Learning from Prince: Why it pays to have an estate plan with trusts and a will
One year after Prince’s death on April 21, 2016, the fate of his estate remains up in the air, and according to a recent article in the New York Times, the six likely heirs to the pop icon’s vast fortune are fighting. At issue are legal fees and the question how much discretion the estate’s administrator should have in managing the estate. But the disputes — as well as a substantial tax bill that looms over the estate — could easily have been avoided: with estate planning measures that include trusts and a will. Prince, who was only 57 when he died, had neither.
Here are just a couple of thoughts on what being proactive could have meant for Prince’s estate:
1. The heirs. In the case of Prince, it took nine months just for a Minnesota court to decide who the artist’s likely heirs are. (A final ruling remains outstanding because of pending appeals.) After his death, dozens of individuals came forth to claim a relationship with the artist by blood or legal bondage. One woman said that the CIA had kept her marriage to the pop icon secret. Dismissing her claim and most others, the judge eventually settled on Prince’s sister and five half-siblings as likely heirs. With proper estate planning, the artist could have kept the bulk of his assets out of probate court and laid out in advance who should inherit what.
2. Management of affairs. After Prince’s death, a Minnesota court appointed Bremer Trust as temporary special administrator of his estate. In February, Comerica Bank & Trust took over as the permanent administrator. Had he planned ahead, the singer would have carefully chosen the executor of his estate and trustee of the trust estate.
3. Philanthropy. Prince had a reputation for being charitable. He gave to causes and religious organizations and generously helped out friends in need. (One of his ex-wives, Manuela Testolini, once called him a “fierce philanthropist.”) From what we know now, Prince did not provide for charitable giving beyond his death. Had he been proactive, he would have set up charitable trusts to ensure the continuing support of causes he treasured.
4. Taxes. The value of Prince’s estate is still unknown. But including intangibles such as the worth of his likeness, it could be as high as $300 million. Federal and state taxes might wipe out almost half of that. If there aren’t enough liquid assets to cover the tax debt, Comerica Bank & Trust might have to sell parts of Prince’s property such as unpublished music. Prince could have easily protected most of his fortune from the grasp of the IRS. A little estate planning that makes good use of tax-sheltering trusts would have done the trick.
Prince’s story is, of course, extraordinary, simply because the man was. But it still serves as a reminder: that it’s never too soon to start thinking about estate planning strategies, especially if you’re wealthy.