Since Aretha Franklin’s death much has been made about the fact that she did not have a Will. The truth is she needed a Trust. This isn’t because of her significant wealth, but because Aretha had circumstances and preferences – shared by many Americans – that are not adequately addressed in a Will.
Many families now include children from prior relationships, a remarriage to a new spouse, or a new partner. Aretha had both children and a “special friend” of several decades – Willie Wilkerson. Because Willie was an important part of Aretha’s life for many, many years, it’s reasonable to assume that – if she had given attention to her estate plan before her death – Aretha would have included him. But then Aretha might have wondered “how can I help Willie while also making sure what remains of what I leave for him goes to my children at his death?” The solution? A Trust.
A Trust allows you to leave money for a beneficiary’s care and enjoyment without leaving the beneficiary in complete control of the funds. This feature allows you to provide for a new spouse or “special friend” during the rest of their lifetime and at the same time ensure that what you have provided for them isn’t frivolously spent, attacked by creditors, or diverted away from your children by the beneficiary’s subsequent marriage. A Trust is also useful to address any unique circumstances of your beneficiaries.
Special Needs Beneficiary
Aretha’s son Clarence is reported to have special needs. The term “special needs” refers to someone who has a disability. Clarence reportedly has an intellectual disability, but other beneficiaries may have a physical disability or a combination of intellectual and physical disabilities. The problem with leaving assets directly to a beneficiary with special needs is threefold.
First, if the beneficiary receives any needs-based government aid, then inheriting money might terminate the needed government assistance (that might not be replaceable in the marketplace). Second, because the beneficiary might not be able to manage her own funds, the court will need to appoint a conservator to manage the beneficiary’s money. The conservatorship will be in place for the rest of the beneficiary’s lifetime or until no assets remain. Third, needs-based programs treat money that the beneficiary inherits directly differently from money that you leave in a special needs trust. Money that you leave to the beneficiary through a special needs trust does not disrupt the government assistance the beneficiary receives. Money that the beneficiary receives directly may have to be used to reimburse the government, leaving less for the beneficiary or your successor beneficiaries. A Trust that you establish provides a much better alternative.
With a Trust, the parent can leave specific instruction that the trustee can only distribute funds in a way that won’t terminate government benefits. The Trust allows the trustee flexibility to spend the money in other ways that improve the beneficiary’s quality of life, such as for travel, entertainment or other enriching activities, without jeopardizing the government benefits that the beneficiary receives. Regardless of the government benefits, establishing a Trust means that the parent’s gift to the child is not needlessly squandered on the additional expense for the appointment and ongoing public reporting of a court-appointed conservator.
The ongoing public reporting by the conservator leads to the third reason why Aretha needed a Trust: privacy.
Desire for Privacy
Aretha is said to have been a very private person, and Wills do not provide privacy. Administration with a Will after death (“probate”) is not private. The Will is recorded in the courthouse. All probate assets (and even some that aren’t!) are listed on an inventory which is a public record filed with the court. What is more, every step of the process may play out in the public domain from who should be appointed to who will receive which assets of the probate estate.
In stark contrast, a Trust is a private agreement between the person who created the Trust and the trustee who holds the Trust assets for the benefit of the beneficiaries. The Trust creator is typically their own trustee during their lifetime, then the Trust names someone else to serve as trustee at the creator’s death. A Trust is not filed with any court at the Trust creator’s death. Usually the terms of a Trust state that beneficiaries may receive a copy, but no third party is entitled to see the contents of the Trust. The trustee is required to provide financial information to beneficiaries on request but is not expected to file anything with the court. Thus, the trustee simply divides and distributes the funds of the Trust, or for certain beneficiaries the assets may be held for their lifetime benefit with the remainder going to a successor beneficiary designated by the original trust creator. The benefit of the Trust is that its terms, the assets, and the activity in administration are all private.
Do any of Aretha’s circumstances or concerns sound familiar to you? Or do you have other questions about Trusts? Then contact the attorneys of Promise Law at (757) 690-2470 or click here to get started.