What’s the Latest with the Queen of Soul’s Estate?

Clearing the Queen of Soul’s tax debts could clear the way for her four sons to finally take over her post-death affairs and fully benefit from revenues flowing into her estate — which could be millions of dollars.

The Detroit Free Press reports in its recent article entitled “Aretha Franklin estate says $7.8 million IRS bill is paid; could spell windfall for sons” reports that Franklin’s tax burden had been an immovable hurdle as her heirs sorted out other estate matters — sometimes combatively — in Oakland County Probate Court following her 2018 death.

The IRS debt prevented the sons from receiving money, even while the late star’s music and movie projects generated big revenue in her name. The remaining tax liability was paid off in June with delivery of a cashier’s check to the IRS.

The IRS said that the singer’s estate had nearly $8 million in unpaid taxes, penalties and interest that had piled up during the previous seven years. The estate at last struck a deal with the IRS in April 2021 with an accelerated payoff schedule that also set up limited but regular payments to Franklin’s sons.

The IRS deal earmarked 45% of incoming Aretha Franklin revenue to pay down the standing tax balance. Another 40% was directed to an escrow account to handle taxes on newly generated income.

With the tax debt now purportedly off its back, the estate contends that most of the incoming cash should get distributed equally among the four sons each month. From that point, income tax obligations would be on each individual. Oakland County (MI) Probate Judge Jennifer Callaghan would have to approve the request.

In the meantime, there’s still the issue of multiple wills that were apparently signed by Franklin. That includes three handwritten documents discovered in her home in 2019.

A fourth will draft suddenly was discovered last year — a typed document prepared by a Troy law firm in 2017 but left unsigned by the star.

The documents contain conflicting instructions about Franklin’s wishes for her estate, including which heirs were to get what, and their emergence exacerbated tensions among sons Clarence, Edward, Teddy and Kecalf.

A trial to clear up the situation was planned for 2020 but was delayed due to the pandemic.

Reference: Detroit Free Press (July 11, 2022) “Aretha Franklin estate says $7.8 million IRS bill is paid; could spell windfall for sons”

When Should I Hire an Estate Planning Attorney?

Kiplinger’s recent article entitled “Should I Hire an Estate Planning Attorney Now That I Am a Widow?” describes some situations where an experienced estate planning attorney is really required:

Estates with many types of complicated assets. Hiring an experienced estate planning attorney is a must for more complicated estates. These are estates with multiple investments, numerous assets, cryptocurrency, hedge funds, private equity, or a business. Some estates also include significant real estate, including vacation homes, commercial properties and timeshares. Managing, appraising and selling a business, real estate and complex investments are all jobs that require some expertise and experience. In addition, valuing private equity investments and certain hedge funds is also not straightforward and can require the services of an expert.

The estate might owe federal or state estate tax. In some estates, there are time-sensitive decisions that require somewhat immediate attention. Even if all assets were held jointly and court involvement is unnecessary, hiring a knowledgeable trust and estate lawyer may have real tax benefits. There are many planning strategies from which testators and their heirs can benefit. For example, the will or an estate tax return may need to be filed to transfer the deceased spouse’s unused Federal Estate Unified Tax Credit to the surviving spouse. The decision whether to transfer to an unused unified tax credit to the surviving spouse is not obvious and requires guidance from an experienced estate planning attorney.

Many states also impose their own estate taxes, and many of these states impose taxes on an estate valued at $1 million or more. Therefore, when you add the value of a home, investments and life insurance proceeds, many Americans will find themselves on the wrong side of the state exemption and owe estate taxes.

The family is fighting. Family disputes often emerge after the death of a parent. It’s stressful, and emotions run high. No one is really operating at their best. If unhappy family members want to contest the will or are threatening a lawsuit, you’ll also need guidance from an experienced estate planning attorney. These fights can result in time-intensive and costly lawsuits. The sooner you get legal advice from a probate attorney, the better chance you have of avoiding this.

Complicated beneficiary plans. Some wills have tricky beneficiary designations that leave assets to one child but nothing to another. Others could include charitable bequests or leave assets to many beneficiaries.

