1st Nov 2016
> The presence of a proper estate plan ensures efficient administration while reducing the likelihood of conflict amongst family members.
> Life insurance or other liquidity can alleviate the strain on the estate in the interest of preserving the assets.
> The assumption that your estate planning wishes are understood and accepted by your heirs without a proper estate plan can be a costly mistake.
Prince, whose legal name was Prince Rogers Nelson, died on April 21, 2016, at his Paisley Park recording studio and home in Chanhassen, Minnesota. Since Prince died without a Will or other estate planning instrument, the heirs of his complex and sizable estate are to be determined by the laws of intestacy of the state of Minnesota. Additionally, the management of his unique assets is left to a third-party administrator for the benefit of the approved heirs.
Since Prince was not married at the time of his death and had no living children, his sister, Tyka Nelson, and his six half-siblings were determined to be the heirs of his 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, Prince’s half-siblings are entitled to the same share of his estate as his full-sister, Tyka.
Following his death, numerous media reports circulated regarding individuals claiming to be blood relatives of Prince. On Wednesday, October 26th, Carver County probate judge, Kevin Eide, ruled on whether three individuals claiming to be heirs of Prince’s estate were indeed entitled to shares of the estate. The judge denied all three claims.
Corey Simmons, Brianna Nelson and Victoria Nelson claimed to be Prince’s nephew, niece and grandniece, respectively, by way of Corey and Brianna’s father, Duane Nelson, Sr., being a “half-brother” of Prince because Prince’s father, John L. Nelson, had treated Duane as a son. The claimants argued that Minnesota law provides for and recognizes parent-child relationships that are not genetic or established as a matter of law. Judge Eide disagreed.
The court held that revised Minnesota probate law requires that a parent-child relationship may be established only by genetics, adoption, assisted reproduction or a presumed relationship that was “legally established” before death. In his ruling, Judge Eide said “there is no case law in Minnesota, or, to the Court’s knowledge, anywhere in the United States that establishes a parent-child relationship for intestacy purposes where there is no genetic relationship but the parties to the relationship held themselves out to be parent and child.”
Administration of the Estate
Prince’s vault of unreleased music and iconic symbol are the most complex and likely, most valuable, part of his estate. In October, TMZ reported that Jay Z had flown Tyka Nelson and her husband, Maurice Phillips, to New York in the hopes of purchasing Prince’s unreleased recordings. An unnamed representative from Prince’s estate denied the report.
While this makes for a dramatic story, it is not entirely realistic. One of the flaws in Jay Z’s plan, if true, is that Tyka alone does not have the authority to sell the assets. In the absence of a Will or Trust, Judge Eide appointed a trust company, Bremer Trust, as special administrator of Prince’s estate. Thus, it is the duty of Bremer Trust to organize and administer the assets for the benefit of all heirs of the estate, while balancing the other fiduciary responsibilities of an executor, such as paying the expenses and taxes of the estate. Since Jay Z is unlikely to be the only suitor for Prince’s unreleased recordings, it is the fiduciary duty of Bremer Trust to entertaining additional offers before agreeing to a value, sale or licensing agreement.
Another complex asset of Prince’s estate is his Paisley Park property, which served as his home and recording studio. While real estate itself is readily marketable and divisible, the value of Paisley Park is in its history and allure to Prince’s fans. After considerable bureaucracy and red tape, the estate obtained the required clearance to operate as a museum on October 24th and has commenced ticket sales and tours.
As is the case with his recordings, it is the duty of the estate administrator to serve the interests of the beneficiaries of the estate. In some cases, that may mean selling or dividing and distributing assets. In the case of Prince, the property is likely to be more valuable to the heirs as a museum if the estate can afford to hold on to the assets and still pay its expenses.
Since the estate tax return is due nine months after death, valuation of the assets and payment of the estate’s tax liability, which could be as high as $150 million, is likely a significant concern for the administrator. Life insurance or other liquidity could have alleviated this strain on the estate in the interest of preserving the assets.
Absence of an Estate Plan
A proper estate plan would have allowed Prince to declare his desired beneficiaries and enhance the efficiency of the administration of his complex estate. Had Prince appointed one or more individuals to manage both his real estate and his recordings in accordance with his wishes, the estate could have not only been certain of his wishes, but could have been administered privately, out of the public eye and free of the involvement of the probate court.
The assumption that your estate planning wishes are understood and accepted by your heirs without a proper estate plan can be a costly mistake. In the absence of an estate plan, there is no way to know whether Prince wanted Paisley Park to be become a museum, whether he wanted his unreleased recordings to be heard and whether he intended for his sister and half-siblings to inherit his estate. As is the case for any estate, large or small, the presence of a proper estate plan ensures efficient administration while reducing the likelihood of conflict amongst family members.