Despite acknowledging the importance of having at least a basic estate plan in place, over half of all Americans do not have one. One of the most important motivations for creating an estate plan should be to ensure that you do not leave behind an intestate estate. Amazingly, it is not only the average American who fails to heed the advice of experts when it comes to estate planning. A surprising number of celebrities also die intestate (without executing at least a basic Last Will and Testament), including the music superstar known as Prince. Two years after his death, the heirs of his estate have yet to see a penny, but bankers, lawyers, and consultants have drained the estate of a small fortune.
Prince Died without a Will
Prince died of an accidental opioid overdose at his suburban Minneapolis studio on April 21, 2016. At the time of his death, Prince was not married and he did not leave behind any children or other descendants. He also failed to leave behind a Will. Consequently, Prince’s estate, rumored to be worth at least $200 million, is being probated as an intestate estate. That means the Minnesota intestate succession laws govern what happens to his estate assets. With no spouse or children and because Prince’s parents pre-deceased him, his estate will be split among his six surviving siblings. So far so good. Then the problems begin—with no end in sight.
How Much Will Gift and Estate Taxes Diminish the Value of the Estate?
By failing to execute a Will prior to his death, Prince lost the ability to choose an Executor of his estate. The court, therefore, appointed Comerica Bank and Trust as the Executor of the estate. One of the biggest delays in distributing the estate’s assets appears to be the inability of the Executor and the Internal Revenue to reach an agreement on the value of the estate at the time of Prince’s death. The estate’s value determines how much the estate owes in federal gift and estate taxes, and in this case in state estate taxes as well. All estates are potentially subject to federal gift and estate taxes. In addition, a handful of states, including Minnesota, also impose a state level gift and estate tax.
Because attorneys, accountants, and industry experts have yet to finish appraisals and deals for the use of his music, videos, and assets including his Paisley Park studio, the actual value of the estate is unknown. With an estate valued in the $200 million range, however, both the federal and state governments stand to gain a substantial sum in taxes. Unfortunately for the estate heirs, every dollar owed in taxes is one less dollar they will inherit. A well thought out estate plan could undoubtedly have incorporated tax avoidance tools and strategies that would have significantly decreased the estate’s tax obligations.
Legal Battles Continue, Expenses Mount, and Heirs Wait
In the meantime, the six heirs have been bitterly split. Sharon Nelson, Norrine Nelson, and John R. Nelson form one faction that has battled Comerica and other heirs on several fronts, including Comerica’s decision to move the contents of Prince’s vault of recordings from Paisley Park to Los Angeles. All six siblings came together though recently when Tyka Nelson, Omarr Baker and Alfred Jackson joined the other three in strenuously objecting to an unspecified “entertainment transaction” in the works that they say would be “an embarrassment to Prince’s legacy.”
While the squabbling continues, everyone but the heirs is getting paid out of the estate. Public filings don’t say how much the estate has already paid the IRS and state of Minnesota, but Comerica and its lawyers have already collected at least $5.9 million in fees and expenses, as of March 2018. “There is legitimate concern that at the end of the Estate’s administration there will be little, if anything left to pass on to the Heirs,” said attorneys for Sharon, Norrine and John. That $5.9 million figure doesn’t include a pending request for nearly $2.9 million in fees and expenses for Comerica and its lawyers, nor does it include fees for the heirs’ lawyers and other attorneys, or fees for the estate’s main music adviser, Spotify executive Troy Carter.
Prince’s estate offers to teach all of us a very simple lesson – the only people who benefit if you die intestate will be Uncle Sam and the professionals involved in probating your estate.
Contact an Arizona Estate Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you wish to get started creating your estate plan, contact the experienced Arizona estate planning attorneys at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.