Nearly three years have passed since Aretha Franklin, known as the “Queen of Soul,” died from pancreatic cancer at age 76. When she first passed away in August 2018, her family thought that Aretha died without any estate plan at all.

But since then, four different wills attributed to the late singer have been discovered. And ever since those documents came to light, her four adult sons—Clarence, Edward, Ted White Jr., and Kecalf—have been in court fighting one another over her assets, as well as who among them should be designated as the estate’s representative.

While a trial is set for August 2021 to establish whether any of the four documents, some of which are handwritten and barely legible, can formally stand as her will, Aretha’s story demonstrates just how destructive shoddy estate planning can be for the loved ones we leave behind.

Indeed, in part one of this series, we discussed how the ongoing court battle between Aretha’s four sons has created an ugly rift between the siblings and exposed dark family secrets to the tabloids, both of which the notoriously private singer undoubtedly would have wanted to avoid. We also noted that following Aretha’s death, the IRS claimed that she owed nearly $8 million in unpaid income taxes. And because Aretha’s sons only recently reached a tentative deal to pay off the IRS, so far, Aretha’s family has yet to receive a single penny from her estate—which is estimated to be worth up to $80 million—even though the legendary musician died nearly three years ago.

Here in part two, we will discuss how Aretha could have planned to spare her loved ones from their current conflict, expense, and embarrassing public exposure. From there, we will discuss how you can take steps to ensure that your family can avoid suffering a similar fate as Aretha’s, even if you have far less wealth and assets than Aretha.

The IRS Comes Calling

Given that none of Aretha’s four alleged wills were properly completed or filed with the court, her estate and all its assets remain stuck in court, awaiting a judge to rule on the validity of those documents. However, even if one of those wills was proven valid, her assets would still be inaccessible to her loved ones due to her massive tax debt.

When Aretha died in 2018, the IRS claimed the late singer owed more than $7.8 million in unpaid income taxes, interest, and penalties, which accrued from 2010 to 2017, according to the Detroit Free Press. While her sons have appealed the total amount owed, the estate has been steadily paying on the tax debt and interest since Aretha’s death, and as of December 2020, the remaining unpaid balance with the IRS was estimated to be $4.75 million. 

In March 2021, a tentative deal was reached with the IRS to pay off the debt, as well as finally distribute some cash to her four sons. Under the agreement, which was reached with attorneys for Aretha’s sons, the IRS will receive an immediate payment of $800,000. Additionally, 45% of quarterly revenue from the estate, which comes largely from royalties and licensing, will be paid toward the balance due to the IRS. Another 40% is to be held in an escrow account to pay future taxes on income generated by the estate.

The deal also stipulates that Aretha’s four sons will receive an immediate payment of just $50,000 each. From there, they are set to get quarterly payouts in equally distributed shares of whatever is left after the remaining 15% of revenue is used to cover the estate’s administration costs, which could eat up a substantial part of the remaining funds.

Although the deal must still be approved by a judge, and Aretha’s sons continue to dispute the total amount of taxes owed, the agreement stipulates that any overpayments to the IRS will be returned to the estate for equal distribution to the sons should they be successful in proving a lower amount is due, whether in trial or through a settlement outside of court.

The Dangers of DIY Planning

Aretha made an obvious mistake by attempting to create her first three wills on her own by hand, with apparently no help from legal counsel, and the fact that those wills were lost for years attests to just how risky do-it-yourself (DIY) planning can be. Indeed, when you rely on DIY estate planning instead of the services of a trusted advisor guiding you and your family, your planning documents can easily disappear or even be stolen and changed by someone else. 

When we create or update your plan, it is standard practice for us to not only keep current copies of your documents in a file at our office, but we also ensure that everyone named in your plan knows what their role is and what to do when something happens to you. This way, the people you choose can immediately put the necessary legal actions in motion to effectively manage your estate.

While it is always a good idea to have a lawyer help you create your planning documents, this is particularly true when you have a blended family like Aretha’s. If you are in a second (or more) marriage, with children from a prior marriage, there is an inherent risk of dispute because your children and spouse often have conflicting interests, particularly if there is significant wealth at stake.

And the risk of conflict is vastly increased if you are looking to disinherit a beneficiary, like Aretha may have attempted to do in one of her wills. By creating your own plan, even with the help of an online document service, like LegalZoom, Rocket Lawyer, or TrustandWill.com, you will not be able to consider and plan ahead to avoid all the potential legal and family conflicts that could arise.

As your Personal Family Lawyer®, our processes and systems are designed to identify and prevent conflicts before they ever happen, and our unique planning process can help create connections among your loved ones and bring your family closer together. In fact, this is part of our special sauce!

Relying on a Will Alone is Not Enough

Next up in the list of Aretha’s planning failures is her fourth will, which was reportedly created with help of the Detroit law firm Dickinson Wright, according to the Detroit Free Press. Although the fact that Aretha hired a law firm to help her draft the will shows that the singer was apparently getting more serious about planning, her efforts there still failed.

First off, because her estate plan includes only a will and not a trust to hold title to her assets privately, Aretha’s family had a guarantee of getting stuck in the court process known as probate. And as we have already seen in Aretha’s case, probate can not only be a long, drawn-out process that takes years to complete, but it can also create ugly conflicts between family members and waste significant money on lawyer’s fees.

Worst of all, relying on a will alone has the potential to have disastrous repercussions for one of Aretha’s family members in particular—her oldest son, Clarence, who has special needs. While Aretha’s fourth will reportedly contained instructions to create a trust for Clarence, it is unclear exactly what kind of a trust this would be, and regardless of the type, it appears that no trust was ever set up. 

Planning For Those With Special Needs

When planning for a loved one with special needs, you must be extremely careful and always work with an experienced lawyer like us, because if handled improperly, you can easily disqualify your loved one with special needs from much-needed government benefits. Because individuals with special needs often require a lifetime of healthcare and other forms of support, most of these individuals rely on government programs to offset the exorbitant costs of such care.

However, these programs have strict income limits, so if you leave money directly to a person with special needs, such as through a will as Aretha seemed to do, you risk disqualifying him or her for those benefits. Aretha could have set up a planning vehicle known as a Special Needs Trust for her son Clarence. By creating a Special Needs Trust, Aretha would be able to provide supplemental financial resources for Clarence for the rest of his life, without affecting his eligibility for public healthcare and income assistance benefits like Medicaid and Social Security. 

That said, the rules for Special Needs Trusts are complicated and can vary greatly between different states, so if you have a loved one with special needs like Clarence, be sure to work with us as your Personal Family Lawyer®. We can make certain that upon your death, your loved one with special needs would have the financial means they need to live a full life, without jeopardizing their access to government benefits.

One final benefit a Special Needs Trust would have had for Clarence is the fact that such a trust—like all trusts—would not be required to go through probate, so Clarence would have had immediate access to his inheritance. And though Clarence’s three brothers do not require a Special Needs Trust, they too would have been far better off had Aretha used a trust instead of just a will to leave them their inheritance. 

