

Aretha Franklin Estate Planning Problems

— For starters, the state of Michigan will write her will for her because she didn’t have one.

— Aretha Franklin didn’t choose who would be in charge of her estate, including her amazing music catalog.

— Aretha Franklin’s heirs will get to fight it out to see who’s in control.

— And it’s all going to play out in public view, including the valuation of Aretha Franklin’s assets, her music catalogue,  all of it.

— Everything about Aretha Franklin’s financial life will be completely and totally public.

All of this was totally avoidable.

Wealthy families who work with trusts and estates attorneys are focused on estate, gift and income tax planning along with business succession planning. Financial Advisors who simply sell stuff don’t really have a lot of incentive to encourage estate planning.

Aretha Franklin was a Michigan resident and Michigan laws will dictate where her assets will go. Michigan will decide who will inherit what. And, since she had no spouse, her children will most likely inherit all or most of her assets.

There is no state estate tax in Michigan, so everything over the $11.18 million is subject to 40 percent federal estate tax.

Aretha Franklin’s estate taxes are due nine months after the date she passed away. So, with no plan in place, her “estate” is going to have to come up with the cash and pay the IRS.

Celebrities are not the only wealthy folks who sometimes ignore advice from Wealth Advisors. I have to assume Aretha Franklin was getting good advice but she just didn’t act on it. I suspect there were lot more Financial Advisors trying to sell stuff to Aretha Franklin than trusted advisors who encouraged her to do a little estate planning.

Like a lot of folks, Aretha Franklin just didn’t want to deal with it. Some people are a little superstitious about planning end of life issues because they think it’s like signing their own death warrant. I like what Ricky Bobby said:

“98% of us are going to die at some point in our lives — so, a little planning goes a long way”.

Aretha Franklin could have reduced the estate taxes for her heirs. A little planning would have created liquidity within the estate to pay the taxes through several vehicles:

— life insurance,
— charitable gifting to reduce taxes,
— some basic trust transactions could have created liquidity within the estate

Whether Aretha Franklin had charitable planning or not, arranging for her memorabilia to go to museums could have provided a potential tax benefit for her heirs. Aretha Franklin’s heirs inherit all of her stuff directly – along with the tax liability.

I have no idea what Aretha Franklin’s assets are, but The Queen of Soul is probably going to have significant illiquid assets, like music copyrights and future royalty payments. Those long-term income streams could have and should have been planned for in advance.

Ricky Bobby was right… Aretha Franklin missed her opportunity. Don’t miss yours.