Please enjoy our first cross-Atlantic blog post since the merger of Bryan Cave and Berwin Leighton Paisner. Caroline Ferrigan is a Senior Associate in the Private Client team in Bryan Cave Leighton Paisner’s London office. Stephanie Moll is a Private Client Partner in Bryan Cave Leighton Paisner’s Denver and St Louis offices.
The music world was left mourning the death of another legend recently with the passing of the Queen of Soul, Aretha Franklin. A woman with a voice full of power and emotion, her death leaves a musical landscape with few (if any) who can emulate someone rated by Rolling Stone as the greatest singer of all time. However, as well as leaving a gaping hole in the music industry, Aretha Franklin’s death may also leave an estate administration headache, as it is understood that she passed away without leaving a Will or trust.
With an estimated fortune of $80m, it may come as a surprise that someone of such significant wealth did not make a Will, but it is not the first time that such a high profile individual has passed away in these circumstances. The hugely talented singer and songwriter Prince also died without making a Will, leaving his estate in disarray – a situation still continuing two years after his death.
So what happens to someone’s estate if they die without making a Will? And is it a total disaster?
Fortunately, the law (in both the UK and the US) is at hand to ‘step in’ and direct how an estate passes where no Will has been made, or where a Will does not deal with the entire estate. These rules are known as the “intestacy rules” and they set out the way in which an estate passes according to the categories of family members the deceased leaves behind.
Under Michigan law, the two key categories of family members – spouse and descendants – are treated in priority to others. Since Aretha was not married at her death, her four children should be able to take comfort, at an otherwise sad and stressful time, that they do not have to overly worry about the need to bring any form of claim for provision from her estate. In fact, according to the Detroit Free Press, her four sons filed probate documents, listing themselves as interested parties in her estate, and her niece has also requested that she be appointed as personal representative of the estate.
So, no, relying on the intestacy rules is not a total disaster. However, the situation is best avoided, given the estate passes in accordance with statutory rules which may not correspond with the wishes of the deceased. Not every individual may want their children to receive potentially significant assets outright or for a spouse to receive only part of the estate – the potential effects of the intestacy rules.
Relying on the intestacy rules can also give rise to some pretty undesirable tax consequences. For example, under US law in effect in 2018, Aretha had estate and generation-skipping transfer tax exemptions of $11.18m (reduced by any lifetime use), which could have been allocated to trusts created for her descendants, allowing the trusts to continue from generation-to-generation without being subject to estate or generation-skipping transfer taxes, for as long as allowable under state law. Also, in both the UK and the US, in most cases, there is a significant benefit in leaving your entire estate to your surviving spouse (either outright or on a special form of trust) as transfers to spouses generally benefit from a total exemption from UK inheritance tax or US estate tax, as applicable.
As Aretha Franklin died with children, it seems that it should be possible for her estate administrators to avoid some of the mess encountered in Prince’s estate – particularly as the passing of Aretha’s estate does not appear at this stage to be contested. However, estate administration can be difficult and complicated even where a Will was in place. Why make the position harder at such a difficult time (both emotionally and practically) by not drawing up a Will? Her long-time attorney, Don Wilson, was quoted in the Detroit Free Press article, saying “I was after her for a number of years to do a trust. It would have expedited things and kept them out of probate, and kept things private.”
There is great peace of mind that comes with knowing that your wishes will be followed and your loved ones provided for once you have gone.
In any case, whilst we see how the administration of Aretha’s estate unfolds, we can all be thankful to be left with a catalogue of hits from a woman whose voice brought together the traditions of gospel, jazz and rhythm & blues in the most incredible way and in whose own words used “to the highest degree possible the gift that God gave me to use.” Rest in peace, Aretha Franklin (1942-2018).