Talk to an experienced attorney, whose primary focus is estate and trust law.

Reference: Kiplinger (July 5, 2022) “Should I Hire an Estate Planning Attorney Now That I Am a Widow?”

Should I have a Pour-Over Will?

A pour-over will is a type of will that’s created in conjunction with a trust. It can help facilitate the transfer of assets, if a trust’s grantor (the person establishing the trust) has failed to transfer all intended assets into the trust. A pour-over will can be an important part of a person’s estate planning checklist. Bankrate’s recent article entitled “Do you need a pour-over will in your estate plan?” gives us more information.

This type of will has a provision that directs the will to “pour-over” any residual assets left in the person’s estate into a living trust that is overseen by a trustee upon the grantor’s death.

A big benefit of this type of arrangement is that it’s a backstop, in case there were assets the grantor didn’t specifically fund into the trust before their death. This allows these assets to avoid the intestate rules (when someone passes away without a valid will), even though they were not specifically part of the living trust.

A person might designate certain assets to be titled in the name of a living trust they’ve established to facilitate passing these assets to the trust’s designated beneficiaries upon the grantor’s death. The trust avoids probate on these assets. However, any assets, such as an IRA or a life insurance policy, that passes on to heirs via a beneficiary designation wouldn’t be eligible for inclusion in this type of trust.

A pour-over will allows the grantor to state that any assets that had not previously been included in the trust should be added to the trust upon their death. Therefore, assets that may have been acquired after the trust was established are eligible for the same treatment as the assets that had already been funded to the trust.

It’s also simple and eliminates the need to decide which heir receives certain assets because everything eventually becomes part of the trust. These assets are, therefore, distributed via the terms of the trust.

It also helps avoid a lengthy probate case due to a significant asset that wasn’t included in the trust or elsewhere.

However, this type of will doesn’t eliminate the probate process. The will still needs to go through probate. There may also be possible legal challenges, which can be costly to litigate and take time to resolve.

Ask an estate planning attorney about a pour-over will as a part of your estate plan.

Reference: Bankrate (April 20, 2022) “Do you need a pour-over will in your estate plan?”

Can My Ex Get Some of My Estate?

For many people, their will is their final communication to the world.

A will states how their property should be distributed upon their death. CNBC’s recent article entitled “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes” says that depending on how you plan, it may have a few some surprises for those who are close to you.

There are a couple of situations where you could inadvertently leave money to people you no longer intend as heirs, much to the surprise of other heirs.

An ex-spouse could get some of your money when you die, if you do not update your beneficiaries under a retirement plan.

Divorce does not automatically change a beneficiary designation, unless the divorce decree includes a stipulation to change it. IRAs are the same, so it is not uncommon for an IRA owner to die without having changed the beneficiary designation after a divorce. It’s usually just a simple oversight.

However, most state laws provide that once a married couple is divorced, ex-spouses lose all property rights.

However, pensions are governed by federal law, formally known as ERISA or the Employee Retirement Income Security Act of 1974. As a result, state rules do not apply.

Pensions are not the only accounts that people tend to forget to update. Bank account beneficiary designations are often hard to find, and circumstances may change from when you first set them up.

While it may be tempting to disinherit someone to whom you are no longer close, it can be a bad idea. That is because it can invite all kinds of issues, like a will challenge.

There is always the chance you may reconcile, even on your death bed, at which point it will be too late to update your will and estate plan. Therefore, leave something less to them and do not say anything bad.

To ensure your wishes are carried out the way you want, work with an experienced estate planning attorney.

Reference: CNBC (Jan. 9, 2022) “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes”

How Do I Give Assets to Minor Grandchildren in My Will?

If a married couple is creating its estate plan, then how does the couple leave the estate to non-adult grandchildren?

However, what if something were to happen to them before the grandchildren become adults? Can this couple make sure the minor grandchildren do not get control of any inheritance until they’re adults?

Can arrangements be made for any unborn grandchildren to be included?

