Not So Happily Ever After: A Cautionary Prince’s Tale
As tributes continue to pour in for Prince – the musical artist who passed away unexpectedly in April at his Minnesota home – the more mundane realities of his death have begun to hit the news.
Along with the stories of what Prince’s death means to his fans and fellow artists, there are also articles about wills, long-lost family members and estate taxes. While it’s become like clockwork to hear stories in the news evolve like this after the death of a famous artist, Prince’s story offers a unique cautionary tale because he happened to die without any known estate planning and without a will (called intestate). The mess of Prince’s estate is very real and could happen to anyone who doesn’t take the time to plan ahead.
When a person dies intestate, the law decides how the person’s money and property will be split. These laws vary depending on the state or country the person lived in. It doesn’t matter one iota what the decedent’s friends or family members want, or what might be most fair, or what everyone thinks is best; it’s all based on impartial, black and white laws.
In the case of Prince, he had only one first-degree biological relative – his sister, Tyka Nelson. He also had a reported five half-siblings. Prince had no living children, no grandchildren, no spouse, and no living parents. He was also heavily involved in his church and there are already rumors of at least one love child, but nothing verified.
In Minnesota, where Prince lived and died, the law says that when there’s no spouse, children or parents, the siblings inherit the estate. Half-relatives, including half-siblings, are considered the same as whole siblings. So unless a love child is indeed found (in which case the child would get the entire estate), the siblings will split everything evenly. The church that was such a large part of Prince’s life will get nothing, nor will his friends, relatives who weren’t his siblings, or any other causes Prince may have supported or people he may have wanted to help.
Knowing that his estate will be split evenly between six people might sound simple, but it’s not. For example, Prince did not die with exactly $120,000 in the bank, allowing everyone to walk away with an easy $20,000. Instead, Prince died with property, a catalog of music still making money, residual earnings as a songwriter, and of course – bills. He might also have died owning insurance policies, investment accounts, stocks and bonds, retirement accounts, and other sources of money or income.
Everything Prince owned and any money he owed must now be dissected and evaluated and even possibly sold (such as his home, cars, artwork, jewelry, clothes, instruments, music, etc.) in order to split his estate evenly.
Because Prince had no will in which he identified who should do this on his behalf, the court is required to step in and appoint a third-party administrator (also known as an executor) on behalf of his estate. This administrator will be paid for his or her time as well as any expenses they incur. This may end up costing his estate 7-10% of its total worth.
Prince’s apparent lack of planning before his death will likely end up costing his estate a lot more than 7-10% in court costs, however, due to the dreaded estate tax.
The estate tax is what the government takes from the value of whatever is transferred to another person at the time of death. In this case, Prince’s entire estate will ultimately be taxed since it is all being transferred to his siblings. The amount the federal government takes varies on the amount of the estate, although it is already being estimated that 40% of Prince’s estate will be taxed. Minnesota will take an additional amount estimated at 16% (although this amount can be written off for the federal amount).
In the end, Prince’s estate will be cut by more than half by fees and taxes.
This is all assuming, of course, that no one contests the valuation of the estate and no other parties try to lay claim to the estate. If either of these situations occur, Prince’s estate – and his siblings – could end up paying attorney and litigation fees, which can quickly decimate an estate to nothing. It can also stretch probate (the legal administration of the estate) almost indefinitely. The estate of Bob Marley, another cautionary tale, is still being litigated between his family members over 30 years after his death.
So how could Prince have avoided this mess and helped to ensure that as much of his estate went to his family or any other cause he cared about? He should have gotten the help of a good estate planning attorney and financial planner.
The first step to smart estate planning is having a will because it allows you to specify who gets what, and who is responsible for administering your estate. That person gets the benefit of earning an administration fee rather than the court-appointed administrator.
Next, with good estate planning, including taking advantage of legal ways of get around the Estate Tax, the majority of an estate will not be taxed. If you are someone with enough assets to be affected by the estate tax, or if you’re not sure, it’s vital to explore these options before it’s too late, unless you’re okay with a large chunk of your money going to the government!
Finally, and perhaps most importantly, having a well thought out plan should help reduce any confusion, stress and worry your loved ones will experience during what will already be an emotionally trying time. As uncomfortable as talking about your own demise may be, do it for those whom you love to avoid the apparently costly legacy just like the one Prince left behind.