‘Think’ about making an estate plan now to protect your heirs later

“You better think.”

The unmistakable lyrics sung by Aretha Franklin are words to the wise, but sadly, Franklin herself did not take this advice when planning her estate. Consequently, her heirs may be on the hook for a significant tax bill, not to mention the possibility of years of very public legal battles.

While most people don’t have the assets of an Aretha Franklin – her estate is estimated to be worth $80 million and she has a valuable music catalog – her situation, and those of other high-profile celebrities without wills, like pop icon Prince, serve as a clarion call for anyone with significant financial holdings.

Proper estate planning, including drafting a will that outlines your wishes for the distribution of your assets upon your death, is crucial in making sure those wishes are fulfilled.

Without a will, the state decides how one’s estate is distributed. It does not – and cannot – take into account personal relationships, good or bad. It simply prioritizes family members, starting first with immediate relatives. Surviving spouses, children, parents, and siblings receive preferential rights in the eyes of the state.

If a person with minor children dies without a will in place that names a guardian for those children, once again, the courts step in to name a guardian. It’s easy to see how that could turn into a painful process for all involved.

To make matters worse, estates probated without the benefit of a will or clear estate plan can result in disputes among family members, often causing irreparable harm to relationships and lasting years in litigation, draining the assets of the estate.

It’s worth noting that the full details of the estate and any disputes that arise in situations where the state takes control of distributing the assets are public information.

Consider this quote from Los Angeles attorney Jeffrey Eisen in a recent interview with “Accounting Today” discussing the fact that Aretha Franklin died without a will, leaving it to the state of Michigan to write a will for her:  “It means that she didn’t get to choose who would be in charge of her estate, including being in control of her music catalog. That’s going to be determined by the heirs, assuming they can agree. And it means that everything is going to be played out in public view, including the valuation of her assets, her music catalog – everything. It’s completely and totally public and all avoidable.”

Aside from settling the estate, the heirs may have to contend with the federal estate tax of 40 percent, which must be paid nine months after the owner of the estate dies. The federal estate tax exemption is $11.18 million a person for 2018. In other words, if an estate is valued at more than $11.18 million, there could be a tax liability associated with the estate. The tax consequences of not having a will and estate plan in place can be devastating to the heirs.

Planning for one’s death is not the most pleasant way to spend one’s time, but it something that can save a world of trouble for your loved ones and preserve what you have worked so hard to earn over your lifetime.

We advise that you do not wait to draft a will until you decide on the ideal plan for your assets. It is best to plan now for your current wishes. If circumstances should change, you can always amend your will at a later date. The most important thing is to have a will and estate plan in place so your assets are not distributed at the discretion of the courts.

Please let us know how we can help you create an estate plan that protects your assets and your loved ones.

Source: Accounting Today