We tend to think the famous and ultra-wealthy have top-notch advisors and airtight financial plans in place. More often than not, they’re no better prepared than the average American when it comes to protecting and transferring their wealth. Sometimes worse.
Take Aretha Franklin.
The iconic Queen of Soul didn’t leave behind a formal, typewritten will when she died of pancreatic cancer five years ago at age 76. Her net worth was estimated at $80 million when she died. But due to back taxes owed, lawyer fees and several updated valuations, the 18-time Grammy winner’s estate is now worth closer to $6 million, including her gated mansion, according to a BBC report. But that’s still a sizable estate for her heirs to split, because the $6 million valuation doesn’t include future royalties, which are likely to be considerable.
Originally many believed Franklin died without a will. That meant her four sons would likely share her assets evenly after going through probate. But several months after her death, Franklin’s family discovered two handwritten, barely legible wills at her Detroit home that were written in 2010 and 2014, respectively. The 2014 will was found in a notebook under couch cushions. The 2010 will was found in a locked cabinet.
Handwritten (holographic) wills aren’t recognized in most states because they’re so easy to forge or alter. But Franklin’s home state of Michigan is among a handful of states where handwritten wills are legally permissible—provided those documents are signed by two competent witnesses. Generally, courts say the most recent will supersedes older wills. But in Franklin’s case, the 2010 handwritten will was notarized and signed, while the 2014 wasn’t. According to Michigan law, the parameters in the unnotarized will can still be put in place as long as it’s dated, signed and in the original writer’s handwriting.
The 2010 will lists one of Franklin’s sons, Theodore White, and White’s niece, Sabrina Owens, as co-executors of the estate. It also says two other sons, Kecalf Franklin and Edward Franklin, “must take business classes and get a certificate or a degree” in order to benefit from the estate. Those stipulations weren’t required of the other two children, including Clarence Franklin, 63, who has special needs, who lives under a guardianship and who must be regularly cared for. In many cases, heirs with special needs are entitled to state benefits and disability benefits, etc. But if the estate isn’t set up properly, such as with a special needs trust, those benefits could be lost.
The 2014 will also has Owens as an executor but crosses out White’s name, replacing him with Franklin’s son Kecalf Franklin. And in this version of the will, there’s no stipulation requiring business classes. Kecalf Franklin and his grandchildren would get his mother’s main home in Bloomfield Hills, which was valued at $1.1 million when she died but is worth much more today. However, the 2010 version splits the home evenly between White and Kecalf Franklin.
The sons sued in court over the conflicting wills, and a Michigan jury determined last week that the handwritten 2014 will—yes, the one found in a notebook under couch cushions—is the valid will for Franklin’s multimillion-dollar estate. Presumably it’s the blueprint for settling the estate (some day).
In most states that don’t recognize handwritten wills, the estate would have passed under the intestate laws, essentially saying the deceased had no plan. Then the estate would be divided up however the state saw fit. Further, it’s very slow, expensive (and public) to do it that way.
Unpaid Taxes
In a separate challenge to the estate since Franklin’s death, the IRS claimed the R&B legend owed nearly $8 million in unpaid taxes. The estate was able to pay back the debt by 2022, according to Detroit Free Press. The debt had kept Franklin’s children from earning profits from their mother’s estate.
Keeping Things Private
Ironically, Franklin was hesitant to consult with estate planners despite years of poor health because she was so guarded about her private life. A revocable trust could have allowed her to circumvent the courts. But now her financial affairs are anything but private. As advisors, our job is to make clients feel safe enough to talk about all of their financial concerns, including what their wishes will be when they pass on. If you don’t know the whole truth, it’s extremely difficult to do the planning. This happens more than you think. Bob Marley, Prince, Howard Hughes, Pablo Picasso, Jimi Hendrix and even Abraham Lincoln, among others, all died without wills and triggered years of family squabbling.
Lessons for Advisors
We have to pull our heads out of the sand, and this applies across the board. Just because someone is wealthy or famous doesn’t mean they have their estate planning done—or done correctly and recently. That’s one of the biggest mistakes advisors make. Because their ultra-wealthy clients are successful and know how to make lots of money, advisors assume they have the rest of their lives in order—including their estate planning.
We have to be intelligent enough to ask the right questions. Quite often, your most affluent and successful clients are surrounded by people who agree with them and rarely challenge them. As a result, they don’t know what they don’t know—and are ashamed to admit they don’t know. They put up a good front, appearing unapproachable and distant, when they really need the help as much as anybody else. Because their situations are more complex, the need for planning is even more important.
Just because your clients aren’t explicitly asking you for assistance with their estate planning and planned giving, it doesn’t mean they don’t need help. People often balk at the cost of doing a complex estate plan. But what’s the cost of not having a complex estate plan—significantly more! I wouldn’t be surprised if the Queen of Soul is looking down from above thinking to herself: “Say a little prayer for me.”
Randy A. Fox, CFP, AEP is the founder of Two Hawks Consulting LLC. He is a nationally known wealth strategist, philanthropic estate planner, educator and speaker.