Lifetime Asset Protection Trusts: Airtight Protection for Your Children’s Inheritance

While there are several types of trusts available, given the size of Aretha’s fortune and the complexity of her assets—which include the rights to her vast catalog of music, as well as royalties from her recordings and licensing rights to her name and image—we would have advised the Queen of Soul to create a Lifetime Asset Protection Trust to pass her assets to her three youngest sons, Edward, Ted White Jr., and Kecalf.

Using a Lifetime Asset Protection Trust, Aretha could have not only immediately transferred her assets to her sons upon her death or incapacity, without the need for court intervention, but she could have also ensured that those assets would transfer with protection from common life events like divorce, serious illness, lawsuits, and even bankruptcy. At the same time, the trust would give her sons the ability to access, manage, and invest those assets, while retaining airtight asset protection for their entire lives. 

Guidance and Direction For Your Children’s Inheritance—And Your Legacy

Had Aretha used a trust, she could have provided guidelines to the Trustee, providing him or her with clear directions about how her assets could be used for her beneficiaries’ benefit, or even built-in provisions to let her heirs control their own inheritance while maintaining their asset protection benefits. By providing a Trustee with guidelines for distributions, you can be sure that the person you name to handle your affairs is aware of your wishes and values when making distributions, rather than simply guessing about what you would have wanted, which often leads to problems.

Given that Aretha’s estate includes the rights to her music, name, and likeness, all of which can provide a potentially indefinite source of income for her loved ones, it is almost certain that Aretha would have wanted a say in how this priceless intellectual property should be managed in the future. A Lifetime Asset Protection Trust would give Aretha the ability to govern how these treasured assets should—and should not be—used by her heirs, ensuring that her artistic legacy is always honored, and her family can benefit from her incredible talent for generations to come. 

Although a Lifetime Asset Protection Trust would have been an ideal way for the Queen of Soul to protect and pass on her assets, such trusts are not for everyone. But contrary to what you might think, Lifetime Asset Protection Trusts are not just for the rich and famous.

These protective trusts can be even more useful if you are leaving a relatively modest inheritance, since the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency or lawsuit. That said, if your kids are going to spend most of their inheritance on everyday expenses and consumables, such trusts probably do not make much sense.

Meet with us, as your Personal Family Lawyer®, to see if a Lifetime Asset Protection Trust is the right choice for your family.

Learn from Aretha’s Mistakes

Regardless of your financial status, planning for your potential incapacity and eventual death is something that you should take care of immediately, especially if you have children. While Aretha lived a relatively long life, you never know when tragedy may strike, and through diligent estate planning, you can save your family from the needless disputes, expense, and embarrassing public exposure the late singer’s loved ones are currently enduring.

As Aretha Franklin’s story demonstrates, do-it-yourself planning can have terrible consequences for your family—and in the worst cases, it can be even worse than if you had no estate plan at all. We urge you to use the Queen of Soul’s story as a learning experience—when done properly, estate planning can keep your family out of court, out of conflict, and out of the public eye. Even more, truly effective planning can ensure your wealth, assets, and legacy are protected and used to benefit your children, grandchildren, and great-grandchildren in strict accordance with your values.

To ensure your estate plan works exactly as intended, meet with your Personal Family Lawyer® to review and update your current plan or create one if you have yet to do so. Contact us today to schedule your appointment.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Hiring independent contractors (ICs) can be an essential way to boost productivity and streamline your resources, especially during the startup phase, when you have limited access to capital and can’t afford to hire a full roster of employees. 

And even after your operation grows beyond its fledgling period, contractors are often vital for completing one-off projects or rounding out your team during particularly busy periods. That said, working with ICs also creates a number of unique legal and financial risks for your company.

Outside of the risk of getting sued or hit with hefty fines for misclassifying an employee as a contractor, you must also be careful to properly secure ownership of anything an IC creates for you. This is particularly true when it comes to intellectual property (IP).

Make Sure You Actually Own The Work You Pay For

Unlike employees, with whom you generally own automatic copyrights to everything they produce while working for you, ICs typically retain full copyrights to their work—unless they’ve signed a written agreement stating otherwise.

Indeed, if you don’t have properly drafted agreements in place, you may not even own the work you pay ICs to produce for you. My mentor and the founder of New Law Business Model, Ali Katz, learned this the hard way during her early days as a lawyer when she hired a friend to create a website that helped parents name legal guardians for their kids online.

When Ali went to move the website to a different developer, her friend claimed the source code was his, and he said she’d have to pay him $25,000 on top of the $25,000 she’d already paid him because they didn’t have an agreement containing a “work-for-hire” clause.

Because Ali trusted her friend, she figured she didn’t need a formal written agreement to govern their relationship, and in doing so, she didn’t own the website she had paid her friend, the developer, to create as an independent contractor. And this is true of all creative works of authorship you might hire an IC to produce, including graphic design, written content, software, computer code, photos, videos, and other content.

Fortunately, it’s fairly easy to secure full ownership of such works by using the proper legal agreements. However, this is only possible if you actually put such agreements in place with every IC you work with—and yes, this means every single person, even those you may have worked with for years without a single problem.

Work-For-Hire Agreements

When it comes to using legal agreements to secure ownership of the work you hire an IC to produce, you have a couple of options. One option is to include a work-for-hire clause in their independent contractor agreement.

A work-for-hire clause states that you, not the IC, own all copyrights to the deliverables he or she produces for you under the agreement. Such a clause effectively makes it as if you created the work yourself, and as such, it allows you to use the work in any way you wish.

Just be sure to have the IC sign the agreement before he or she starts working. If not, it may be too late to acquire full ownership. Additionally, work-for-hire clauses only cover certain types of materials. According to the U.S Copyright Office, in order for a work-for-hire to apply, the work being created must fall into one of the following nine categories:

  • a contribution to a collective work, such as a magazine or anthology
  • a part of an audiovisual work or movie
  • a translation
  • a supplementary work, such as a forward, editorial notes, appendix, bibliography, or chart
  • a compilation created by selecting and/or arranging preexisting works
  • an instructional text
  • a test
  • answer materials for a test 
  • an atlas

It is important to point out that if the work you hired an IC to create does not fall into one of these nine categories, a work-for-hire clause would not give you full ownership. This catches many business owners by surprise, who falsely assume having such a clause is all they need. If the work you are paying for doesn’t fit into these categories, you will need a different type of agreement.

Copyright Assignment
For works that fall outside of the work-for-hire domain, you will need to include an assignment clause in the contractor’s agreement, in which the IC transfers some or all of their copyrights to your business. Without this clause, the IC would retain all rights to the work, even if the agreement contained a work-for-hire clause.

Adding an assignment clause to the IC’s agreement is fairly simple, and for maximum protection, you can even include such a clause alongside a work-for-hire provision. Simply add a brief clause stipulating that if the work is not deemed a work for hire, the IC assigns all copyrights to your company. Contact us today to ensure you have proper agreements in place.

Don’t Do-It-Yourself

Although both work-for-hire and copyright-assignment clauses are not difficult to create, because each work is unique, there is not a specific template or generic form that would cover every job. What’s more, the wording of each agreement is important, and some states require specific language for work-for-hire agreements.  

