Prince’s Estate: Purple Pain
Posted on August 9, 2016
by David F. Port, J.D.
Executive Vice President, Head of Trust Administration
People around the world will be remembering Prince (Prince Rogers Nelson) as one of the most influential artists of our time, known for his flamboyant style, extravagant dress and incredible talent. His death, at age 57, was a surprise and a shock to everyone, especially to trust and estate attorneys around the country when they learned that Prince allegedly died without a will.
One of Prince’s famous songs was titled, Money Don’t Matter Tonight, but for his heirs it is certainly going to matter tomorrow! His estate, estimated at $300 million, will now go through the Minnesota probate courts without the benefit of prior estate planning that could have named specific heirs, preserved his wealth, minimized or avoided taxes, and ensured that loved ones and charitable causes were provided for in the future.
Instead, his estate will be subject to a 40% federal estate tax plus a 16% Minnesota state tax, be subject to the Minnesota laws of intestacy, and face an onslaught of claims and lawsuits from those who believe they are entitled to a portion of the money as long-lost siblings, half siblings, and even those claiming to be wives or children. The costs of paying the taxes and defending the claims are estimated to be more than $140 million and will takes years to settle.
Under Minnesota laws of intestate succession (dying without a will), because Prince died without a surviving spouse, surviving children, or surviving parents, his siblings will inherit everything. “Half” siblings inherit as if they were “whole” so that sharing one parent with the decedent entitles you to inherit the same as those who share both parents. A corporate trustee was appointed by the Minnesota Probate Court, and in the first three weeks following Prince’s death, more than 700 people filed claims of being somehow related. Defending those claims on behalf of the estate means even more of the assets will be spent on lawyers, trustee fees, and genetic testing.
During his lifetime, Prince gave millions of dollars to charity, helped those in need, and was a devout Jehovah’s Witness. Estate planning could have created a charitable remainder trust, whereby he could have named the beneficiaries he wanted to support with a lifetime income stream with the remainder going to charity. The bulk of his estate is comprised of intellectual property – the music rights to his songs. Had Prince transferred those rights into an irrevocable trust, a separate legal entity would own, control, and protect those music rights and pay dividends to named heirs. Those songs would be free from additional capital gains tax if they increased in value after his death.
The irony is, Prince could have accomplished these estate goals simply, economically and efficiently by seeking expert advice. Give yourself and your loved ones the peace of mind that comes from working with an estate planning professional. Prudent estate planning is designed to give your loved ones the benefit of your wealth in the most tax efficient and timely manner possible.
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