In 2018, at age 76, Aretha Franklin passed away. It was initially believed that she had not prepared a will; however, it was later discovered that she had created two handwritten documents dealing with the disposition of her assets, one in 2010 and one in 2014. This lack of planning and the absence of a formal, well drafted will, led to family disputes and conflicts, eventually resulting in a lengthy and expensive lawsuit.
Lesson 1: Avoid Intestate Succession.
Intestate laws dictate the distribution of assets when someone dies without a will. These laws may not align with an individual’s true wishes had they actually took the time to contemplate and prepare a will. Dying intestate requires lengthy and expensive probate procedures and often leads to disputes among family members. By having a valid will or trust in place, you can ensure their assets are distributed according to their desires and prevent unnecessary conflicts.
Lesson 2: Ensure Clear & Valid Documentation.
The discovery of Aretha’s two handwritten wills in different locations created confusion and fueled the legal battle. It is important to maintain clear, valid, and up-to date documentation – do not keep multiples or “old” wills. A will should be properly executed, with witnesses and a notary to establish its authenticity and validity. It is crucial to store the will in a safe, secure and accessible place and to inform individuals of its location.
Lesson 3: Do It Yourself (DIY) is for Home Projects.
Aretha attempted to handwrite her own will in two separate documents, but she actually created two separate holographic wills. A holographic will is a will that is entirely in the testator’s own handwriting. Texas accepts holographic wills, but not every state recognizes the validity of holographic wills. Other type of DIY wills are pre-printed form wills and software wills, which are boilerplate forms with blanks for a person to fill in on their own. These types of DIY wills present many pitfalls to the preparer, such as, misapplying the law, using the wrong document, or preparing them incorrectly, thereby running the risk that their estate will not be distributed according to their wishes. Like Aretha’s holographic wills, DIY wills most often contain confusing or incomplete language and fail to clearly state one’s intentions. Additionally, the one-size-fits-all character of a DIY wills does not take into account each individual’s unique circumstances, and consequently each individual’s estate planning needs. Attorneys do not simply fill in forms. We analyze your unique circumstances, explain the ramifications of your choices, advise you on the best way to accomplish your goals and objectives, and tailor your documents to address your unique estate planning needs.
Lesson 4: Planning for Potential Tax Liabilities.
Mitigating inheritance tax is a crucial aspect of estate planning. Aretha’s estate faced significant tax liabilities due to delayed estate planning, which significantly reduced the estimated value of her fortune. The federal estate tax exemption for 2023 is $12.92 million per person and $25.84 million for a married couple. By engaging in proactive tax planning strategies, such as establishing trusts and gifting assets during one’s lifetime, you can minimize the tax burden on your beneficiaries and preserve more of your hard-earned assets.
Lesson 5: Planning for Those with Special Needs.
One of Aretha’s four sons, Clarence, has special needs and is under a guardianship. When planning for a loved one with special needs, you must be extremely careful because if handled improperly, you can easily disqualify them from much-needed government benefits and programs. Many of these benefits and programs have strict income limits, so leaving money directly to a person with special needs may disqualify them. Using a planning vehicle, such as a Supplemental or Special Needs Trust (SNT), allows you to provide supplemental financial resources for an individual for the rest of their life, without affecting eligibility for government benefits and programs, like Medicaid and Social Security. Another benefit of a SNT has is the fact that such a trust—like all trusts—would not be required to go through probate, so an individual would have immediate access to their inheritance.
Aretha’s estate was, at one time, valued over $80 million. Due to lack of proper planning, this amount was substantially reduced by estate taxes, unpaid taxes, legal fees, probate court costs, and related fees. Proper planning could have avoided virtually all these costs, expenses and confusion, minimized family conflicts, and protected Aretha’s legacy. These unfortunate events serve as a stark reminder of the importance of estate planning, not just for the rich and famous, but for everyone.