This week marks the two year anniversary of Prince’s death. Since he passed in April 2016, those close to Prince have been unable to find a will or any other estate planning documents. Without these instructions, his $200 million estate is still in probate limbo. No funds have been distributed to his heirs, and millions have already been spent on legal fees and court proceedings.
Prince is a fantastic example of a cautionary tale. If you die unexpectedly (like Prince, at the young age of 57), you must have a plan in place to ensure that your family and loved ones will be cared for in accordance with your wishes.
What Happens If You Die Without A Will?
Since he did not leave behind a will, Prince’s estate must be distributed according to Minnesota state laws of intestacy. Under these laws, the probate judge appointed Comerica Bank and Trust as the executor and determined that Prince’s six siblings will be the sole beneficiaries of his estate. However, with no plan in place to protect his assets, a battle over the appropriate valuation of Prince’s estate was been waging for two years without a single penny being distributed to his heirs.
Court filings show that the estate was worth approximately $200 million at the time of Prince’s death. However, because Prince retained the rights to his intellectual property (his music and videos) it is unclear what the real value of the estate will be. Until the IRS and the executor can agree on a fair valuation of Prince’s estate, his estate taxes cannot be paid and his heirs cannot inherit the remainder.
Why Does Probate Take So Long?
Probate is often a lengthy and expensive process. However, it is made longer and more costly when the deceased dies intestate (without a will). Without a will, family members are left guessing about what you would have wanted, and they may not all agree. These conflicts can create delay and rack up legal bills. Not to mention, the probate process is public. Although some of Prince’s estate filings have been redacted or sealed, his family’s pain is part of the public record.
Because assets are only distributed to heirs at the close of probate, a lengthy court proceeding means that the heirs are left without support for the duration of the probate process. In Prince’s case, his estate has paid the executor and its lawyers almost $6 million so far, and they have already made a claim for an additional $3 million in legal work. It is not clear how much the estate has paid in taxes so far to both the IRS and the state of Minnesota. When all is said and done, it is expected that the state and IRS will get about half of the total value of the estate.
With legal fees and court costs coming out of the heir’s remaining half, there may be very little left to distribute at the end of the probate process.
How Can You Avoid Prince’s Probate Problem?
Prince’s probate issue highlights two important estate planning points. The first is, you need an estate plan to protect your family. At the very least, a will can communicate your wishes to your loved ones to avoid lengthy, painful, and expensive disputes in court. A will allows you to appoint a trusted executor, decide who will inherit from your estate and in what proportions, and articulate any special wishes to avoid confusion during the probate process. For Prince, this may have included a statement explaining how he wanted his intellectual property managed after his death.
The second point is about the money. Because he had no estate plan in place, Prince’s family will end up losing approximately half of the total value of the estate to the IRS and the state of Minnesota. While the estate likely would have paid some taxes, Prince could have set up trusts, charitable contributions, and other estate planning mechanisms that could have preserved more of his estate for family and future generations.
If Prince’s cautionary tale gives you shivers down your spine, feel free to contact us at 770-933-9009 to discuss creating an estate plan that is right for you and your family. You don’t need to be worth $200 million to have a lot to lose, and your loved ones will be grateful for the effort you put into protecting their futures.
