Please note that this is not legal advice. See our disclaimer.
Many articles are covering the recent passing of Prince. Whether you were a diehard fan, or just listened to the radio occasionally, you probably know the chorus to Little Red Corvette or Raspberry Beret. Whenever a celebrity passes, especially someone as successful as Prince, we all have some curiosity with respect to their massive estates. Who were the beneficiaries? How much was there? Who will get what?
Despite his millions of dollars in wealth, according to reports by those close to him, Prince did not leave a Will. As such, Prince’s estate will face the same kind of issues that any other estate will go through where the deceased person died without a will. We don’t usually think about how Prince’s life or estate would have relation to our lives, but the issues will be the same (albeit on a much larger scale) and could have been prevented with proper estate planning.
The first issue is that Prince has absolutely no control over the disposition of his massive estate. In most states the surviving spouse gets the entire estate. If there’s no spouse, it may pass the children, siblings, or parents of the decedent. Prince died unmarried, with no children, though already there are those claiming to be his children. His parents predeceased him and his surviving next of kin are his sister and several half siblings. Further, if any of Prince’s siblings/half siblings are deceased, the deceased sibling’s heirs will split the share.
The next issue facing Prince’s estate is the question of who is entitled to serve as the Administrator or the Personal Representative of his vast estate. When there isn’t a clearly identified personal representative in a Will, there can be multiple parties entitled to serve as Administrator. This creates a significant risk of fraud where everyone who thinks they might be entitled to serve as the personal representative may petition the court to allow them to do so. Prince’s brother for instance, has come forward at a hearing in the Court. It is very important that the right person is appointed as the Administrator. The person who will ultimately serve as the Administrator will have access to Prince’s enormous fortune, so it is a very lucrative position for someone who may have ulterior motives. As a result, often courts will select a bank or a similar entity to serve as the Administrator
Whether there is a will or not, the probate process is public record. When James Gandolfini died, he had a will and his estate became public knowledge. A trust is administered privately and generally, only the Trustees and Beneficiaries have a right to information regarding a trust. This helps prevent prying eyes from fixing their gaze on property to which they have no legitimate claim- Steve Jobs used a trust, and aside from his death, news of his estate was scarce. The extent of Prince’s assets and who it will pass to will all become public record in the course of the administration.
In some states, probate fees can be a very expensive. Usually payment of a fee deposit must be made before an attorney will begin work on an estate. Florida and several other states set fees by statute, and with attorney’s fees in many jurisdictions exceeding $300.00 dollars an hour, these fees can be sizeable. It’s too early to tell what Prince’s estate is worth, but some estimates state that the estate is worth over $300 million dollars. Attorney’s fees to administer an estate that large could easily run to a few million dollars! That doesn’t include filing fees, taxes, accountings, valuations, etc. Even our most exotic estate planning techniques cost a fraction of this. The savings of having a plan cannot be overstated.
The attorney’s fees mentioned above don’t include any litigation fees, filing fee, tax preparer’s fees etc. All of those fees would be in addition to the probate attorney’s base fee and filing costs. We can provide many options to avoid all of these costs. Further, with an estate as complex as Prince’s and with as many claimants are there are, the chance of litigation is extremely high. You can’t always prevent all litigation, but with proper estate planning you can try to minimize the risk of litigation.
Additionally, there are taxes. Individual estates over $5.45 million dollars are subject to a federal estate tax, and the administrator of the estate must file an estate tax return. As of 2016, the top marginal rate for estate tax will consume 40% of an estate with no preparation. Based on a $300 million dollar estate that’s a potential $120 million dollar tax bill. This doesn’t include a fee in excess of $1 million to prepare the estate tax return. With some planning, you can use legacy gifting and other structured gifting to minimize the taxes.
It cannot be emphasized enough that paying professionals to value and protect the estate prevents an unplanned $300 million dollar estate from becoming a $176 million dollar estate. This is a conservative estimate, and distributions will still be further hampered by property that is held as assets that need to be liquidated before first. Moreover, with Prince’s vast musical portfolio, there are issues such as song rights and other intellectual property, including incomplete works that may be almost impossible to evaluate.
To set up a free initial consultation to discuss your estate planning needs, contact our office by e-mail or for assistance in Pennsylvania and New York call our office at 215-568-4968, for assistance in New Jersey call our office at 609-523-2222, and for assistance in Florida, call our office at 727-538-4178. Evening and weekend meetings can be scheduled at your request.
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