The Death of a Superstar
Last week, musical icon, Prince, was found dead at age 57 at his home in Minnesota. Beyond his music, Prince was known during his life as a savvy businessman, someone who was fiercely protective of his music and preferred to deal directly with record companies and executives.
Shockingly, however, Prince’s sister Tyka Nelson filed documents in probate court in Minneapolis today asserting that Prince inexplicably died without a will, much less a sophisticated estate plan that should have included a series of trusts. If Nelson’s claim turns out to be true, Prince wouldn’t be the first celebrity to die intestate i.e., without a will–Bob Marley, Pablo Picasso, and Abraham Lincoln are a few that immediately jump to mind–but the consequences of Prince failing to properly plan his affairs are potentially catastrophic.
Probate Court – Taxes, Fees and Fighting
The probate court will first have to appoint an administrator to temporarily oversee his estate. Since Prince was not married, had no known children, and his parents were deceased, his roughly $300 million fortune will need to be distributed according to Minnesota’s intestacy laws which in this case would be split his estate among his siblings and half-siblings. Of course, the actual value of the estate is likely to be fiercely contested in court for years (by way of example, in a case currently before the Tax Court and set for argument next year, Michael Jackson’s estate valued the singer’s “right to publicity” at $2,105 while the IRS valued it at $434 million).
In any event, regardless of its ultimate valuation, in the absence of a well-drafted estate plan, Prince’s estate will almost certainly be decimated by estate taxes and attorneys’ fees. The federal government assesses a 40% estate tax on amounts valued at over $5.45 million. The State of Minnesota would then further tax Prince’s estate at additional 16%, thereby wiping away well over 50% of the value of the estate. Throw in a potentially long and contentious public battle between squabbling heirs, individuals claiming to be legal heirs, angry creditors, and the IRS, and millions more can easily be consumed in attorney fees.
Sadly, this entire impending mess could and should have been avoided through some basic estate, tax, and charitable planning. As an estate planning attorney, I’ve seen a wide spectrum of outcomes when people pass. Families that otherwise got along great are suddenly broken up after a family member dies due to the lack of proper planning. Prince’s death is a sobering reminder that no matter how rich or poor, young or old, financially savvy or unsavvy a person might be, it’s critically important to ensure that you have affairs in order. Doing so won’t just save your loved ones a lot of money and grief but can also be an effective way of preserving family harmony after your death.