In 2016, the legendary musician and actor Prince died of a fentanyl overdose. He left behind an incredible legacy, significant assets, many relatives, and, unfortunately, no will and no trust. It took six years and tens of millions of dollars in legal fees, but the heirs and the IRS agreed that his estate was worth $156.4 million, and the legal battle is finally coming to a close.
When Prince died in 2016, his parents had been deceased for more than a decade. He had six siblings from the same father, but it’s unclear how close he was with the ones still alive (at least two have died). He was married and divorced at least twice. He reportedly had one child — a son — who died shortly after childbirth. Without a will or trust in place, his living relatives have faced a costly legal process to have the estate’s value settled and distributed.
What Is the “Nightmare of Probate”?
The nightmare of probate happens under three scenarios:
- During lifetime if someone is or becomes incapacitated and does not have a power of attorney in place naming somebody to handle their legal and financial affairs, resulting in the need for conservatorship, also called lifetime probate or living probate;
- After death when a person dies without a last will and testament or a trust (also called dying intestate); or
- After death when a person dies with a last will and testament as their only or primary estate planning tool, and there are assets solely in that person’s name that do not have a joint owner or a named beneficiary.
The after-death probate process begins by proving the authenticity of a decedent’s will (if they had one), appointing a personal representative (either an executor nominated in a last will and testament or an individual asking to be appointed as the administrator of the estate, which can result in many people fighting over who gets to serve in that role), identifying and inventorying a person’s assets, paying debts and taxes, identifying heirs, and distributing property according to the will or, if the decedent died intestate, according to state law.
According to the laws of Minnesota (where Prince lived at the time of his death), as in most states, in the absence of a will and without having a surviving spouse, with no descendants and no living ancestors, the estate goes to his brothers and sisters (and to the children of the deceased siblings) in equal shares, per stirpes.
Here is why probate is such a nightmare:
- Probate requires frustrating intrusion by the court, lawyers, and the public into a very emotional, private, family time;
- All of your affairs become public knowledge;
- Anyone can walk in and request to view and copy a probate file. Today, many courthouses are online, so anyone in the world can access probate files;
- Probate can take years;
- Probate is expensive;
- On a national average the probate process takes from 5-8% of your family estate out of the hands of your beneficiaries and gives it to lawyers, accountants, courts, and other outside individuals;
- Probate can exacerbate family strife;
- The court, not your family, will supervise and authorize the settling of all debts and the payment of inheritances, in its time and with its delays.
After Six Years, Prince’s Estate Was Settled
After six years, the $156 million figure that was agreed upon as the value of Prince’s estate with the Internal Revenue Service (IRS) and the heirs to Prince’s estate, is finally being distributed.
- Prince’s estate will be split evenly between Prince Legacy LLC and Prince OAT Holdings LLC. Prince Legacy LLC consists of interests previously held by three of Prince’s half siblings, Sharon Nelson, John Nelson and Norrine Nelson. Prince Oat Holdings LLC is owned by music publishing company Primary Wave and consists of interests once held by Prince’s other half siblings, Tyka Nelson, Omarr Baker, and Alfred Jackson, as well as three separate entities owned by Primary Wave.
- Comerica Bank & Trust, the trust company that was assigned by the court to administrate the estate’s affairs during litigation, gets $3 million for its part in closing the estate, “including the preparation of tax returns, professional fees, expenses and any awards entered in pending litigation involving the Estate.”
- The IRS ultimately charged a $6.4 million “accuracy-related penalty” it had levied on Prince’s estate, and the Minnesota Department of Revenue also charged an accuracy penalty.
- Whatever is left over gets split between Prince Oat Holdings LLC and Prince Legacy LLC.
In Prince’s situation, the court was left to divide his extensive estate – including his studios-turned-museum, real estate, and music rights – equally among six blood relatives. Had Prince simply spelled out his wishes in a living trust prior to death, his heirs may not have been happy but they would have received their inheritance intact and in a reasonable time. Also partly due to lack of planning, the fight over valuation of the estate resulted in a huge tax bill that will likely force Prince’s heirs to sell their interests in his catalog, rather than reaping its long-term benefits, not to mention tens of millions of dollars to lawyers and consultants and valuable assets to pay those fees.
