Prince’s Estate Has Valuable Estate Planning Lessons For Us

Retirement

Prince’s estate and the legal actions following his death deliver important estate planning lessons to most of the rest of us. Prince Rogers Nelson, the entertainer known generally as Prince, was a successful musician, entertainer, and record producer. He died at age 57 and left a valuable and complicated estate that was made more complicated by his inactions and oversights.

He apparently left no valid will. He was twice divorced and unmarried at the time of his death and had no offspring. Prince had numerous full- and half-siblings. Two of the siblings predeceased Prince, one of whom had a child. These people and others claimed to be rightful heirs to part of the estate.

Since he didn’t have a will, Prince didn’t exercise his right to determine who would and would not inherit a share of his estate or which shares the heirs would inherit. Perhaps he wanted his half-siblings to inherit shares equal to those of his full siblings. Maybe he wanted the children or his siblings or half-siblings to inherit along with the rest of his relatives. We’ll never know, because he didn’t have a will.

Instead, the courts following state statutes will determine who will inherit and how much each will inherit. Already, years have passed and the estate still is involved in litigation to determine how the estate will be distributed. My hunch is that a sizeable amount of money will go to some relatives with whom Prince had little contact and no interest in sharing the benefits of his life’s work. I also suspect the real objects of his affection won’t receive nearly the benefits Prince wanted.

By not having a will, Prince also didn’t select the executor of his estate. The executor, or administrator, often is the key to determining how the estate is distributed and how much is available to distribute. While important in every estate, the role of executor is more important than usual in Prince’s estate.

Prince died in Minnesota. Under its law when someone dies without appointing an executor, a court will appoint an administrator who is acceptable to a majority of those with an interest in the estate. When a majority of the potential heirs can’t agree on an executor, the court can appoint any suitable person.

One of Prince’s sibings petitioned a court to appoint the bank Bremer Trust as executor and was able to persuade the others to consent. Bremer Trust was appointed. Of course, this process took a while, because the list of potential heirs was long and there were some individuals claiming some relationship that entitled them to shares.

After a while Bremer Trust resigned, and the court appointed another bank as executor. All that activity caused delays in administering and processing the estate. There probably was lost income and some wasting of assets.

The executor controls many important decisions. The executor selects the various professionals who will help identify the estate’s assets and value them. Of course, the professionals who file the estate tax return and handle any disputes with the IRS are selected by the executor.

The estate now is in a dispute with the IRS over the taxable value of the estate, with the IRS claiming the estate is worth more than twice the amount listed on the estate tax return.

The executor also determines who will manage the various assets of the estate, hopefully with an eye toward maximizing their long-term value.

Prince owned unique assets, many of which are copyrights or other intellectual property. He also had firm ideas on how these assets should and shouldn’t be managed. It’s likely he had ideas about who should participate in managing the assets when he wasn’t able to, but those ideas weren’t available to his executor.

In this estate, as in many others, the choice of executor determines much of what happens. An executor determines whether there is transparency about the estate and fairness to the heirs. An executor also controls the extent to which the deceased’s wishes and goals are respected or ignored, among many other issues.

Because Prince died without preparing a will he didn’t have a say in even the basic decision of who should shares in his estate or be his executor. Even in a much less valuable and complicated estate, those decisions are critical. Often, what the deceased would have wanted differs greatly from what happens once the courts take control of an estate because there was no will or an inadequate will.

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