Last month, Prince
died at
the ripe young age of 57. He had no will, as reported by his only full sibling
(a sister). She filed for probate of his estate in Minnesota, where he owned a
home in Paisley Park. Under
Minnesota law, a probate court there will determine who gets what.
Typically, an intestate estate (one without a
will) in Minnesota would first go to his children, then to his parents, and
then to any siblings. As Prince was twice divorced with no children, and his
parents are deceased, his sister and five
surviving half brothers and sisters are banking on splitting the estate.
Various pundits estimate Prince’s net worth between $150 and $300 million.
While some suggest he was very attentive to his business matters, other say he
didn’t trust anyone and his financial
affairs are in disarray. If this is the case, who will control and manage
Prince’s brand, his record label and the thousands
of unreleased songs?
Assuming no will exists, Prince’s sister asked
the Minnesota probate judge to appoint her as a special administrator. In the
probate court, all financial details and business relationships will become
public record and all asset decisions and distributions require court approval
and will be shared with the public.
Probate Issues and Concerns
The Heirs: There will almost certainly be a fight, even if
it’s just among his siblings. Given the amount of money involved, it would not
be a surprise if one or more individuals came forward claiming
to be Prince’s child. If a claim turned out to be true, they would
eliminate everyone else as a potential heir.
Asset Management: The expanse of his assets–a humongous
song catalogue (both released and unreleased) and vast real estate and business
holdings–would
be daunting to manage, even without the worries of taxes and heirship
challenges.
Privacy: Unlike the privacy granted in estate planning,
every asset must be filed and every minor decision about management and
distribution of the assets and payment of liabilities will likely to require
approval by the probate court. It’s a lengthy process, and will likely take
years.
Taxes
True to Ben
Franklin’s adage, death and taxes are certain. Having not
availed himself of the benefit of estate tax planning and legal counsel, the
bite could be painful. If we assume an unplanned $350 million estate, it’s
conceivable that estate taxes could be over $138 million. Even if the estate
was a paltry $150 million, estate taxes could be roughly $58 million.
But wait! Who has that kind of cash lying
around? For a farmer or rancher, the dilemma is called “land rich and cash
poor.” To get the money to pay the estate taxes, something will need to be
sold. If the assets are not readily marketable at full value, it’s possible
that some will need to be sold at a fire sale discount to secure the necessary
funds. Land sales are especially subject to this risk.
Tilting the Scales in Your Favor
Avoid these 5 Frequent Estate Planning Stumbling
Blocks
1. No will. Over
50% of Americans like Prince do not have a will and do not
expect to die anytime soon. Whether you have a lot or a little, start with a
will, particularly if you have kids or are divorced. If you don’t have a will,
the laws of your state will determine who receives your assets after you die,
how they are divvied up and by whom.
2. Failure to set up a trust. Do you want everyone to know how much
money you had and who got it? Planning in advance avoids the public airing of
your laundry. Consider a living trust. A living trust details who is entitled
to your assets and how they’ll receive it, but it’s not part of the probate
court inventory that is generally filed, and it can offer some tax benefits.
3. Failure to Implement the Estate Plan. As a trial lawyer, I cannot count the number of times
that a well-intended couple completes their estate planning process and pays
the lawyer, but doesn’t supply the funding of the related trusts and business
entities or change the beneficiaries on the insurance policies and retirement
plans, saving it all for “later”. Only, “later” doesn’t come before death. Good
plan. Good idea. But, it’s as if it never happened, because it didn’t.
4. Neglecting to update estate plans. Life changes. Children are born and pass into
majority. Divorces affect estate plans as do new spouses. The needs of older
children change. Grandchildren are born. Businesses are bought and sold. All of
these are reasons to update your estate planning documents.
5. Forgetting to plan for disability. Physical and mental needs change as we get older.
Power-of-attorney documents can protect you if you become incapacitated, or be
subject to challenge if you wait too long to sign them. Properly drafted living
wills and advance directives can give loved ones the authority to make medical
and financial decisions when you can’t. Without them, your family and spouse
may not have the legal right to speak or act on your behalf when you aren’t
capable.
Estate Planning Expertise
Gray Reed experienced probate and estate lawyers Norm
Lofgren, Greg
Sampson and
their protégé Jennifer Gurevitz are the experts here. I work with them to
pick up the pieces when one or more of these estate planning stumbling blocks erupts
into a full-fledged fight between heirs over an estate.
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