Given this, you should steer clear of generic legal agreements you find online, and always have us, your Family Business Lawyer review your IC agreements, even if they were drafted by another lawyer. Whether you need your existing agreements reviewed or need help creating new contracts, we can support you in developing sound employment agreements that will give you the most comprehensive ownership rights possible with every contractor you hire.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you

A last will and testament is the most commonly thought-of document when it comes to an estate plan. But really it is only a very small part of an integrated plan that ensures your family stays out of court and out of conflict if and when something happens to you.

Do not think you can just write your own will and that will help your family.

You have probably seen ads from services that tout the idea that you can write your own will quickly – maybe even while you are in the security line at the airport (seriously, we have seen those ads in our own Facebook feeds).

Instead, consider the reality that trying to do so could actually create far more trouble for your loved ones down the road if you try to write your own will. Your family and loved ones need you to get professional support from someone who can help you look at what you own, who you love, and what would happen to you and everyone you love if and when something happens to you.

Death is unavoidable – and incapacity may happen before that. These are non-negotiables.

Facing these matters head-on leads you – and your loved ones – to having the best life possible. Otherwise, it is the people you love who get stuck with everything you were not willing to take care of now.

Unfortunately, if you go it alone, you may miss important facets of what happens in the event of your incapacity or death. For example, you may think that a will is sufficient when what you really need is a probate avoidance trust to keep your family out of court. A five-minute will won’t help you stay out of court.

Or you may think your kids are adequately protected because you have a will, but you may really need a full Kids Protection Plan® and without it your kids could end up in the care of strangers, even if just temporarily. Before you do anything, get educated and empowered to do what is right.

The right plan for you begins with knowing what you have, and then being clear on what is necessary to keep your family out of court and conflict and keep your assets out of your state’s unclaimed property fund. If you are ready to write your will, that is great – come see us first.

The biggest mistake you can make is not facing the reality of death, the second biggest mistake is facing it alone.

If you need help getting started, consult with us your Personal Family Lawyer®. We will help you through the process so you can make sure your loved ones are protected and your wishes are honored.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Although you can invest in many different types of insurance to protect your business from lawsuits and other liabilities, one of the greatest liabilities you simply can’t avoid, especially if you are the sole owner of your business, is your incapacity or death.

To make certain that your business—and the income it generates for your family—would continue to run smoothly when something happens to you, you need to create a comprehensive estate plan, and it really needs to include a trust. Without such a plan in place, your business will be stuck in an unnecessary court process, and it could easily cause the loss of everything you’ve worked so hard to build.

A Will Alone Is Not Enough
When it comes to creating an estate plan, most people typically think of a will. While it’s possible to leave your company to someone in your will, it’s far from the ideal option. That’s because, upon your death, all assets passed through a will must first go through the court process known as probate. The cost of probate, the time of probate, and the complexity of a court making decisions about your business assets is wholly unnecessary. 

During probate, the court oversees your will’s administration to ensure your assets (including your business) are distributed according to your wishes. But probate can take months, or even years, to complete, and it can also be quite expensive, which can seriously disrupt your operation and its cash flow. What’s more, probate is a public process, potentially leaving your business affairs open to your competitors.

Furthermore, a will only goes into effect upon your death, so it would do nothing to protect your business should you become incapacitated by illness or injury. Indeed, if you only have a will in place (or have no estate plan at all), in the event of your incapacity, your family would have to petition the court for guardianship in order to manage your business and other personal and financial affairs.

Like probate, the court process associated with guardianship can be long and costly. And in the end, whether it’s a family member or professional guardianship agency, there’s no guarantee the individual the court ultimately names as guardian of your assets would be the best person to run your company.

Maximum Protection For Your Business and Family

Given the drawbacks associated with a will, a much better way to ensure your business’s continued success is by placing your company in a revocable living trust. A living trust is not required to go through probate, and all assets placed within the trust are immediately transferred to the person, or persons, of your choice in the event of your death or incapacity.

Upon your death or incapacity, having your business held in trust would allow for the smooth transition of control of your company, without the time and expense associated with probate or guardianship. Using a trust, you can choose the individual(s) you think is best suited to run your company in your absence, whether that absence is permanent (your death) or temporary (your incapacity). What’s more, within the trust, you can also create a succession plan, which would provide the new owner with detailed—and legally binding—instructions for how you want the business run when you are gone. 

Finally, trusts are not open to the public, so your company’s internal affairs would remain private, and the transfer of ownership would take place in your lawyer’s office, not a courtroom.

Although the majority of business owners will get suitable protection for their business using a revocable living trust, for the most airtight form of asset protection, you may want to consider creating a specialized irrevocable trust. Such irrevocable trusts are quite complex, so they are not for everyone, ask your Family Business Lawyer™ to find out if such a trust would be suitable for your particular company.

A Comprehensive Plan

While placing your business in a trust is an effective way to protect your company upon your death or incapacity, it’s merely one part of a comprehensive asset protection plan. To get the maximum level of protection for your business, meet with us, as your Family Business Lawyer™. We can analyze your business and its assets, and discuss all of the different tools available to ensure the company and wealth you’ve worked so hard to build will survive—and thrive—no matter what.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you

Nearly three years have passed since Aretha Franklin, known as the “Queen of Soul,” died from pancreatic cancer at age 76. At the time, her total fortune was estimated to be worth up to $80 million. Yet due to poor estate planning, the late singer’s children have yet to see a dime of their inheritance, and what they ultimately do receive will be significantly depleted by back taxes. Moreover, it’s still not clear whether or not Aretha ever had a valid will.

When she passed away in August 2018, her family thought that Aretha died without any estate plan at all. But since then, four different wills attributed to the late singer have been discovered. And ever since those documents came to light, her four adult sons—Clarence, Edward, Ted White Jr., and Kecalf—have been in court fighting one another over her assets, as well as who among them should be designated as the estate’s representative.

While a trial is set for August to establish whether any of the four documents, some of which are handwritten and barely legible, can formally stand as her will, Aretha’s story demonstrates just how destructive shoddy estate planning can be for the loved ones we leave behind.

Indeed, although her alleged wills clearly show Aretha was concerned for the well-being of her family and wanted them to share her fortune, the legendary singer’s haphazard planning has pitted brother against brother, exposed dark family secrets, and lost millions of dollars to the IRS. And perhaps worst of all, while the legendary singer was notoriously private, all of this has played out in the news headlines for the whole world to see.

Aretha’s situation is definitely tragic, and sadly, far too common among famous musicians—Prince, Jimi Hendrix, and Bob Marley all died without a will. Yet we cover her story and others like it in hopes that it will inspire you to do right by your loved ones by creating a proper estate plan.

And such planning is vital even if you have far less wealth than Aretha. In fact, planning can be even more critical for those with fewer assets. After all, given Aretha’s massive fortune, it’s likely that her heirs will still receive an inheritance, while similar mistakes would likely totally wipe out a smaller estate.

With this in mind, here we’ll discuss Aretha’s planning mistakes and how those errors have impacted both her family and fortune. From there, we’ll explain how proper planning could have prevented the entire mess from ever happening, and then we’ll outline the steps you can take to make certain that, unlike Aretha, your loved ones never have to endure such a nightmare.

Three Wills, a Sofa, and a Spiral Notebook
As we first reported in 2018, Aretha passed away due to pancreatic cancer in her Detroit home on August 16, 2018. At the time, it was widely believed she didn’t have a will. As a result, Michigan law stipulated her assets would be divided equally among her four adult sons, and they agreed to designate their cousin—Franklin’s niece, Sabrina Owens—as the estate’s executor. 

