Clearly there is a problem, and recent celebrity cases underscore the issues which arise when a high net worth individual does not have a will. The recent death of the famous singer, Aretha Franklin, is only the latest in a line of such cases.

The North American wealth management industry has a clear incentive to encourage clients to have their will written, and spread the message that sensible will and estate planning saves all manner of trouble later on. When families are grieving over the loss of a loved one, how much harder is the pain when fights break out over an estate and the tax collectors demand their cut?

The team at Cresset Capital Management, the US firm, examine the issues. The editors of this news service are pleased to share these views and invite responses. Email tom.burroughes@wealthbriefing.com

The headline should have been shocking.

“Aretha Franklin, Queen of Soul, dies without a will.”

Should have … but we have seen it before. She was far from alone. The following is a small sample of other famous people with significant wealth who died without a will:

Prince; 

Bob Marley; 

Pablo Picasso; 

Jimi Hendrix; and 

Howard Hughes. 

How does this happen?  True, some died young and unexpectedly. But what about the others? 

“It’s safe to assume they had a host of advisors who no doubt implored them to have a will,” says Scott Winget, senior managing director of Family Enterprise Consulting at Cresset Family Office. “But obviously, those recommendations were ignored. Why? Sometimes their mortality is just too uncomfortable to think about. Sometimes they don’t want to upset their family and can’t decide how to divide things up. Sometimes it’s just a low priority.”

While it is true that virtually everyone should have a will, for high net worth individuals, the ramifications of not having one can be particularly problematic. Not only can it lead to infighting, but it can also result in unnecessary costs and lost opportunities. 

We will never know exactly why Aretha Franklin did not create a will. What we do know are the potential ramifications:

-- First, without a will and an accompanying revocable trust, her entire estate, including the value of all of her assets, will become public record as part of the probate process.  Beyond the loss of privacy, that could cost her family considerable money and take far longer to settle;   

-- Second, regardless of her intentions, each of her four sons can be expected to receive one-quarter of her estate.  Even if that is what she wanted, without an estate plan, the executor will decide who gets what;   

-- Third, if she had certain causes she cared about, none of her assets will go directly to those charities, where they no doubt could have done considerable good;   

-- Fourth, if she had done at least some minimal estate planning during her lifetime , it is likely that she could have reduced her estate tax bill; and 

-- Lastly, it is believed that one of her sons has special needs and an appointed guardian/conservator. Without the correct trusts and documents in place, costly court supervision might be required, and he might lose access to public benefits. 

Thankfully, there is a silver lining to all of this in that it serves as a cautionary tale and a reminder for the rest of us to ensure that we all have the basics of an estate plan. The following is a checklist to get you started:  

1. First and foremost, it is never too early to start. Creating a will is not something to do later in life, particularly if you have a spouse and/or children, it is essential. “If you don’t have a will in place, you are essentially telling the state to make your decisions for you, and every state has its own rules to divide up property,” Winget explains;  

2. Review your beneficiary designations for retirement accounts and life insurance policies. Are the people listed still the right ones? Have you listed any contingent backups? In many instances, it may have been years or decades since those beneficiaries were chosen. Do you want your ex-spouse to receive your 401?

3. Get your personal durable power of attorney and health care proxy drafted. This is critical to ensure that your wishes are followed in case you become unable to make decisions for yourself ;  

4. Select a person you trust to serve as the executor or administrator of your will. That person will help ensure that your assets are distributed according to your wishes. If not, the courts will choose that person for you;   

5. Create a personal property memorandum, a simple document referred to in your will that you can draft on your own and identifies who will receive your personal items, such as collectibles and family heirlooms;

6. For larger and more complex estates, it is important to engage in more advanced wealth planning to mitigate your estate tax liability and protect your family’s assets. This is especially true for those with complex assets or estates in excess of the current estate tax exemption of $11.18 million ;  

7. Let your loved ones know that you have a will, where to find it, and the location of all of your assets and accounts. Imagine the confusion if you were to die unexpectedly without sharing that information; and 

8. Finally, let your loved ones know your wishes, as expressed in your will. That will help avoid surprises and, more importantly, will serve as a basis for discussion on family values. 

“Aretha Franklin’s passing is yet another sad example of why it’s so important that we all have a will and estate plan,” Winget concludes. “To procrastinate is to waste money and allow others to potentially frustrate your intentions. Through the thoughtful creation of an estate plan, you are protecting your family and helping to ensure the legacy you desire is realized.”

Disclaimer

The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based on publicly available information from sources believed to be reliable - we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.