Unfortunately, on August 16, 2018, Aretha Franklin passed away from advanced pancreatic cancer. Ms. Franklin was a very well known musical artist that is currently rumored to have had a lucrative estate. At this time, it is being estimated that the value of her estate is approximately $80 million dollars. Instinctively you would think that she would have a will or a trust, right? According to the above article, she did not. The article indicates that her attorney insisted for years that she needed to have estate planning documents in place, but it doesn’t seem like she ever did it. As it stands right now, she has left behind an $80 million dollar estate, four sons, and a niece; who has already asked the Clerk to appoint her as the personal representative for Ms. Franklin’s estate.
What does all of this mean? First, we look at where she passed away. It looks like she died in Michigan, so any legal process that is identified in the above article is not relevant to North Carolina. But what would have happened if she died in North Carolina? We then look to whether or not she had a surviving spouse. With the information provided above and a quick search into Aretha’s marital status, she was not married at the time of her death. The North Carolina intestacy laws seem to give a substantial portion of the estate to the surviving spouse. For example, if Aretha were married and had four sons then the husband would have gotten a 1/3 undivided interest in the real property, leaving the remaining 2/3 to be split amongst the four children. The hypothetical distribution of her personal property would have been that the husband would have received $60,000 of the value of the personal property plus 1/3 of the remaining balance of the personal property, leaving the remaining 2/3 to be split amongst her four sons. Since Ms. Franklin was not married at the time of her death and IF she had passed away in North Carolina, then the four children would likely split the account equally.
Of course, with larger estates, this isn’t something that is as simple as dividing everything up equally between everyone and carrying on. One of the first things that I anticipate her personal representative will need to do is immediately retain an attorney that can draft a carefully worded trust to delegate what happens to the future income of her estate. Future income? What’s that? For Aretha, there is a good chance that her music will continue to profit for decades to come. Who is entitled to that profit? All four children? Under what terms? What if one of her children passes away who is still covered by the terms of the trust? Will their share be distributed to the siblings or will it get passed down to their children? This is a perfect example of how a trust for larger estates is beneficial.
I mentioned above that the personal representative will likely need to open a trust and that her niece applied to become the personal representative. Why would her niece do that? Again, remember in this hypothetical and we are in North Carolina. In North Carolina, the personal representative can receive up to a 5% commission for handling the estate. A 5% commission doesn’t seem like a lot when we put it in context of an average person’s estate. For example if you were handling a $40,000.00 estate, then you would be looking at $2,000.00 commission. However, if we are dealing with a large estate then that number gets to be much higher. Take, for example, Aretha Franklin’s estate. Right now, her estate has an estimated value of $80 million dollars. If she passed away in North Carolina, then the personal representative could be looking at a $4 million dollar commission. So, assuming the niece is approved and assuming this were in North Carolina, the niece just potentially set herself up to receive a hefty distribution at the close of the proceedings.
Why was the word “potentially” used? In North Carolina, just because the Clerk CAN grant up toa 5% commission doesn’t mean the personal representative will get that entire 5%. When does the Clerk make that decision? Well in North Carolina, when you close an estate, you have to submit a final accounting and show the Clerk where all of the assets went. This includes the allocation of a 5% commission. Most of the time, people assume that they can get all 5%, distribute the assets accordingly, and then ask the Clerk to approve what they did. This is where some Personal Representatives can have an issue. If the Clerk looks at the account and the work that went into the estate and determines that the personal representative should only be entitled to perhaps 3% or 4%, then the Personal Representative would be responsible for reimbursing the amount they distributed to themselves that was over what the Clerk decided was fair and would likely need to resubmit a new final account. How do you prevent this? Submit a draft accounting with the Clerk before making any distributions, this way you are doing what the Clerk approves rather than guessing what you are doing is right.
With all that being said, it is going to be interesting to see what happens with this estate. Will the Clerk approve of Aretha’s niece’s request to become the personal representative? Will her sons contest that request and want to nominate someone else? Who else is going to come forward to try to lay some claim to the estate?
This is merely a hypothetical and not intended to be used as legal advice or guidance for any potential matter in any state. If you have questions about any estate planning or estate administration concerns then please call our office at 919-335-5291 today to schedule a free consultation with the attorney about your matter.