But in May 2019, nine months after Aretha’s death, Sabrina discovered three different handwritten wills while cleaning out the late singer’s home. According to Hour Detroit magazine, the three documents—two of which were dated from 2010 and found in a locked cabinet and one dated from 2014 was scribbled in a spiral notebook found under her sofa cushions—contain conflicting instructions for how the singer wanted her assets divided and whom she wanted as her executor.  


The 2010 copies of Aretha’s handwritten will provide for regular allowances for all four sons and leave specific assets to each of them. Those documents also name Sabrina and her son Ted as executors. The 2014 version, however, provides for a simpler division of her assets in equal shares between her three youngest sons, and it leaves the decision as to how much money their older brother, Clarence, should receive up to his three brothers.

Clarence, Aretha’s first child, has unspecified special needs, and he is currently 66 years old and has lived in a group home near Detroit for decades. Clarence is represented by his own court-appointed attorney. 

Furthermore, in her 2014 will, Aretha reportedly wrote the names of Sabrina, Ted, and Kecalf as executors, but then apparently crossed out the first two names, according to Hour Detroit. Given this, when the three wills were discovered, Kecalf filed in court to be appointed as the estate’s executor.

However, Ted and the attorney for Clarence, fought against this move. In a court filing, Clarence’s attorney noted that Kecalf isn’t fit to be the executor, as he has not “displayed any ability or inclination to support himself and lacks the financial knowledge or ability to act as a fiduciary.”

Family Secrets Come to Light
In addition to causing infighting between the brothers, Aretha’s handwritten wills also disclosed a previously unknown fact about Clarence’s father, according to a report by NBC News. Aretha gave birth to Clarence Franklin in 1955, when she was just 12 years old. The late singer rarely discussed her personal life in public, and up until recently, Clarence’s father was reported to be a friend of Aretha’s from school, named Donald Burk.

However, one of the handwritten wills from 2010 names Clarence’s father as Edward Jordan Sr., who’s also the father of Aretha’s second son, Edward, who was born when she was 14. Little is known about Jordan, but in the will, Aretha makes it clear that he was a terrible father and should get nothing from her estate.   

On page six of the purported document, Aretha wrote, “His father, Edward Jordan Sr., should never receive or handle any money or property belonging to Clarence or that Clarence receives, as he has never made any contribution to his welfare, future, or past.” In both instances, the word “never” was underlined.

The resulting court battle between the brothers also led Sabrina to quit as executor. In January 2020, Sabrina filed her resignation with the court, noting that the family feud “is not what [Aretha] would have wanted for us.” With Sabrina gone, in March 2020, Oakland County Probate Court Judge Jennifer Callaghan appointed Reginald Turner, a Detroit attorney and longtime friend of Aretha’s, as temporary personal representative for the estate.

The judge also scheduled a hearing for June 2020 to determine whether any of the three handwritten wills can be deemed valid. Under Michigan law, a handwritten, or holographic, will can be valid as long as it meets three primary requirements: it must be dated, signed, and written by the decedent.

A Fourth Will Appears

Although the judge set a trial to determine the validity of the three wills for the summer of 2020, the ensuing pandemic caused that trial to be delayed—and in the interim, yet another will was uncovered.

According to the New York Times, the latest version of her will, which was filed in probate court in March 2021 by lawyers for Clarence and Ted, including a typed, eight-page document, titled “The Will of Aretha Franklin,” along with another 23 pages that reportedly lay out the terms of a trust for Clarence. The documents are stamped as “draft” and unsigned.

The latest will was reportedly created by Aretha with the law firm Dickinson Wright in 2018, which would make it the most recent. According to the court filing, Aretha hired Detroit lawyer Henry Grix to assist her with estate planning, and the filing includes correspondence between Grix and Aretha discussing her estate plan that’s dated back to 2017. 

As for the division of her assets, the draft of the fourth will would create a trust to benefit Clarence, and it would split her remaining assets equally between her three other sons and leave specific assets to her other relatives. The will also stipulates that the three youngest sons should serve as the estate’s representatives, and as such, they would have the authority to make determinations about the late singer’s music rights, name, and likeness.

According to the lawyers for Clarence and Ted, the documents show that Aretha hired Grix and had been in discussions with him for more than two years about her estate plan, and the documents contained her initials. However, the late singer became too ill “to finish discussions on a few items” and was unable to sign the papers.

It remains unclear exactly how the documents were obtained and why it took so long for them to come to light. While the court filing noted that the documents were discovered “late in 2019,” the lawyer for Clarence told the New York Times that the date was a mistake and that he actually received the document in December 2020 in a response to a subpoena.

Although the fourth will was not signed by Aretha, in his petition, Ted asks the court to recognize the draft of the will and its accompanying notes as Aretha’s final wishes. His petition cites a Michigan law that allows a deceased person’s “intent to be recognized even if the documents are defective in execution.” 

In light of the new will, the judge scheduled a trial for August 2021 to determine whether any of the documents that have been found can be deemed a valid will and therefore govern the Queen of Soul’s estate.

An Incomplete and Inadequate Plan

Based on all of the different versions of her will, it’s clear that Aretha cared deeply about her four sons and other family members, and she wanted her loved ones to benefit from her wealth and other assets. However, given that her first few attempts at planning were done on her own, by hand, and then seemingly lost or forgotten about, she didn’t take the job as seriously as she should have—at least in the beginning. 

Additionally, while the discovery of the fourth will suggests that Aretha did get serious about creating a more formal plan in her final years, it’s puzzling why that version of her will and its corresponding instructions to create a trust for her oldest son, Clarence, didn’t surface earlier. Indeed, if the New York Times report is accurate, those documents were only uncovered in response to a subpoena, and even then, they were incomplete, unsigned, and in our opinion, far from adequate for an estate that large and complex.

What’s more, as we’ll discuss further in the second part of this series, even if Aretha’s fourth will is ruled valid, her estate is still on the hook for millions in back taxes. According to the Detroit Free Press, when she died in 2018, the IRS claimed the singer’s estate owed more than $7.8 million in unpaid income taxes, interest, and penalties. While the sons have reportedly worked out a tentative deal with the IRS that will finally give them access to small cash payments from their mother’s estate, the terms of the deal must still be approved by Judge Callaghan.

Adding that huge tax liability on top of all the other troubles that have plagued her loved ones since the day she died, it becomes all too clear that Aretha could have done a much better job at estate planning. As we’ll see next week, with the proper planning, the legendary singer’s loved ones would have had immediate access to her assets upon her death, avoiding the need for court involvement altogether and kept the contents and terms of her estate totally private.

What’s more, a truly effective plan also would have provided a lifetime’s worth of support for her eldest son Clarence, who has special needs and will likely need financial support for the rest of his life. Most importantly, it would have done so without disqualifying Clarence for vital governmental support, which is essential for those with special needs. If you have a loved one with special needs, contact us, as your Personal Family Lawyer® to learn more about the unique strategies involved with estate planning for those with special needs.