Nj.com’s recent article entitled “How can I leave my money to my minor grandchildren when I die?” says that one way to solve these issues is to create a testamentary trust to provide for young beneficiaries whether they’re children, grandchildren, step-children, or unrelated beneficiaries. The terms of a testamentary trust are in your will. It is only established and funded after you pass away.

The terms of the trust generally provide instructions to the trustee about the ages at which distributions must be made, if any. These instructions also allow the trustee to make discretionary distributions of income and principal to the beneficiaries.

Beneficiaries do not need to be identified by name or need to be born at the time the will is written.  However, they must be able to be identified upon your death. As a result, you can provide a bequest to all of your grandchildren, whether or not they are born yet.

It doesn’t matter where your grandchildren live as far as estate planning is concerned. However, if they live outside the United States and the bequest is considerable, the laws of their home country should be addressed. This is because a big gift may cause adverse tax implications to the recipient.

For children, some states’ laws allow you to add a term in your will that penalizes any interested person — like an heir or beneficiary — for contesting the will.

However, if there’s probable cause initiating a proceeding concerning the estate, then the clause will not be enforced.

When a person names another as primary beneficiary, they should also name one or more contingent beneficiaries, so that if the first person predeceases him or her, they will not have to revise the will.

If you do not designate a contingent beneficiary, and an heir predeceases, the assets pass according to the state’s intestacy statute rather than according to the will.

Reference: nj.com (Dec. 9, 2021) “How can I leave my money to my minor grandchildren when I die?”

Can You Keep Your Children from Inheriting Your Money?

What if you want to exclude your children and give your assets to a charity or a college after you pass away? You also don’t want your children to be able to contest your will.

Nj.com’s article entitled “My kids are brats. I don’t want them to inherit. What’s next?” explains that a person with this intention has a number of options for their estate.

First, you should understand that, unless there is a pre-existing contractual agreement or other obligation to do so, a person typically isn’t required to leave anyone other than their spouse anything in their estate.

A properly drafted will by an experienced estate planning attorney allows a person to name the beneficiaries of their estate. This can include charities. It also includes the amount or specific items and in what way each beneficiary will inherit.

You really can’t do much to prevent a child from challenging a will. However, your estate planning attorney can take steps to mitigate the risk that a challenge may be successful. This can include ensuring the testator — the person who establishes a will — has the requisite capacity to sign a will (“being of sound mind”) and that they’re signing it free of any undue influence or duress.

An experienced estate planning attorney will usually meet with a client several times to discuss the client’s assets and intention of disinheriting a child. The attorney will take notes that may be offered as evidence in the event of a will contest and even conduct the meeting in the presence of another attorney or staff member of the firm who could act as another witness.

A will should include specific language that it is the testator’s intent to disinherit a person, and that this individual should be treated as predeceasing the testator for purposes of the will. This helps ensure that the disinherited individual doesn’t somehow benefit.

Note that not all assets pass through the estate and pursuant to the terms of a will. Assets like retirement accounts, life insurance, annuities, and other financial accounts pass by beneficiary designation.

Real estate usually passes by operation of law, such by joint tenancy with right of survivorship.

Reference: nj.com (Dec. 22, 2021) “My kids are brats. I don’t want them to inherit. What’s next?”

Remind Me Why I Need a Will

There are a number of reasons to draft a will as soon as possible. If you die without a will (intestate), you leave decisions up to your state of residence according to its probate and intestacy laws. Without a will, you have no say as to who receives your assets or properties. Not having a will could also make it difficult for your family.

Legal Reader’s recent article entitled “Top 7 Reasons to Fill Out a Will” reminds us that, before it is too late, consider these reasons why a will is essential.

Avoid Family Disputes. This process occasionally will lead to disagreements among family members, if there’s no will or your wishes aren’t clear. A contested will can be damaging to relationships within your family and can be costly.

Avoid Costly and Lengthy Probate. A will expedites the probate process and tells the court the way in which you want your estate to be divided. Without a will, the court will decide how your estate will be divided, which can lead to unnecessary delays.

Deciding What Happens to Your Assets. A will is the only way you can state exactly to whom you want your assets to be given. Without a will, the court will decide.

