PRINCE HAS DIED: WHAT ABOUT HIS ESTATE?
As we all know by now, legendary musician Prince unexpectedly passed away recently at 58. While the circumstances of his death are unclear, what is also unclear is who will get his estate, whether he had a will or a trust set up and the particulars of who will be in charge of what has been estimated to be a $300 million estate.
Most celebrities are surrounded by a team of professionals looking out for their best interests. In the case of legal matters, Prince undoubtedly had a trusted lawyer to assist him with legal matters. Part of the advice I would have given Prince some time ago would be to get his affairs in order, to get an estate plan. That would have been an easy recommendation considering his age, wealth and the fact that he was not married.
Since he died living in Minnesota, the laws of that state will largely govern the administration of his estate. If he died without a will, that could be a big deal, because the intestacy laws of the state would control and Minnesota allows half-relatives to inherit. He was married and divorced but, as in most states, ex-spouses do not inherit in a situation where there is a will and only inherit if a will specifically states that they do.
Most people close to Prince knew him as a smart man who was very aware of his circumstances and that weighs in favor of him having created an estate plan.
If Prince created a trust, then the trust would name a trustee in charge of all the assets held by it. It would also name beneficiaries to receive property and that could be right away or over time. Prince was also known to be a philanthropic person, so it’s possible he left funds for the creation of a foundation or several foundations for issues close to his heart. When people create a will they can also leave money directly to a charity or to a church either as a specific bequest (the “Little Red Corvette” for example) or as a general bequest (a set amount of money).
If Prince did create a trust or several trusts, were they funded with his assets? This is yet another issue. Funding a trust requires that titled assets like accounts, homes, vehicles, stocks and life insurance be set up so that the trust either becomes the owner right away or becomes the owner at death through payable on death and transfer on death beneficiary designations.
Another issue for his estate would be estate taxes. Unfortunately, Minnesota (unlike Missouri – hooray!) has an estate tax which appears to kick in after an asset exemption of nearly $2 million dollars at a top rate of 16%. Since I am not a Minnesota licensed attorney, I can’t talk too much about that, but needless to say, the state will likely pick up a large check from Prince’s estate.
On a federal level, the estate tax exclusion for an individual dying in 2016 is $5.45 million (up $20,000 over 2015). The tax owed will depend on what estate tax planning if any he put in place, but the estate tax rate is 40% based on the expected size of his estate. That means 40% over the exempt amount of $5.45 million could go to Uncle Sam. Wow.
Don’t feel too bad for Prince’s heirs and beneficiaries. That still leaves several hundred million dollars for their benefit. That amount doesn’t include the future value of his music which potentially could double or even triple the value of his estate. How the federal government and the state of Minnesota value these assets for estate and inheritance tax purposes might be the subject of litigation and more complexity.
As an estate planning practitioner (and admitted fan of Prince’s early work) it should be interesting to see what happens on this subject in the next several months. Hopefully, Prince, like anyone reading this, planned ahead.