Next week, in part two of this series, we’ll discuss how Aretha’s poor planning created an enormous tax bill for her loved ones, and how the late singer could have avoided that liability, along with all of the other problems her heirs are currently facing, using proactive estate planning.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Going into business with your spouse or romantic partner can be an amazing opportunity—but it can just as easily be an absolute nightmare. Regardless of how amazing your love life may be, there’s no guarantee you’ll be equally compatible in a working relationship. And if things don’t work out, it has the potential to wreck both your business and marriage.

That said, though it’s bound to be just as—if not more—challenging than maintaining a romantic relationship, if you are able to stick it out and grow through the experience, establish appropriate boundaries, and respect each other’s differences, building a business with your spouse or significant other can be one of the most rewarding experiences of your life. 

To improve your odds of success, here are four things that have enabled successful couples to make their working relationships work:

1. Formally Document Your Business Relationship

Getting married involves taking vows and signing a marriage license, and you should treat your business relationship with an equal degree of formality. Before opening your doors, clearly outline the terms and conditions of your company’s ownership, operation, and dissolution in formal legal agreements that are signed by you both. Just creating these agreements will often show you how well you’ll be able to work together and handle hard conversations. 

Along the same lines, just like you need a third party to witness and officiate your marriage, you should have all of your business agreements navigated and reviewed by an experienced business lawyer like us, and never rely on generic online agreements. We can not only ensure your agreements are sound and in compliance with state laws, but we can also help you surface the tough conversations and resolve the conflicts that are inevitable in business.

2. Clearly Define Your Responsibilities

Although you may have a casual division of household chores and responsibilities in your marriage, trying to run a business without clearly defined roles and responsibilities is a recipe for disaster. With each of you trying to do things your own way, you are not only bound to run into conflict, but it will also encourage redundancy, wasting both time and energy that could be put to much better use.

Instead, you should clearly define the operation’s responsibilities and decision-making powers based on your individual strengths and preferences. In this way, you can divide and conquer the aspects of the business where each of you naturally excel, and use your differences to complement, rather than restrict, your company’s success.

3. Set Up Your Business Entity

Unless you set up a separate legal entity for your business, your company will automatically be considered either a partnership (if both of you are owners) or a sole proprietorship for tax purposes. And since partnerships come with complex tax-filing requirements and sole proprietorships offer no liability protection for your personal assets, meither are the most ideal entities for a family business.   

For both liability protection and tax advantages, you should consider setting up your business as a limited liability company (LLC) or S-Corporation. Both LLCs and S-Corporations not only shield your personal assets from debts and lawsuits incurred by your business, but they also offer numerous tax-saving benefits, including a potential straight 20% deduction on all of your company’s qualified business income, thanks to the Tax Cut and Jobs Act. 

That said, beyond LLCs and S-Corporations, there are other entities that might be better suited to your business, so consult with your Family Business Lawyer™ to discuss all of your options. We can not only advise you in selecting the entity that’s right for your situation, but also support you in maintaining the administrative formalities required of your chosen entity.

4. Have Your Own Space

While at first it might seem like a dream come true to spend all day, every day working together with the one you love, spending every waking hour with each other can actually be quite unhealthy for both your business and marriage. This is particularly true if you work from home, where the line between your business and home life can disappear completely.

Consider creating separate workspaces, so you have the freedom to develop your own routine and establish a healthy boundary between your personal and business life. If you can’t afford to have an outside office right away, this can be as simple as working in separate rooms, or you might even try a community office space. These communal workspaces can provide the ideal way to get out of the house, network with like-minded people, and maintain your sanity.

And, make a deal to never talk business in the bedroom or the bathroom! This may sound silly, but it could save your relationship. Save your intimate spaces for intimacy, and only talk business in the “office” (even your home office) at predetermined times.

Keep Your Eyes Wide Open

If you are thinking about going into business with your spouse or life partner, you need to get absolutely clear on the potential problems, risks, and benefits that these jointly run ventures entail. You don’t want to get stuck ruining both your romantic relationship and your business relationship at the same time.

Before you jump into business together, meet with us, as your Family Business Lawyer™ to discuss the best ways to ensure your family business will thrive. With our trusted guidance and support, we can help you manage the legal, insurance, financial, and tax issues to ensure your business—and marriage—stay as healthy as possible. Call today for an appointment. 

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you

The Netflix movie I Care a Lot provides a dark, violent, and somewhat comedic take on the real life and not-at-all funny dangers of the legal (and sometimes corrupt) guardianship system. While the film’s twisting plot may seem far fetched, it sheds light on a tragic phenomenon—the abuse of seniors at the hands of crooked “professional” guardians.

Last week in part one of this series, we offered a brief synopsis of the movie, which revolves around Marla Grayson, a crooked professional guardian who makes her living by preying on vulnerable seniors, and we then outlined the true events that inspired the fictional account. The film’s writer and director, J. Blakeson, came up with the idea after reading news stories of a similar scam involving a corrupt professional guardianship agency in Las Vegas.

In that case, a real-life Marla Grayson named April Parks, who owned a company called A Private Professional Guardian, was sentenced to up to 40 years in prison in 2018 after being indicted on more than 200 felonies for using her guardianship status to swindle more than 150 seniors out of their life savings. While I Care a Lot is fictional, the Parks case also inspired the 2018 documentary, The Guardians, directed by award-winning filmmaker Billie Mintz, and his film details the terrifying true events that ravaged the Nevada guardianship industry.

In a Facebook post, Mintz praises I Care a Lot as “a perfect introduction to guardianship,” but worries that because of the movie’s heavy focus on violence and Russian mobsters, “people won’t believe it’s real.” However, as Mintz points out, “I assure you that everything you see about guardianship is true.”

Indeed, while the Parks case is the most famous, similar cases of senior abuse by professional guardians are on the rise across the country. A 2010 report by the Government Accountability Office found hundreds of cases where guardians were involved in the abuse, exploitation, and neglect of seniors placed under their supervision. And given the country’s exploding elderly population and our overloaded court system, such abuse will almost certainly become more common.

Additionally, although most of the cases that have made the news have involved the elderly, the fact is, any adult could face court-ordered guardianship if they become incapacitated by illness or injury and haven’t put the proper legal protections in place.

To this end, here in part two, we’re going to explain how you can protect yourself and your loved ones from such abuse using proactive estate planning. 

How It Happens

Should you become incapacitated without any planning in place (due to illness or injury), your family (or a friend) would have to petition the court in order to be granted guardianship. In most cases, the court would appoint a family member as guardian, but this isn’t always the case. If you have no living family members, or those you do have are unwilling or unable to serve or deemed unsuitable by the court, a professional guardian would be appointed. 

Beyond the potential for abuse by professional guardians, if you become incapacitated and your family is forced into court seeking guardianship, they are likely to endure a costly, drawn out, and emotionally taxing process. Not only can the legal fees and court costs drain your estate, but if your loved ones disagree over who is best suited to serve as your guardian, it could cause a bitter conflict that could tear your family apart and make it less likely that you get the kind of care you want.

In another scenario, should your loved ones disagree about who should be your guardian, the court could decide that naming a relative as your guardian would be too disruptive to your family dynamics and appoint a professional guardian instead. However, if you have the proper planning vehicles in place, it is highly unlikely for a guardian to be appointed against your wishes.