Designating a Guardian for Your Children. Without a will, the court will determine who will take care of your minor children.

Eliminate Stress for Your Family. Most estates must go to probate court to start the process. However, if you have no will, the process can be complicated. The court must name personal representatives to administer your estate.

Protect Your Business. A will allows you to pass your business to your co-owners or heirs.

Provide A Home For Your Pets. If you have a will, you can make certain that someone will care for your pets if you die. The law considers pets as properties, so you are prohibited from leaving assets to your pets in your will. However, you can name beneficiaries for your pets, leaving them to a trusted person, and you can name people to serve as guardians of your pets and leave them funds to meet their needs.

Drafting a will with the help of an experienced estate planning attorney can give you and your family peace of mind and convenience in the future.

Reference: Legal Reader (Jan. 28, 2021) “Top 7 Reasons to Fill Out a Will”

Who Can Witness Wills?

For a will to be binding, there are a number of requirements that must be met. While state laws on wills vary, most require you to be of legal adult age to make a will and have testamentary capacity (i.e., that you be “of sound mind”).

Yahoo Finance’s recent article entitled “Who Can and Cannot Witness a Will?” explains that you usually must have your will witnessed.

Witnesses to your will are significant in the event that someone disputes its validity later or if there is a will contest. If one of your heirs challenges the terms of your will, a witness may be asked by the probate court to attest that they watched you sign the will and that you appeared to be of sound mind when you did so. Witnesses provide you with another layer of validity to a will, and it makes it more difficult for someone to dispute its legality.

When drafting a will, it’s important to understand several requirements, including who can serve as a witness. Generally, but depending on applicable state law, anyone can witness a will, as long as they meet two requirements: (i) they are of legal adult age; and (ii) they do not have a direct interest in the will. Therefore, the types of people who could witness a will for you include your friends who aren’t to receive anything from your estate, a neighbor, co-workers and any of your relatives who aren’t included in your will.

If you’ve hired an experienced estate planning attorney to help you draft your will, he or she can also act as a witness, provided they’re not named as a beneficiary. An attorney who’s also acting as the executor of the will (the person who oversees the process of distributing your assets and paying off any outstanding debts owed by your estate) can also witness a will.

Most states don’t allow you to select individuals who will benefit from your will as witnesses. If you are drafting a will that leaves assets to your spouse, children, siblings, or parents, then none of those individuals can serve as witnesses to the will’s signing because they all have an interest in the will’s terms. The same is true for relatives or spouses of any of the beneficiaries.

The witnesses to your will do not need to review the entire will document in order to sign it. They only need to be able to verify that the document exists, that you have signed it in their presence and that they have signed it in front of you.

When you sign the will, get both witnesses together at the same time. You’ll need to sign, initial and date the will in ink, then have your witnesses do the same. Some states require you to attach a self-proving affidavit or have the will notarized in front of the witnesses.

Reference: Yahoo Finance (Dec. 28, 2020) “Who Can and Cannot Witness a Will?”

Does My Estate Plan Need an Audit?

You should have an estate plan because every state has statutes that describe how your assets are managed, and who benefits if you don’t have a will. Most people want to have more say about who and how their assets are managed, so they draft estate planning documents that match their objectives.

Forbes’ recent article entitled “Auditing Your Estate Plan” says the first question is what are your estate planning objectives? Almost everyone wants to have financial security and the satisfaction of knowing how their assets will be properly managed. Therefore, these are often the most common objectives. However, some people also want to also promote the financial and personal growth of their families, provide for social and cultural objectives by giving to charity and other goals. To help you with deciding on your objectives and priorities, here are some of the most common objectives:

  • Making sure a surviving spouse or family is financially OK
  • Providing for others
  • Providing now for your children and later
  • Saving now on income taxes
  • Saving on estate and gift taxes in the future
  • Donating to charity
  • Having a trusted agency manage my assets, if I am incapacitated
  • Having money for my children’s education
  • Having retirement income; and
  • Shielding my assets from creditors.

