By Jeffrey R. Wolfe, Senior Vice President, Manager of Wealth Planning Strategies

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As we wrap up Estate Planning Awareness Week, we turn to two famous, but unfortunate, examples of what happens if you fail to plan.  On April 21, 2016, the recording artist Prince died.  On August 16, 2018, the Queen of Soul, Aretha Franklin, passed away.  These two amazing artists had incredible musical talents.  Unfortunately, they also had another similar trait, no estate plan.

It has been reported that both Prince and Aretha Franklin died without a will or any other formal estate planning.  To die without a will is also known as dying “intestate”.  When you die intestate that means you didn’t provide any formal direction on what you would like to happen to your assets when you pass away.  Consequently, your state’s law will decide where your assets will pass, and most states leave assets to your closest blood relatives.

For Prince, he had no children, meaning his six siblings are in line to inherit his fortune.  For Aretha Franklin, she left four children as presumed heirs, one of which it has been reported has special needs.  We will never know if either artist wanted these people to inherit, whether they had charitable intent with their estate, or anything else for that matter.  The state will decide who will inherit.

By dying intestate, several other consequences occur.  First, their assets must pass through probate, a public, judicial process.  Because it is public we can learn the value of their estate, what’s in it, who’s inheriting, etc.  All could have been avoided with proper trust planning.

For both, it is reported their estates are worth significantly more than the current $11.18 million federal estate tax exclusion.  Without planning, they have done nothing to address their tax liability.  It is likely each estate will owe several million dollars in estate tax.  Such taxes could have been managed for, or even minimized, with proper planning.

Intestate probate is also very slow and costly.  Forbes reported that as of the two-year anniversary of Prince’s death none of his beneficiaries have received a penny of his wealth.  However, the executor and their lawyers have been paid approximately $5.9 million in fees and expenses, with another $2.9 million already requested.[1]  It’s safe to assume this wasn’t Prince’s intent.  Moreover, these facts are only known because the probate estate is a matter of public record.

For Aretha Franklin, she failed to plan anything for her special needs child.  While it’s likely the inherited estate may leave enough assets to care for the child, it’s also possible that child could be in a facility sponsored by a government program that can no longer provide care for the child due to the newfound wealth.  Again, there are likely enough dollars for the child to go elsewhere, but it’s also likely such a change could be an overwhelmingly stressful event for the child.  Again, planning that involved a special needs trust could have been employed to address these issues.

Whether you’re as wealthy as these two, or whether or not you have a special needs child, the point remains that everyone needs to do an estate plan.  Failing to do so leaves decisions regarding your estate and your loved ones in the hands of a state controlled, public judicial process.  This is rarely someone’s intent.

To get started, review what you have in place today, if anything.  Upon your review, if you don’t like what you find, get to work on your plan.  Outline your goals for your legacy and your intentions for your estate.  Work with your Benjamin F. Edwards financial consultant to organize your efforts.  Seek tax and legal counsel and implement a formal plan.  Only you can control your legacy.  Don’t be the next unintended probate case.  Get your estate plan in order today.

IMPORTANT DISCLOSURES

The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards & Co. is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.

[1] Eghrari, Mark. Two Years Later, Prince’s Heirs Have Still Not Received a Penny of His Estatehttps://www.forbes.com/sites/markeghrari/2018/04/18/two-years-later-princes-heirs-have-still-not-received-a-penny-of-his-estate/#26aa8fd23ab2