Uncle Sam may be a big beneficiary from the estate of pop icon Prince, especially if it is proved the superstar died without a will or estate plan.
The 57-year-old award-winning musician died suddenly at his Paisley Park home/studio complex in Minnesota on April 21 and the question of who will manage his legacy is far from decided.
Without the presence of a will, the estate — estimated to be worth between $300 million and $500 million — must go through the state probate process. Prince was not married and did not have any children. His parents are also deceased. As a result, according to Minnesota law, the heirs to the estate would be his surviving siblings. His closest living relatives include a full sister and five half-siblings.
His sister, Tyka Nelson, filed documents April 26 to start a probate process in Minnesota’s Carver County stating she did not know of the existence of a will. The filing also requested the court appoint Bremer Trust, a Minnesota-based corporate trust company, as special administrator of Prince’s estate. On April 28, a judge appointed Bremer Trust as temporary special administrator to manage the estate, until a personal representative is appointed.
A lengthy process
As the estate moves through the public probate court, it will likely be a lengthy process. An administrator will be appointed. Then there will be fees and the potential for considerable federal and state tax liabilities. In addition, considering the size of the estate and Prince’s celebrity status, there could be multiple lawsuits from people claiming to be heirs or making claims to the copyrights of the musician’s music.
Complicating the probate process is the value of the estate itself. In addition to monetary assets and real estate, Prince’s brand, future royalties, and associated properties are expected to add enormous value. In fact, Prince was a public advocate for the rights of musicians to protect their creative property. He also reportedly had a vault in his home holding extensive unpublished music.
In the end, with the current federal estate tax at 40%, the Internal Revenue Service may be among the biggest winners. For large estates with illiquid assets, raising enough to pay the estate tax bill could force liquidation of assets at an inopportune time.
State laws rule
A 2015 survey of adult children found that only 56% of American parents have a will or living trust. And more than half of adult children didn’t know where their parents keep their estate documents.
When a person dies without a will, the laws of the state of residence guide what happens to the estate. In general, immediate living family members are considered heirs. When the individual has no spouse or children, or living parents, the courts look further out to identify heirs. If no relatives can be found, the state takes the assets. Many states also have an estate or inheritance tax.
Individuals don’t need to have a multi-million-dollar estate to appreciate the benefits of a will and other estate-planning documents. Even a small number of assets can fall to a costly and complicated process when courts have to identify heirs and determine how the estate will be divided.
Without a will, family members, lawyers, and court officials are left wondering what the person would have wanted for his or her legacy and whom should benefit.
It’s important to establish estate-planning documents and keep them updated with beneficiary information. Working with a financial advisor and tax expert may help mitigate the impact of estate and inheritance taxes. Investors may also want to consider a revocable trust, which names individuals to manage the estate and distribute assets outside of the court system.
Prince not the first celebrity to die without a will
The appointment of a temporary administrator for Prince’s estate was a first step. Someone could still come forward with a valid will or trust documents prepared by Prince before his death. When Michael Jackson died, his mother filed documents to administer the estate. In the following weeks, a lawyer presented a will that Jackson had signed and was deemed viable. The document excluded his mother’s claim.
Other celebrity deaths have resulted in years of litigation due to planning mistakes or lack of estate planning altogether. Pop singer/songwriter John Denver, for example, died without a will, leaving his family to spend six years in court seeking a resolution. When rock guitar virtuoso Jimi Hendrix died in 1970, his estate went to his father, and was later subject to legal battles from other family members.
When Doors’ lead singer Jim Morrison died in 1971, he passed his estate to his common-law wife, Pam Courson. The couple never had children and when she died three years later without a will, the estate transferred to her parents, opening up subsequent litigation.