The recent death of Aretha Franklin, the undisputed Queen of Soul, sent fans around the world into mourning. A day-long public funeral drew the biggest names in music, politics, and religious communities to celebrate her life and her musical achievements. While Franklin’s musical legacy is secure, her estate will likely be the subject of a legal process that will take years to resolve.
Aretha Franklin died without preparing even a basic will or trust. And while the law does provide a process for distributing someone’s property when they die “intestate,” which is Latin and essentially means “dying without speaking”, that process becomes highly costly and time-consuming, even when decedent’s estate is not worth hundreds of millions of dollars. So, you can imagine that this process will be extremely slow and expensive for Franklin’s family.
The law in Michigan, where Franklin lived at the time of her death, as well as nearly every other state, including California, dictates that because she did not have a living spouse, the estate will be divided equally among Franklin’s four adult children. As simple as it may sound, the reality is that there will be significant questions that will need to be answered before the estate property can be distributed. Here are just a few:
For most of us, the way to value our estate when we die is to take the value of our assets, subtract the amount of any proper debts, pay whatever state or federal estate taxes may be owed, whatever income tax or other expenses are due, and the remainder is distributed to the rightful heirs. It’s a mostly straightforward equation.
But with an international celebrity like Aretha Franklin, who won 18 Grammy Awards, sold 75 million albums, and was the first woman inducted into the Rock and Roll Hall of Fame in 1987, calculating the value of her assets is very difficult. If she left behind any unpublished music that could later be released, which is not uncommon among major recording artists, the value of her estate could skyrocket even higher.
Celebrities such as Aretha Franklin are required to undergo a complicated valuation process designed to assign a future value to any income from assets like image rights, music royalties, and publishing credits. Michigan state law provides for a post-mortem right of publicity, which means that her heirs can protect Franklin’s likeness or image from unauthorized use. All this translates to years of work before a value can even be ascertained.
After the estate completes its appraisal which could cost hundreds of thousands of dollars in itself, the results are compared to the results of an appraisal conducted by the Internal Revenue Service of the same assets. As one can imagine, the IRS value may be significantly higher than the value prepared by the estate itself. The Probate Court will also conduct its own valuation for its own purposes as it does in all other Will or Intestate Succession cases. Of course, the estate pays for that court valuation, as well as its own.
Franklin owned three homes in Bloomfield Township, Michigan, which will also have to appraised and either sold or included in the distribution to her children instead of the cash value. If Ms. Franklin had a trust then she could have provided flexibility as to who received real property, or whether it was sold, or kept for the benefit of someone in her family. In essence, she had discretion has to who received what, and when. There is no such flexibility in the court monitored process, or when a large sum needs to be given to the IRS for estate tax payment. She likely also owned numerous investment and financial accounts which will have to be identified, accounted for, and consolidated into the estate.
As far as taxes go, there is no estate tax in Michigan so that nothing will be owed to the state, but there will be federal estate tax owed, and it won’t be pretty. Federal law allows the first $11.4 million of an individual’s estate to be exempt from the estate tax, but the remainder is taxed at a whopping forty percent.
Another problem that will need to be reconciled is the debts Franklin had outstanding when she died. According to court records, there is a long list of people who claimed they were never paid, including dentists, accountants, lawyers, limo drivers, and tax collectors as well as a songwriter, a dressmaker, a music arranger, a moving company, a landscaper, a home inspector, and even the guardian for her mentally ill son.
Anyone who Franklin owed money to can file a claim with the estate to be paid and those claims must all be settled before the estate can be closed. It is a virtual certainty that scam artists will file false claims to get their hands on Franklin’s estate, which means someone will have to go through all of them to try and determine what is legitimate and what isn’t. Sorting out the mess of creditor claims could take a long time and cost the estate quite a bit of money, but it has to be done.
There is also the issue of how to protect the interests of one of Franklin’s adult children, who reportedly has special needs. To just hand him a check for the inheritance of this size would almost certainly end in disaster as people seek to take advantage of the situation. It is likely that a guardian will need to be appointed by the Court, which is another legal process the estate will need to attend to before distribution.
Many observers are wondering why Aretha Franklin did not establish even a minimal estate plan before her death. Had she adequately prepared for how her estate would be distributed, Franklin would have saved not only considerable money but also avoided many of the headaches that her heirs will now be required to handle on her behalf. To put the numbers into perspective, in California, the minimum attorneys’ fees on an $80M estate will be approximately $1,000,000, and likely more. In California, there is a minimum of 1% attorney’s fees on matters such as Franklin’s. In contrast, basic estate planning would have cost Franklin in the neighborhood of just $10,000.
There are many ways to protect your assets, minimize your estate tax liability, and streamline the probate process by utilizing a will, various types of trusts, and other financial instruments like life insurance policies. Unfortunately, those opportunities vanish when you pass away or once you lose the capacity to make an estate plan. Essentially everyone should have an estate plan, whether you’re the Queen of Soul or the King of your own castle.
At NM Law, APC, we have the experience you need to help you build an estate plan to protect you and the ones you love. Contact us at (949-253-0000) to speak to an experienced estate planning attorney today.
Disclaimer: This article is intended to provide a general summary of laws in the State of California and should not be construed as a legal opinion nor a complete legal analysis of the subject matter. Noelle Minto is an attorney at NM Law, APC in Tustin, California, a law firm specializing in Trusts & Estates and Business Transactions.