A Comprehensive Plan For Incapacity

Should you become incapacitated, a comprehensive incapacity plan would give the individual, or individuals, of your choice the immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. Moreover, such planning allows you to provide clear guidance about your wishes, so there is no mistake about how these decisions should be made.

There are several planning vehicles that can go into a comprehensive plan for incapacity, but a will is not among them. A will only goes into effect upon your death, and then, it merely governs how your assets should be divided, so it would do nothing to protect you in the event of incapacity.

When it comes to creating your incapacity plan, your best bet is to put in place a number of different planning tools rather than a single document. To this end, your plan should include some or all of the following:

  • Durable financial power of attorney: This document grants an individual of your choice the immediate authority to make decisions related to the management of your financial and legal affairs.
  • Revocable living trust: A living trust immediately transfers control of all assets held by the trust to a person of your choice to be used for your benefit in the event of your incapacity. The trust can include legally binding instructions for how your care should be managed, and the document can even spell out specific conditions that must be met for you to be deemed incapacitated.
  • Medical power of attorney: A medical power of attorney grants an individual of your choice the immediate legal authority to make decisions about your medical treatment in the event of your incapacity.
  • Living will: A living will ((sometimes called an advance directive) provides specific guidance about how your medical decisions should be made during your incapacity, particularly at the end of life. In some instances, a medical power of attorney and a living will are combined in a single document.

But here is the thing about all of these documents—they are just documents and not guidance for the people you love. If you really want to keep your family and friends out of court and out of conflict, you cannot just rely on documents to do it. Rather, these documents should be created by a lawyer who will get to know you, your wishes, and be there for you throughout the many stages of life, plus be there for your family and friends if and when you can’t be.

Communication is Key

In addition to the above planning tools, it is equally—if not more—important for your loved ones to be aware of your plan and understand their role in it. As part of our planning process, we hold a family meeting with all of the individuals impacted by your plan where we walk them through your plan and explain the reasoning behind your decisions and what they need to do if something happens to you.

By combining your comprehensive incapacity plan with a team of people who care for you, can watch out for you, and know exactly what to do in the event tragedy strikes, we can make it virtually impossible for you to be abused by a professional guardian.

Don’t Put It Off

Although incapacity from dementia is most common in the elderly, debilitating injury and illness can strike at any point in life. Given this, all adults 18 and older should have an incapacity plan. Furthermore, planning for incapacity must take place well before any cognitive decline appears, since you must be able to clearly express your wishes and consent for the documents to be valid.

In light of this, you should get your own planning handled first, and then discuss the need for planning with your aging parents as soon as possible, and from there, schedule a Family Wealth Planning Session with us to get a plan started. And if you or your senior loved ones already have an incapacity plan, we can review it to make sure it has been properly set up, maintained, and updated. Unfortunately, a plan put in place years ago is unlikely to work now, so updating is critical, and unfortunately often not overlooked.

Indeed, once you have a plan in place, make sure to regularly review and update it to keep pace with life changes, changes in your assets, or changes in your family structure. And if any of the individuals you have named become unable or unwilling to serve for whatever reason, you will need to revise your plan—and we can help with that too.

Retain Control of Your Life and Assets

To avoid the loss of autonomy, family conflict, and potential for abuse that comes with a court-ordered guardianship, we invite you to meet with us as your Personal Family Lawyer®. While there is no way to prevent dementia and other forms of cognitive decline or an unexpected illness or injury, we can put planning tools in place to ensure that you at least have some control over how your life and assets will be managed if it ever does occur. Contact us today to schedule your appointment.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Starting your own business can be both exciting and scary, and you are bound to make numerous mistakes along the way. But you’ll often discover that some of your biggest mistakes will later become your greatest strengths.

This was exactly the case for my mentor, Ali Katz, who went from losing $1 million to running a company that earns over $5 million a year. Indeed, Ali was able to not only learn from her early missteps as a lawyer and businesswoman, but she capitalized on those lessons by creating New Law Business Model, which trains lawyers like me to help families and business owners not repeat the same expensive mistakes she made.

Here, we share four of the most important lessons Ali learned on her way to success, which have been adapted from a recent Grow By Acorns article Ali was featured in.

1. Be Open About What You Don’t Know

As a new business owner, Ali didn’t want her lack of financial knowledge to show. And because she was afraid to ask for help, she missed out on $50,000 in tax savings and was stuck with a surprise tax bill totaling more than $100,000, which she had to take out a loan to cover.

From that experience, Ali learned to share her income and expense projections for the year with her CPA no later than mid-November. Today, she asks her CPA for yearly projections of what she’ll owe in taxes, along with at least three different tax-saving options, such as accelerating expenses, deferring income, or setting up retirement accounts, so she can implement tax planning strategies before the end of the year.

As part of our ongoing business counsel programs, we meet with our business-owner clients and their CPAs to support them with the implementation of tax-saving strategies on an annual basis. 

2. Always Get Agreements In Writing

Even as a lawyer, in her early days Ali was often afraid to ask for agreements in writing, or she thought they weren’t necessary because she was working with friends. However, this cost her big time after she hired a friend to create a website that helped parents name legal guardians for their kids online.

When Ali went to move the website to a different developer, her friend claimed the source code was his, and he said she’d have to pay him $25,000 on top of the $25,000 she’d already paid him because they didn’t have an agreement containing a “work-for-hire” clause.

Now, whether she’s never worked with someone before or they are close friends, Ali always requires a written agreement—and you should, too. In your business, you actually need two standard agreements at a minimum: one to use when you are the provider of services, and one to use when you are hiring service providers. In addition, if you have one or more partners or collaborators, it’s your agreements that will protect your relationships and make success most likely. 

Clear agreements protect your relationships because they require you to be as clear as possible about your expectations, and define the interests that are at stake for both parties right from the start. While it can be challenging to have the hard conversations that lead to clear agreements, as your trusted counsel, we can make it easier for you by identifying anywhere there is not documented clarity and initiating the conversations on your behalf.

3. Invest In Expert Help

After five years in business, Ali sold her law practice to another lawyer with 25 years of experience. But she did so without consulting with legal or financial advisors who specialize in the purchase and sale of law practices. Within six months, the buyer claimed the client flow had dried up, and he could no longer make his payments.

Looking over the books, Ali realized he had stopped implementing key drivers of the business like marketing campaigns that consistently brought in new clients. While this was an important aspect of the business, Ali hadn’t communicated this as part of the buyer vetting process, and the do-it-yourself purchase agreement she had in place didn’t protect her interests. Not wanting to leave anyone in a lurch, Ali ran the practice out of her own savings for six months, while transitioning her clients to other attorneys and helping her colleagues find new jobs. 

Had Ali invested the money to hire the right advisors to assist her with the sale, it likely would have cost her between $15,000 to $25,000 to document the sale properly. But thinking she could save money by handling the legal and financial matters herself, she ended up paying $250,000 out of her own pocket instead. 

4. Make Money Decisions From a Position of Strength 

Starting out, many of Ali’s money decisions were made from a place of scarcity and fear, as she tried to do everything on her own, even when she wasn’t the best person for the job. But since then, Ali’s discovered that “hiring the right legal and financial advisors is just as valuable as hiring someone to run my Facebook ads, design my website, handle my sales conversations, or even manage my calendar.” 

