It was reported this week that famed soul singer Aretha Franklin died without a Will or Trust. This problem not only throws all of her assets and liabilities into the public eye of probate and to the intestacy statutes, but also guarantees tens of thousands in unnecessary costs and tens of millions of easily avoidable estate tax.
Depending on which reports you follow, Aretha Franklin’s assets including houses, investments, and future royalties total up to $80,000,000. If she had placed these items into a Trust, she would have avoided probate and would have kept her personal business private. While anything passing through probate is open to the world for public viewing, a Trust builds a wall of privacy. When you think about it, do you really want your friends, neighbors, and (if you are lucky enough to have them) “fans”, to know everything about your financial life?
Intestacy is the unfortunate section of the statutes in every state that specifies where your assets will go if you don’t take the few minutes to talk to an estate planning attorney concerning preparation of a Will or Trust. In Aretha’s case, she died with four sons and no spouse, so the intestacy statutes provide for an outright distribution of one-fourth to each son regardless of whether it would have been better for all concerned to gradually pay out over time.
Besides avoiding probate, another advantage to a Trust is to avoid the cost of a bond. Each state requires a bond to insure your assets are properly handled, but no bond is required if the assets are in Trust. A bond for an $80,000,000 state is tens of thousands of dollars each year, whereas a Trust is a one-time cost of a tiny fraction of that amount.
The federal estate tax exemption is now $11,180,000 for each individual. This will cover most of us. However, every dollar of your net estate above the exemption is hit with a 40% federal estate tax. If Aretha’s net federal taxable estate is $80,000,000, her estate will be sending $27,528,000 to the IRS. With proper tax planning, this could be cut drastically allowing much more of her assets to go to her family.
The team of estate planning professionals at BHMK stand ready to assist you in providing solutions to eliminate this needless pain and anxiety. Please R-E-S-P-E-C-T your family.