Even with a comprehensive estate plan in place, heirs can face a bump in the road during probate when creditors come calling. In the case of Aretha Franklin’s estate, that creditor is the Internal Revenue Service, which is claiming that the late singer’s estate owes over $7.8 million in unpaid income taxes, interest and penalties. The estate was already riddled with disputes as Franklin was originally thought to have died intestate—until her niece, who was previously appointed as administrator before resigning last year, discovered not one, but two handwritten documents purported to be holographic wills.
There now appears to be a light at the end of the tunnel for Franklin’s heirs, as the estate has reached a deal with the IRS to pay off the tax debt. According to a petition filed on Feb. 19 in Oakland County Probate Court, under the agreement, the IRS will receive an immediate payment of $800,000. The deal also stipulates that 45% of quarterly revenue (predominantly generated by royalties and licensing) would go toward the IRS bill. Another 40% is to be held in escrow to be allocated toward future taxes.
Franklin’s heirs, her four sons, will finally see some distributions of their inheritance—an immediate $50,000 payment each and equally distributed shares of whatever is left after the remaining 15% of revenue is used to cover administration costs.
To be clear, the estate continues to dispute the total tax amount and has been paying off the debt since Franklin’s death, with approximately $4.75 million owed remaining. The agreement specifically calls for any overpayments to the federal agency to be returned to the estate for distribution to the heirs in the event they’re successful in proving a lower amount is due during trial or on settlement.