“It has been a long six years,” said L. Londell McMillan, one of the lawyers for Prince’s heirs.
How the Long, Expensive Situation with Prince’s Estate Could Have Been Avoided
Simple steps can prevent a costly, highly publicized probate nightmare like the one that Prince’s family experienced. These are lessons you can learn from the situation:
- Get your estate planning and incapacity planning in order.
Remember that dying with or without a last will and testament means that the probate court will oversee distribution of your property. Better estate planning involves using a living trust to distribute your assets upon your death and having a trusted family member or a professional trustee that you pick distribute your assets.
A revocable living trust to avoid after-death probate, along with a financial power of attorney and an advance medical directive to avoid lifetime probate, will give you much-needed peace of mind and save your family a tremendous amount of stress, time, and money should something happen to you. A living trust allows for the distribution of assets after death according to your wishes and without court involvement. A general power of attorney names someone you trust to make financial decisions on your behalf if you become incapacitated, thus avoiding the need for a conservatorship (called guardianship of the property in Maryland and some other states), which is the court-supervised process of living probate. An advance medical directive names someone you trust to make medical decisions for you if you’re not able to, thus avoiding the court-supervised guardianship process that’s also part of lifetime probate.
- Take inventory of what you have.
Start your inventory with big-ticket items, such as real estate and savings accounts, and work your way down. Some items might not have monetary value, but they have sentimental value to you and your family. Include them and to whom you intend to pass the asset in your estate planning documents to avoid family strife.
- Know what your items are worth.
Protect your heirs by enlisting the services of a reputable expert to value jewelry, artwork, and other items of unique value, and be sure to keep all documentation in a safe place. Although values of these items change over time, having a general idea of an asset’s value when making estate plans can spare your heirs significant headaches down the road.
- Anticipate family dynamics.
Even the closest of families can become dysfunctional when a loved one dies. It’s sad to think that your death could create a permanent divide between your relatives. Make things simple by creating a clear plan that leaves nothing to chance. Just because you’ve told a close relative that you want them to have your artwork, don’t assume that everyone knows this or will be happy about it. A letter that clearly explains the reasons for your decisions can help prevent hurt feelings and possible legal challenges.
- Name a trustworthy trustee/executor.
Designate a trusted individual to carry out your trust’s instructions and manage the affairs and wishes of your estate. Your designee should understand what he or she will be required to do. If you sense any hesitation or concern, talk through those concerns. If it still doesn’t feel right to one or both of you, identify another person to serve in this important capacity, someone who will truly have your heirs’ best interests at heart. And if you are naming an individual, it is always wise to name one or more alternate individuals in case the primary individual you have named is not available or willing to serve in that role when the time comes.
Prince probably thought — like most of us do — that he had plenty of time to get his affairs in order. But of course no one knows when tragedy may strike, so don’t wait to get your estate planning and incapacity planning documents in order!
Estate Planning: Get Your Affairs in Order to Make Things Easier for Loved Ones
As you can see from the situation described, if you die without proper estate planning, it could create unnecessary headaches for those left behind and needlessly waste a significant portion of your assets on taxes, attorney’s fees, and probate expenses. This is why it is important to have an experienced estate planning attorney, such as those here at the Farr Law Firm, to create your estate plan and be sure to keep everything up-to-date.
Once completed, it is wise to review your estate plan at least every three to five years and make necessary updates accordingly, or to join our Lifetime Protection Plan® to ensure that your documents are up-to-date each year or whenever needed. Read more about our four levels of lifetime protection planning here.
We here at the Farr Law Firm have numerous strategies in place to help our clients plan for themselves and their loved ones. If you have not done your estate planning, incapacity planning, or retirement planning or had your planning documents reviewed this year, please call us for an initial consultation:
Estate Planning Fairfax: 703-691-1888
Estate Planning Fredericksburg: 540-479-1435
Estate Planning Rockville: 301-519-8041
Estate Planning DC: 202-587-2797
About Evan H Farr, CELA, CAP