Today, Ali’s latest startup, which guides people to make “eyes wide open” legal, insurance, financial, and tax (LIFT) decisions, isn’t yet earning enough to pay her a salary. But even so, she’s paying a part-time CFO and a bookkeeper to organize her books and review her financials, so she doesn’t repeat her past mistakes. She’s also paying a lawyer to customize her terms of service, member agreements, and privacy policy. She’s able to do this because she’s learned to read her financial reports, create meaningful financial projections, and she’s working with trusted counsel to guide her, so she doesn’t miss anything in her blindspots.

When starting your business, be clear on the service you offer and the market that needs it, and be sure you know how to reach that market. From there, go all-in on the business side of your operation, and have the proper LIFT systems in place to support you. In the end, Ali offers this final tip, “My best advice is to spend the necessary time, energy, and money to learn about the LIFT aspects of running your business and hire the right people to be on your team. This is one of the most important investments you can make in the growth of your company.”

Get Your LIFT Systems In Place Today

With us, as your Family Business Lawyer, we can ensure you have the foundational legal, insurance, financial, and tax (LIFT) systems in place, so you can avoid making the same mistakes Ali and so many other entrepreneurs make, and instead focus your time and energy on building a business you truly love. Call us today for an appointment.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you

The Netflix movie I Care a Lot provides a dark, violent, and somewhat comedic take on the real life and not-at-all funny dangers of the legal (and sometimes corrupt) guardianship system. While the film’s twisting plot may seem far fetched, it sheds light on a tragic phenomenon—the abuse of seniors at the hands of crooked “professional” guardians.

In this two-part series, we’ll discuss how the movie depicts such abuse, how this can occur in real life, and what you can do to prevent something similar from happening to you or your loved ones using proactive estate planning and our Family Wealth Planning process. For support in putting airtight, protective planning vehicles in place, meet with us as your Personal Family Lawyer®.

Note: This article contains spoilers for the movie I Care a Lot.

At the beginning of the movie, we meet Marla Grayson, a crooked professional guardian who makes her living by preying on vulnerable seniors. A professional guardian is a person appointed by the court to make legal and financial decisions for senior “wards” of the court, who are deemed unable to make such decisions for themselves.

Working with a corrupt doctor, Marla targets wealthy victims and gets a judge to order these individuals unfit to care for themselves and then appoint her as their guardian. From there, she and her business partner/ girlfriend, Fran, move the seniors into a nursing home, seize their homes, and sell all of their assets for their own financial gain.

Marla’s scheme takes a turn for the worse when her latest senior victim, Jennifer Peterson, turns out to be the mother of a Russian mob boss named Roman Lunyov. After Marla has Jennifer placed in a long-term care facility, Roman tries unsuccessfully to get his mother out of the facility, first by bribing Marla, then through the court, and finally by trying to break her out. 

While this may seem ludicrous, this kind of abuse actually happens outside of the movies to seniors with significant assets, even those with caring adult children like Roman. 

At this point, the movie descends into a violent back-and-forth between Roman and Marla, as they each try and fail to kill one another, until they both decide that rather than murdering each other, they could make more money by going into business together. 

Fast forward to several years later, we learn that Marla and Roman have become millionaires after starting a global chain of senior care services, called Grayson Guardianships, which employs thousands of crooked guardians overseeing hundreds of thousands of “clients” all over the world.

Based On True Events

With its over-the-top violence, kidnappings, and Russian mobsters, some might dismiss I Care a Lot as nothing but Hollywood hype and find it hard to believe that an operation as sinister as Marla’s could ever actually exist. But the fact is, the movie’s writer and director, J. Blakeson, came up with the idea after reading news stories about very similar (less the mob and murder) situations. And knowing such things actually happen makes the movie even more terrifying.

“The idea first came when I heard news stories about these predatory legal guardians who were exploiting this legal loophole and exploiting the vulnerability in the system to take advantage of older people, basically stripping them of their life and assets to fill their own pockets,” Blakeson told Esquire Magazine. “They run through their money as fast as possible, store them in the worst care home, and just forget about them. Just park them and then move on to the next one, and that felt almost like a gangster’s operation.”

And while the real-life scams never reached a level on par with Grayson’s Guardians, one crooked professional guardianship business in Las Vegas did manage to bilk hundreds of unsuspecting seniors out of their life savings. As we detailed in our previous article, Use Estate Planning to Avoid Adult Guardianship—and Elder Abuse, a real-life Marla Grayson named April Parks, who owned a Las Vegas-based company called A Private Professional Guardian, was sentenced to up to 40 years in prison in 2018 after being indicted on more than 200 felonies for using her guardianship status to swindle more than 150 seniors. 

In her case, prosecutors described how Parks, in a similar fashion as Marla, used a shady network of social workers and medical professionals who helped her track down her elderly victims. On the lookout for wealthy seniors with a history of health issues and few living relatives, Parks was often able to obtain court-sanctioned guardianship during court hearings that lasted less than two minutes.

From there, the guardians would force the elderly out of their homes and into assisted-living facilities and nursing homes. They would then sell off their homes and other assets, keeping the proceeds for themselves. Even worse, the guardians were often able to prevent the seniors from seeing or speaking with their family members, leaving them isolated and even more vulnerable to exploitation.

The Most Punitive Civil Penalty

What makes these cases particularly tragic is the fact that for the most part everything these unscrupulous guardians did is perfectly legal. As Blakeson put it, “They had the law on their side, and there was nothing you could do.” Although guardianships are designed to protect the elderly from their own poor decisions, guardianship can turn out to be more of a punishment than a benefit. 

In a 2018 New York Times article detailing the state of the guardianship system in New York, Florida congressman Claude Pepper described guardianship as “the most punitive civil penalty that can be levied against an American citizen, with the exception, of course, of the death penalty.” 

Indeed, once you’ve been placed under court-ordered guardianship, you essentially lose all of your civil rights. Whether it’s a family member or a professional, the person named as your  guardian has complete legal authority to control every facet of your life. While guardianship is governed by state law and varies from state to state, some of the most common powers guardians are granted include the following:

  • Determining where you live, including moving you into a nursing home
  • Complete control over your finances, real estate, and other assets
  • Making all of your healthcare decisions and providing consent for medical treatments
  • Placing restrictions on your communications and interactions with others, including family members
  • Making decisions about your daily life such as recreational activities, clothing, and food choices
  • Making end-of-life and other palliative-care decisions 

Additionally, though it’s possible for a guardianship to be terminated by the court if it can be proven that the need for guardianship no longer exists, a study by the American Bar Association (ABA) found that such attempts typically fail.  And those family members who do try to fight against court-appointed guardians frequently end up paying hefty sums of money in attorney’s fees and court costs, with some even going bankrupt in the process.


Protection Through Planning

Given the potential for neglect, abuse, and exploitation that guardianship affords, it’s crucial that seniors and their families take the proper steps to prevent any and all possibility of falling prey to such scams. Moreover, because any adult could face court-ordered guardianship if they become incapacitated by illness or injury, it’s vital that every person over age 18—not just seniors—take proactive measures to prepare for potential incapacity.

