Let’s Go Crazy – Estate Planning a la Prince

In 1984, Prince released what was arguably his penultimate album – the soundtrack to his semiautobiographical film, Purple Rain.  This classic filled compilation was ignited by its initial track, “Let’s Go Crazy”.  A phenomenal song with a phenomenal title.  Yet it appears it is regrettably the theme for his estate plan – or apparently lack thereof.

Prince Rogers Nelson (a/k/a Prince) died on April 21, 2016.  He was not married and his only child predeceased him as well as his parents.  He was survived by his sister, Tyka Nelson and five half-siblings.  His estate is apparently worth over $300 million……………………and HE DIED WITHOUT A WILL!

Per the laws of intestate administration for the State of Minnesota, Prince’s estate will be divided among all six siblings with the half siblings receiving the same share as the full sibling.  That’s the easy part.  Two incredible issues face the estate: (1) administration and (2) taxes.  Due to the size of the estate, it is inconceivable that a family member will be appointed to serve as administrator of the estate.  A corporate fiduciary will need to be appointed.  As no estate planning documents or directions apparently exist, the legal fees, fiduciary commissions and other administration expenses will be massive.

The tax bill will be unfathomable.  After a $1.6 million exemption, the State of Minnesota will be impose an estate tax at rates up to 16%.  On tap of that, after an exemption of $5,450,000, the government will assess a tax of 40%.  Without factoring the administration costs, the death taxes could approach $160 million.  Although those costs can be a deduction from the taxes, they are not at a dollar for dollar value.  Thus, it is conceivable that Prince’s heirs may see only 35%-40% of the value of his estate.

Certainly, virtually none of us have $300 million estates.  However, whatever the size of our estates may be, they need to be preserved by proper planning.  Whether or not we enjoyed Prince’s music, we certainly should agree to avoid following his example of failing to plan.  Our loved ones deserve better.