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Lessons to Learn From Prince's Estate

Posted on: April 29th, 2016
celebrity estate plansFollowing news of Prince’s death last week, there has been much discussion of the late pop icon’s contributions to the arts. The discussion of Prince’s legacy has not been limited to talking about the artist’s career, however, as recent reports have focused on the planning, or lack thereof, for the artist’s estate.

Prince’s sister asserts that Prince died without a will or trust in place. As Prince died without a surviving spouse or children, if this assertion is true and he had no will in place at his death, his estate would be distributed among his siblings and half-siblings pursuant to Minnesota intestacy statutes. A special administrator has been appointed to manage the estate for the time being, although it is likely that the search for a valid will or trust will continue for some time. Prince’s estate is estimated to be worth approximately $250 to $300 million. If he did in fact die without estate planning documents to direct the disposition of his estate, the estate not only will be subject to a distribution scheme that might not be consistent with his wishes, but will also face a hefty tax bill.

The distribution of Prince’s estate doesn’t simply encompass passing his assets to heirs who may or may not align with the beneficiaries Prince might have wished to receive his estate. Rather, Prince’s estate also consists of a wealth of intellectual property, the management of which might ultimately wind up in the hands of his intestate heirs. Prince was an artist whose efforts to ensure the proper management and promotion of his creative work consistently made headlines throughout his career. Yet, without a will or trust to direct the disposition and future management of his work, it’s possible that his ongoing legacy might be compromised by use of his work for purposes that he might not have sanctioned. Prince also had a large catalogue of unreleased material which now might make its way to the public, possibly despite his intentions. Furthermore, without proper estate planning to provide for continued gifts to preferred charities, it is unlikely that Prince’s estate will continue a legacy of charitable giving even if his wishes might have been otherwise.  

In addition, without proper planning tools in place to mitigate the application of estate taxes, it is possible that Prince’s estate could pay upwards of $120 million in federal and state estate taxes. Depending on the amount of liquid assets in his estate, this could be a serious burden for the administrator of his estate to meet, particularly if a large portion of his accumulated wealth consists of intellectual property that increases the value of his estate yet is not immediately available as a resource for discharging debts.  

While many will not face the particular issues at stake in the administration of Prince’s estate, the situation nonetheless presents some important points that everyone should keep in mind when considering whether to establish or review their estate planning documents. No matter the size of one’s estate, it is likely that there are particular individuals you would (or would not) want to receive your assets after your death. In the absence of a will or trust directing the disposition of your assets, state law dictates who receives your estate (typically a spouse and/or children, or else surviving family members). If one has specific desires regarding the distribution or maintenance of particular property (for instance, real property that one wishes to remain in the family), unless you have provided for distribution of the asset to the desired beneficiary or to a trust with specific terms for the management of the asset, it’s likely that your wishes will not be followed after your death. Individuals who have strong philanthropic ties similarly might wish to consider making provision for a gift from one’s estate (for instance, by distribution to a specific charity or Donor Advised Fund). Finally, those with potentially taxable estates should discuss estate tax planning options with an estate planning attorney. Certain planning tools, such as credit shelter trusts, can help to shield appreciation of assets with accelerated growth from estate tax, while other tools such as Irrevocable Life Insurance Trusts may help to reduce the value of one’s estate while safeguarding one’s wealth for future generations. 

By Samantha Reichle

 

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