Aretha Franklin died without a will.
According to her children, there was no will, no trust and otherwise no plan for her estate when she died. If you have ever sat down with Nancy or I for a financial planning session, you know that this is NOT a good situation to leave your loved ones in when you die.
When you die without a will (known as "dying intestate" in legal terms) your assets are subject to state laws. Not only do these vary depending on where you die, but they can change without anyone bothering to tell you! For terminology, please note that your estate is generally the collection of assets that you leave behind. If you die intestate, your property would be divided up by a court, in accordance with the state law. In many states, this means that your spouse and children, if you have any would share in what you leave behind. If you don't have a spouse or children, it moves generally to your next of kin. If nobody can be located that has a claim on your estate, your property goes to the State.
While you may not care too much about what happens to your assets when you die, it makes sense that you exercise some control over it besides leaving it up to the courts. Even if you don't think your estate will be worth anything, you should make a plan. Leaving matters up to the courts will undoubtedly incur high fees and drama. If you're worried about your children fighting over and squandering your assets, just think about what will happen when each of their lawyers gets to take a generous fee too!
How do you start estate planning? While this post is by no means an in depth guide to estate planning, carefully consider the assets you have: bank accounts, real property, business interests and future earnings like music royalties. Also consider who will be the beneficiaries of your estate: children, spouses, friends or charities! Depending on how large or complex your situation is, you will want to get a will or possibly et up a trust.
While this post is also definitely not legal advice, my general considerations for when you need a trust are when your estate includes complicated assets like business interests, hard to sell assets like collectibles or less common things like contracts and music royalties. You may also need a trust if your beneficiary arrangement is complicated - if you have children from multiple marriages, the amounts people receive are contingent on future estate values, you want to set up a foundation, or needing to provide for care of special needs children. Even if your estate is simple and your beneficiaries easygoing, a trust may make sense if you have a very large estate and you anticipate it being over the estate exemption for tax purposes. Extra careful planning and a third party trustee are very useful in all three of these situations.
Aretha Franklin died without a will or a trust. Her $80,000,000 estate will now be in the hands of a court, subject to state law that were not crafted with her needs in mind. Her beneficiaries will have to pay lawyers and negotiate over details, even in the most amicable family, these are not easy discussions to have. If you have ever heard nightmare stories of family disputes - it is likely that they came from insufficient or out-dated estate plans.
So, (please Queen Aretha forgive me) R-E-S-P-E-C-T the importance of estate planning and start thinking about the afterlife of your assets now!
Also enjoy this beautiful classic: I Say A Little Prayer.
Please remember that absolutely no part of this post should be considered personal financial or legal advice. Please consult a financial advisor or lawyer for such advice.