1st May 2016
> Without an estate plan, Prince’s half-siblings will stand to inherit the same share as his full-sibling.
> Failure to plan for a potential estate tax liability may lead to a forced liquidation of estate assets, including his vault of unreleased music.
> An unorganized, unplanned estate will be administered in the public eye with many unintended costs and consequences.
Unfortunately, too many recent newsletters have focused on the death of musical legends. This month left us with another untimely death. Prince, whose legal name was Prince Rogers Nelson, died on April 21st at his Paisley Park recording studio and home in Chanhassen, Minnesota. As unbelievable as it may seem, according to his sister, Tyka Nelson, Prince died without a Will or other estate planning instrument, leaving a complex and vast estate that will take years to organize and administer. On April 27th, Minnesota judge, Kevin Eide, declared that Prince did indeed die intestate (without a Will) and appointed Bremer Trust as special administrator of the estate.
According to reports, Prince was not married at the time of his death and had no living children, leaving Tyka and his six half-siblings as the heirs of the estate. As is the case in Illinois, Minnesota law states that any “half-relative” inherits as if he or she was a whole-relative. Without a Will or Trust document stating otherwise, Price’s half-siblings are entitled to the same share of his estate as his full-sister, Tyka. There may also be additional relatives and creditors who file claims against the estate as the case proceeds in the Minnesota probate court.
Prince was widely-known to be a very private person, which makes it especially surprising that he did not bother to establish an estate plan. As discussed after the deaths of James Gandolfini and David Bowie, while a Will must be filed with the probate court after death, a Trust is a private document between the grantor (creator), trustee and beneficiaries. Privacy is not just a concern for celebrities. Due to the exposure and scrutiny of estates resulting from challenges by family members or creditors, keeping estate planning documents out of the public eye can be an invaluable benefit of a proper estate plan. By using a Revocable Living Trust in conjunction with a Pourover Will—which simply “pours” all of the individual’s assets into his or her Revocable Living Trust at death to be administered by the trustee under the terms of the trust document without revealing the terms of distribution—an individual can ensure that his or her affairs will remain private and out the view of the public, creditors or any dissatisfied family members or friends. While the benefits of privacy are exemplified by celebrity estates, its value should not be underestimated for all estates.
Valuation, Tax Liability and Liquidation
It is shocking and disappointing that anyone would not have an estate plan, but especially someone who not only valued privacy but also had a sizable, complex estate. Even more disappointing is the fact that a large part of Prince’s estate may have to be liquidated to pay his estate tax bill, which could be as high as $150 million. Reports vary as to the value of his estate, but a large portion of it—his vaults of unreleased music and symbol—will take a long time to appraise. The estate tax return is due nine months after death, so unless a large portion of his estate was held in cash and marketable securities, the estate may be forced to liquidate large portions of his art, music and collections. Unfortunately, reports indicate quite the opposite—that his cash was limited because his concerts and releases were rarely organized and more often impulsive.
For fans of his music, the lack of an estate plan means that his unreleased music may never see the light of day. Had Prince appointed one or more individuals to handle his recordings in accordance with his wishes—a curator of sorts—the estate could have begun organizing and releasing the music almost immediately to not only please the fans but also generate revenue for the estate.
You do not have to legendary musician to need a proper estate plan. An unplanned estate will be a very expensive headache for your loved ones. If you do not have an estate plan or are unaware how your estate would be administered it is incredibly important to contact an estate planning attorney, have an estate plan established that reflects your wishes and inform your loved ones of its existence. It may encourage them to take responsibility over their own estate planning as well.