Fortunately, there are multiple estate planning tools that can prevent such abuse from occurring. With us, as your Personal Family Lawyer®, we can put planning vehicles in place and offer ongoing advisory and support that would make it practically impossible for a legal guardian to ever be appointed—or need to be appointed—against your wishes.

Next week, we’ll continue with part two in this series on the dark side of adult guardianship and offer tips for how you can avoid the potential for abuse using estate planning.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Included within the 2021 National Defense Authorization Act passed on January 1, 2021, the Corporate Transparency Act (CTA) requires certain small businesses based in the U.S. to report the identities of their owners and organizers to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA is an update to the federal government’s anti-money laundering laws and is designed to crack down on shell companies created for illicit financial activities, such as money laundering and funding terrorist organizations.

While the CTA is aimed at providing greater transparency into who owns and controls small businesses in the U.S., it stands to impact many legitimate small companies by requiring them to provide reports on the identities of their owners. At the same time, the new law may also affect future business transactions, such as mergers and acquisitions, by making the process more logistically complex, with less privacy for certain organizational structures like limited liability companies (LLCs), which have historically been used to avoid disclosing detailed ownership information.

That said, if your business doesn’t have many owners or investors, the CTA will likely not be a major hassle. And for those companies that do have multiple owners or investors, the law will primarily increase your administrative and logistical duties, as you seek to stay in compliance with its new reporting requirements and deadlines. 

The CTA’s new requirements don’t go into effect until January 1, 2022, and at the moment, there are still several ambiguous aspects of the law, including exactly how ownership and control of business entities is determined. To this end, you should work with legal counsel like us ahead of the law’s implementation to ensure you are fully aware of whether your business is subject to the CTA, and if it is, you fully understand what the reporting requirements will be.   

Meanwhile, here we’ll outline the major aspects of the CTA and discuss how you can prepare your company to comply with the law should you find that you are subject to its reporting requirements. For further clarification and support with reporting your company’s ownership information, meet with us as your Family Business Lawyer.

Who Does the CTA Affect?
To better understand the CTA, it helps to clarify exactly which businesses it will affect. According to the U.S. Department of the Treasury, the purpose of the CTA is to “better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity” by creating a national registry of beneficial ownership information for “reporting companies.”

Within this stated purpose, the two terms that are most essential to understanding the law are “beneficial owners” and “reporting companies.” Let’s look at both of these terms here:

Reporting Companies
Under the CTA, subject to certain exclusions, the definition of a “reporting company” is extremely broad and includes any corporation, limited liability company, or similar entity that is (1) created by filing a formation document with a secretary of state or similar office; or (2) formed under the law of a foreign country and registered to do business in the United States.

While the definition of a “reporting company” would include most privately held businesses in the U.S, the CTA expressly excludes some business entities from its requirements.

These exclusions include the following: 

  • Companies operating in highly-regulated industries such as banks, credit unions, brokers, dealers, etc.
  • Publicly traded companies
  • Tax-exempt entities, such as nonprofits
  • Companies that: 1) employ more than 20 employees on a full-time basis in the U.S.; 2) have annual aggregate gross receipt or sales greater than $5 million; and 3) have an operating presence at a physical office within the U.S.

Beneficial Owners

While the CTA provides a lengthy list of exceptions to its requirements, if you do find that you are subject to the law, you will be required to provide a report of the identity of your “beneficial owners.” Under the CTA, a “beneficial owner” is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise: 

  • Exercises substantial control over the entity
  • Owns or controls at least 25% of the ownership interests in the entity


Note that the CTA doesn’t define the terms “substantial control” or “ownership interests,” so we expect future updates on the law will provide clarification on these terms. 

As with the definition of reporting companies, there are several exceptions to the definition of a “beneficial owner.” These include the following:

  • A minor child, if the child’s parent’s or guardian’s information is reported properly
  • An individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual
  • An individual acting as an employee whose control is derived solely because of employment status
  • An individual whose only interest in the entity is through a right of inheritance
  • A creditor of the entity, unless the creditor meets the requirements of a beneficial owner.

Based on these exceptions, if privacy of your ownership interests is extremely important to you for any reason, please contact us, so we can discuss the possibilities available to you using trusts or nonprofit entities to hold your business interests.

Applicants

In addition to the requirement that you submit a report identifying the “beneficial owners,” of your business entity, the CTA also requires that you submit similar information identifying individuals who organized your company, called “applicants.” To this end, an “applicant” is defined as any individual who does the following:

  • Files an application to form a corporation, limited liability company, or similar entity under the laws of a state or Indian tribe
  • Registers or files an application to register a corporation, limited liability company, or other similar entity formed under the laws of a foreign country to do business in the U.S.  

Reporting Requirements

If you are subject to the CTA as a reporting company, you are required to submit a report to FinCEN that includes the identity of each beneficial owner and applicant that are applicable to your business. The information to be included in each of these reports is as follows: 

  • full legal name
  • date of birth
  • residential or business street address
  • a unique identifying number from an acceptable identification document, including a U.S. passport; state driver’s license; another state-issued identification document; or a current non-U.S. passport for individuals who do not hold any U.S.-issued identification documents.

When Does the CTA Go Into Effect?

Although the CTA is technically already in effect, you still have time to learn more about its requirements and begin compiling your ownership data. The official start date for the CTA’s reporting requirements are tied to when the Treasury promulgates the CTA’s regulations, which must take place no later than January 1, 2022, but may become effective sooner. Compliance with the CTA depends on whether a reporting company was formed prior to or after the effective date of the regulations being promulgated.

If your business entity is formed before the effective date, you will have two years to deliver your ownership reports to FinCEN. If your entity is formed after the effective date, you must comply with the CTA reporting requirements upon formation or registration of your entity. In either case, changes in your entity’s previously reported information must be reported within one year.

Penalties for Noncompliance

The CTA imposes various penalties for reporting companies that fail to comply with its requirements or provide inaccurate or misleading information to FinCEN. As such, any person that commits reporting violations may be held liable for fines up to $500 per day, not to exceed $10,000, and may face up to two years in prison for violating the CTA.

How is the CTA Ownership Information Stored, and Who Has Access?

Information provided to FinCEN on beneficial owners and applicants will be kept in a secure, confidential national registry maintained by the Treasury. Such information will be maintained for at least five years after the termination of a reporting company.   

To ensure confidentiality, a reporting company’s ownership information may only be released, upon following appropriate protocols to the following entities: federal agencies engaged in national security, intelligence, or law enforcement activity; state, local, or tribal law enforcement agencies upon court order; federal agencies on behalf of a foreign agency, prosecutor, or judge under an international treaty or agreement; financial institutions subject to customer due diligence requirements, upon the consent of the reporting company; and federal functional regulators.

Stay Tuned For Updates and Clarification

Given the ambiguous nature of certain parts of the CTA, we expect there will be future clarification regarding the scope of the law and its reporting requirements. We will closely monitor any changes to the CTA and as well as cover the implementing regulations once they are promulgated and update you on these developments in future blog posts.

Until then, if you have any questions about the CTA or would like support in implementing your ownership reporting, reach out to us, as your Family Business Lawyer, today to book your appointment.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you