In June 1980, Universal Studios released the movie “The Blues Brothers” starring Dan Ackroyd and John Belushi. I wanted to see it in the worst way. However, I was eleven years old and the movie was rated R. It wasn’t until years later that I finally got to see the movie which, if you love music, is full of great songs and musical artists, as well as some good laughs. One of the artists in the movie was Aretha Franklin and while many people think of the song “Respect” when they think of Aretha, the first song that came to mind when I heard of her passing was “Think.” Now you may be surprised by this choice. However, this song came to mind because I heard that the Queen of Soul had died without a will. The Woman who sang “Think, think about what you’re trying to do to me” clearly did not think about what she would be doing to her loved ones as a result of dying without a will and an estate plan.
I used to give seminars on estate planning and often would ask people to raise their hands if they had an estate plan. Around 25% of the room might raise their hands. I then would share that everyone in the room actually had an estate plan, but many of them would be disappointed with the results. Why? Because if you do not take the time to execute an estate plan, the state in which you resided has an estate plan for you called intestacy. When you die intestate, it means dying without a will and the laws of the state in which you resided govern how your assets will be distributed. The intestate estate plan will very likely result in your assets going to people that you would not have anticipated, or at the very least, not in the amounts you would have wanted. For example, in Nebraska if you are married and have children of the marriage, the surviving spouse receives the first $100,000 from your estate and the remaining assets are split 50% to your spouse and 50% to your children in equal shares. Not quite the scenario most spouses would have chosen as spouses often execute the “I Love You” will which basically leaves everything to the surviving spouse with the intent that any remaining assets will go to children when the surviving spouse dies. While distribution of intestate assets varies from state to state, the Nebraska law is a perfect example of why having a Will is important and definitely preferable to dying without one.
When a person dies, the process to distribute their assets is called probate. When a probate is opened with the court, a Personal Representative is appointed to distribute the deceased person’s assets and settle their final affairs. Probate is a very regimented process and a public one. Notice of a deceased person’s probate must be published in a newspaper of a specified circulation and run a prescribed number of times, to allow for interested parties to file claims in the probate. Because probate is a public proceeding, anyone can check out the file at the courthouse. Shortly after Burt Reynolds died, I saw a headline that read, “Burt Reynolds Omitted His Son from His Will.”i Now a headline like this catches your attention and makes you wonder, “Why would he do that?” It turns out that Burt Reynold’s will stated that his son is being provided for in a trust that Reynolds executed. So, as a result, no one other than a select few individuals will know what arrangements Burt Reynolds made for the son he adopted with Lonnie Anderson. This highlights one of the main benefits of and differences between a Trust and a Will….Privacy. While wills are a matter of public record, trusts are a very private matter and are not available for prying eyes to see. Trusts do not go through probate and the trustee of the trust would handle the deceased person’s final affairs.
In addition to the privacy aspect, trusts can allow for a smooth transition in the case of incapacity. When a trust is executed, the person making the trust, the Grantor, names a trustee. The trustee can be an individual or a corporate entity like a private trust company. Oftentimes, the Grantor serves as their own trustee, but if the Grantor should become incapacitated, either permanently or temporarily, the successor trustee steps in. Having a trust in times of incapacity, allows the trustee to provide continuous management of your assets without the need to go through a conservatorship proceeding. When time is of the essence, having to go through a court proceeding to appoint a conservator may result in costly delays. If the conservatorship is contested, meaning the parties involved are not in agreement, the proceedings will be delayed even further. Why not avoid arguments and ensure that the person or entity you want in charge of managing your assets is clearly stated by executing a trust and naming them as trustee or successor trustee?
When a trust is executed and properly funded, probate can be avoided. By properly funded, I mean that all of your assets are titled in the name of the trust. By doing this, the trust is the vehicle which distributes your assets upon your death and keeps your estate out of probate. Having a trust is like having the “get out of jail” card in Monopoly except you get to skip probate rather than skipping out of jail. If you own property in more than one state, a trust is an absolute necessity, unless you like the inflexibility of probate, and want to have one opened in every state where you own property. Not only does this add to the complexity of handling your estate, it greatly adds to the cost. By having a trust and titling all your assets in the name of the trust, including property you own in other states, you can avoid the additional cost and hassle of a multi-state probate administration.
In Aretha Franklin’s case, it appears that the family is currently in agreement and on the same page. However, there is an estimated $80 million dollars at stake and four children named as interested parties. Aretha’s long-time entertainment attorney Don Wilson had begged her to get a trust done. It was reported weeks before her death that she was ill. This would have been the time to get something on paper, a will at least. Estate planning can take a long time, but it does not have to. When time is of the essence and the person facing their mortality clearly expresses their wishes regarding the distribution of their assets, the will or trust will get done.ii I have seen it —when people are facing surgery with less than favorable odds or when doctors make a terminal diagnosis. No attorney wants to be embroiled in a messy intestate situation when it could be avoided. Even though there does not appear to be any current conflict among the heirs, Aretha’s attorney noted that proper planning would have avoided the messiness of dealing with her assets and her song rights. He stated, “I just hope it doesn’t end up getting so hotly contested. Any time they don’t leave a trust or a will, there always ends up being a fight.”iii No truer words could be spoken. Not only would planning have avoided the in-fighting that will likely occur, it could have also resulted in more money going to her heirs rather than Uncle Sam.
During my career, I previously worked twelve years as a corporate trustee. In that capacity, I settled hundreds of estates, some with trusts and others with only a will and my trust company named as the personal representative. From experience, I can tell you that paying a little more to have a trust included as part of your estate plan will save time and money down the road. Trusts typically are easier to administer, distribute assets quicker and allow for greater flexibility than having a will alone. Whether you choose to have a will or a will and a trust as part of your estate plan, is a discussion best left to you and your legal counsel. No matter what choice is best for you, the important thing is that you think about your loved ones and the legacy you want to leave behind. THINK.
i “Burt Reynolds Omitted His Son from His Will”, David H. Lenok, Wealth Management.com, September 18, 2018
ii Aretha Franklin Died Without a Will, David H. Lenok, Wealth Management.com, August 22, 2018
PLEASE NOTE LIMITATIONS: Please see Important Disclosure Information and the limitations of any ranking/recognitions, at www.fostergrp.com/info-disclosure/. A copy of our current written disclosure statement as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov.