Continuing a year that has been unkind to music legends, Prince passed away a few weeks ago. As you probably have heard by now, it appears that the late artist did little or no estate planning before he died. Unfortunately, this could pose an array of legal issues going forward. This post is dedicated to the basics of estate law — we’ll look explore those basics through the lens of the particular issues facing Prince’s heirs.
When you die without a will — or “intestate” if you want to use fancy legal words — then your estate is handled by a probate court. The probate court will appoint a person or firm, called an administrator, to represent the intestate estate. The court also oversees the administration and disposition of the decedent’s property.
There are myriad problems that accompany the probate procedures when it comes to an intestate estate — I am going to focus on two main problems. First, the lack of clarity will mire the estate in litigation for years to come. As you can imagine, in the case of Prince’s estate, when you’re dealing with an estate valued at around 300 million dollars, a lot of people are going to try to state a claim for some or all of the assets involved. For example, an inmate in federal prison just claimed to be Prince’s son and sole heir. Prince’s siblings are also attempting to claim their share of the estate. Because of the lack of estate planning involved in this case, it is utterly unclear to whom the assets should go. With the assistance of an attorney, the shares could have been clarified and apportioned according to a predetermined system that reflected Prince’s wishes for the distribution of his property.
The second main problem is the tax bill. Given the lack of estate planning, it is likely that the estate will owe taxes on whatever the IRS and administrator determine as the estate’s value. As noted above, the estimates put the value in the range of 300 million dollars. Taxes could cost the estate upwards of 150 million dollars, based on federal and state tax rates. With estate planning, this enormous hit could’ve been mitigated substantially. For example, according to CNBC, “if Prince had placed his unreleased music in a dynasty trust, he would have paid a gift tax on the value of the music at the time of the transfer. But after that, the value could increase with no tax implications, and the trust assets would not count as part of his estate upon his death.”
Estate planning isn’t a fun topic, but this case demonstrates the importance of leaving behind a will and a clear plan for the distribution of one’s assets. I have personally seen the chaos and hostility that can result from poor estate planning, and we are all seeing the issues that are embroiling Prince’s estate disbursement. The only certain things in this life are death and taxes, so there is no doubt that proper estate planning will behoove us all.