A Tribute to Aretha Franklin
I Say a Little Prayer for Aretha’s Family
With the passing of Aretha Franklin, we lost our first lady of soul. Estimates are that her estate is worth $80 million – and that may not count ongoing royalties. Despite all that wealth, Aretha died without a will.
That’s where my little prayer comes in. The federal estate tax of 40% does not apply to a person’s estate unless there are more than $11.2 million in assets. But Aretha did. Her federal estate tax bill alone could be close to $30 million. Some good news, though: Michigan is one of the 38 states that have NO estate tax.
Without a will, rifts among family members or the appointment of an administrator are likely complications. In cases like Aretha’s, her personal finances will become a matter of public record. If she had created a revocable or living trust for her assets, she could have avoided probate and kept her financial affairs private. And, most importantly, she likely could have reduced that enormous federal estate tax bill.
Each state has its own “default settings” about who will inherit if someone dies without a will. Under Michigan law, Aretha’s four sons will inherit in equal shares, which would also be the result in New York too. However, New York has a “state” estate tax of up to 16%. That would mean another big tax bite out of Aretha’s legacy.
According to a study by Caring.com, 60% of us do not have wills. The number climbs to 70% for people ages 45-54 and then drops to 54% for people ages 55-64. If you ask people why they don’t have a will, the likely answer is that they’ve not gotten around to it, or lawyers are too expensive or that it’s not urgent. Not urgent?
Not everyone knows when “urgent” occurs. Yet, as comedians often remind us, no one is getting out of here alive, so why not be prepared? Clients sometimes joke that they won’t be around, so who cares? Your loved ones will care if you leave a big mess and no one can figure out what you own, who you owe or who gets what. You don’t have to have Aretha’s wealth to run into problems like this.
You don’t have to be wealthy to need a basic set of estate planning documents. Regardless of age or urgency, every adult needs a will, health care proxy, power of attorney and living will (DNR). Why? With these four documents, you cover what happens when you die and also what happens if you are alive, but your mental functions are failing.
Don’t be part of a chain of fools. Remember, it’s never too early to plan, but it can become too late.