Aretha Franklin’s Estate Plan

Aretha Franklin, the “Queen of Soul,” passed away in August. Her life and musical legacy were remarkable.

Her estate planning, not so much. Reportedly, Ms. Franklin died without ever executing a will. Her four sons filed notices with the probate court, before her funeral, that they were interested parties to her estate. One signed a document declaring that Ms. Franklin had died intestate, that is, without a will. Under Michigan law, that would mean that the four sons share the estate equally.

The sons nominated Sabrina Owens, a niece of Ms. Franklin, to oversee the settlement of the estate. Media reports did not indicate what Ms. Owens’ qualifications for the job were, but it is rare that a family member would have requisite skills to handle so large an estate.

No one knows what Ms. Franklin’s estate is worth, but finding a value for royalties and use of a celebrity’s likeness can be very problematic. Perhaps the best example would be Michael Jackson’s estate. Because of the scandals late in Jackson’s life, his executors put a value of just $2,105 on his name and likeness. His music they valued at $7 million.

The IRS took a starkly different view. The IRS valued Jackson’s name and likeness at $434 million, and the total estate at $1.1 billion. In fact, the estate has earned over $1 billion since Jackson’s death. The lingering question is how much credit for those earnings are due to astute estate management, and how much to the intrinsic value of the assets.

It has been said that the federal estate tax is a voluntary tax, in the sense that there are a great many planning techniques available to reduce that tax, even to eliminate it in some estates. Techniques such as lifetime giving, charitable trusts, grantor-retained annuity trusts, intentionally defective trusts, and many others can be quite powerful. When one fails to do any estate planning, the estate will be paying the maximum possible amount of federal estate tax.

For most Americans, the federal estate tax is just a curiosity, given the $11.18 million exemption. For the heirs of Aretha Franklin, it is likely to be very real, given that estimates of her wealth range from $80 million to as high as $1 billion. Even at the low end, the estate tax on $80 million comes to roughly $28 million, and it must be paid in cash within nine months of death. An extension is allowed; however, ideally you will create a plan before your death to reduce or eliminate your estate tax. We can help you do that.