This writing follows up on a column in the Mankato Free Press on Sunday August 26, 2018 by Susan Tompor of the Detroit Free Press.
I was a fan of Aretha Franklin, as many of us were. I went to see her at Mystic Lake about 15 years ago. She was morbidly obese at the time, but since then had lost a lot of weight. She left four children, all sons, including Clarence, who has a disability.
Ms. Tompor’s column starts out by noting that Aretha Franklin died without a will. She reportedly had a net worth of $60 to $80 million.
This follows the death of Prince two years ago. He is estimated to have had a net worth of about $200 million and no Will. In Prince’s estate, so far all that has happened is a lot of litigation. Since there was no will or trust, no person was named as executor. Each of the six relatives had equal priority in serving as executor. Determining who would serve as executor took months. In the two years since Prince died, no relatives have received any money. This is despite the fact that some of those relatives might desperately need the money.
For her concerts, Aretha reportedly would require to be paid in cash, at least the first $25,000. Then, she would pay her band, backup singers, and handlers, also in cash. The assumption is that this was done, in part, to avoid income taxes. While she might have accomplished this, she will not avoid estate taxes. These come in at the rate of 40% for the IRS plus whatever the rate is in Michigan. Also, if Clarence receives government benefits, he will lose these. Worse is the fact that there was no mechanism for how his inheritance will be handled.
What can we learn from this? The main thing is that it’s easier and cheaper to do some planning than to leave your heirs with a mess. There are many strategies to avoid estate taxes, probate, and a mess for your successors.
First, if you are married, it might be as easy as having some assets in joint tenancy with your spouse. If you are not married, it might take the form of having transfer on death or payable on death beneficiaries on one or more assets.
Second, if these strategies don’t handle the situation, you should consider having a will. Some people do a will on line with a provider like Legal Zoom. Our experience with on-line providers is that the product itself might be satisfactory, but people fail to properly execute the documents. If documents are not properly executed, the court can and will throw the document out. Obviously, it’s better to do a will with an attorney.
Third, where there is more property, or there are multiple beneficiaries, or a person wants to avoid probate, a trust should be considered.