Aretha Franklin had her first number one hit in 1967. But when she died last week at age 76, there was no way to RESPECT or even to divine her wishes regarding her $80 million estate. That's because like some other wealthy celebrities, she never got around to writing a will.
By all accounts, Ms. Franklin was particularly private about her financial affairs, to the point sometimes demanding payment for performances in cash. So it is ironic that the distribution of her substantial assets will now become a very, very public event.
Christopher A. HopkinsThe Queen of Soul is not alone in neglecting to plan for her final performance. Industry estimates suggest that six in 10 American adults do not have a will or a living trust to dictate the disposition of their assets upon their demise. This is especially disheartening, since the process for most of us is simple and fairly inexpensive, particularly when compared to the costs, delays and potential familial distress of letting the state and the courts do it for you.
If a person dies intestate (Latin for "without a will"), state laws dictate the disposition of that person's estate. It is important to understand that each state has its own laws regarding how to divvy up what's left when one of its residents passes on, and they vary widely. In the nine community property states, a decedent's community property passes to the surviving spouse, even if they have living children. Tennessee, on the other hand, directs that the inheritance is divided up between spouse and offspring. Again, each state has a different rule book.
In Ms. Franklin's case, she had no surviving husband but four adult children. Michigan law dictates that the loot be split equally among the four. Sounds simple, but not so fast. The process must be played out in a legal process called probate, which in high-profile cases involving significant assets can take some time to play out. Also, the process is public and likely to attract significant media attention (just ask the would-be heirs of the singer Prince, whose estate is still being tussled over two years after his death).
And there's the cost. The court must appoint an executor or personal representative to act on behalf of Ms. Franklin during the probate process. She could easily have named the person she wished to perform this duty in her will. And there will likely be substantial claims and challenges that must be litigated. All of which will consume bug bucks in legal fees from the estate.
And there is another wrinkle. It is reported that Ms. Franklin has one son with special needs, yet there appears to be no particular plan set forth conveying how she wished to provide for his care after her death. Again, some simple estate planning could have established a trust that allowed assets to bypass probate, defer taxation, stipulate how the money would be handled and identify the person charged with financial decisions on his behalf.
Wills must still pass through probate, but the process is generally much more straightforward and less costly than intestate succession and spells out who gets what. And for higher-profile cases like Ms. Franklin and Prince, some simple tools like a living trust can avoid public disposition entirely and specify exactly how the person wants their legacy disbursed.
About half of Americans without a will say they just haven't gotten around to it. You may not be as talented as John Denver, Bob Marley, Jimi Hendrix, Prince or Aretha Franklin, but you can surely do one they didn't: make a will.
Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. in Chattanooga.