Speak with an experienced estate planning attorney about the way in which you should handle your assets. If your plan doesn’t meet your objectives, your estate plan should be revised. This will include a review of your will, trusts, powers of attorney, healthcare proxies, beneficiary designation forms and real property titles.

Note that joint accounts, pay on death (POD) accounts, retirement accounts, life insurance policies, annuities and other assets will transfer to your heirs by the way you designate your beneficiaries on those accounts. Any assets in a trust won’t go through probate. “Irrevocable” trusts may protect assets from the claims of creditors and possibly long-term care costs, if properly drafted and funded.

Another question is what happens in the event you become mentally or physically incapacitated and who will see to your financial and medical affairs. Use a power of attorney to name a person to act as your agent in these situations.

If, after your audit, you find that your plans need to be revised, follow these steps:

  1. Work with an experienced estate planning attorney to create a plan based on your objectives
  2. Draft and execute a will and other estate planning documents customized to your plan
  3. Correctly title your assets and complete your beneficiary designations
  4. Create and fund trusts
  5. Draft and sign powers of attorney, in the event of your incapacity
  6. Draft and sign documents for ownership interest in businesses, intellectual property, artwork and real estate
  7. Discuss the consequences of implementing your plan with an experienced estate planning attorney; and
  8. Review your plan regularly.

Reference: Forbes (Sep. 23, 2020) “Auditing Your Estate Plan”

When Exactly Do I Need to Update My Will?

Many people say that they’ve been meaning to update their last will and testament for years but never got around to doing it.

Kiplinger’s article entitled “12 Different Times When You Should Update Your Will” gives us a dozen times you should think about changing your last will:

  1. You’re expecting your first child. The birth or adoption of a first child is typically when many people draft their first last will. Designate a guardian for your child and who will be the trustee for any trust created for that child by the last will.
  2. You may divorce. Update your last will before you file for divorce, because once you file for divorce, you may not be permitted to modify your last will until the divorce is finalized. Doing this before you file for divorce ensures that your spouse won’t get all of your money, if you die before the divorce is final.
  3. You just divorced. After your divorce, your ex no longer has any rights to your estate (unless it’s part of the terms of the divorce). However, even if you don’t change your last will, most states have laws that invalidate any distributive provisions to your ex-spouse in that old last will. Nonetheless, update your last will as soon as you can, so your new beneficiaries are clearly identified.
  4. Your child gets married. Your current last will may speak to issues that applied when your child was a minor, so it may not address your child’s possible divorce. You may be able to ease the lack of a prenuptial agreement, by creating a trust in your last will and including post-nuptial requirements before you child can receive any estate assets.
  5. A beneficiary has issues. Last wills frequently leave money directly to a beneficiary. However, if that person has an addiction or credit issues, update your last will to include a trust that allows a trustee to only distribute funds under specific circumstances.
  6. Your executor or a beneficiary die. If your estate plan named individuals to manage your estate or receive any remaining funds, but they’re no longer alive, you should update your last will.
  7. Your child turns 18. Your current last will may designate your spouse or a parent as your executor, but years later, these people may be gone. Consider naming a younger family member to handle your estate affairs.
  8. A new tax or probate law is enacted. Congress may pass a bill that wrecks your estate plan. Review your plan with an experienced estate planning attorney every few years to see if there have been any new laws relevant to your estate planning.
  9. You come into a chunk of change. If you finally get a big lottery win or inherit money from a distant relative, update your last will so you can address the right tax planning. You also may want to change when and the amount of money you leave to certain individuals or charities.
  10. You can’t find your original last will. If you can’t locate your last will, be sure that you replace the last will with a new, original one that explicitly states it invalidated all prior last wills.
  11. You purchase property in another country or move overseas. Many countries have treaties with the U.S. that permit reciprocity of last wills. However, transferring property in one country may be delayed, if the last will must be probated in the other country first. Ask your estate planning attorney about having a different last will for each country in which you own property.
  12. Your feelings change for a family member. If there’s animosity between people named in your last will, you may want to disinherit someone. You might ask your estate planning attorney about a No Contest Clause that will disinherit the aggressive family member, if he or she attempts to question your intentions in the last will.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”