This article demonstrates why having a will is so important! His rumored lack of estate planning is going to be leaving a nightmare for his family.
Prince’s apparent lack of planning may cost his estate
As an artist, Prince was fiercely protective of his music.
“If you don’t own your masters, your master owns you,” he said in a 1996 interview with Rolling Stone.
Prince, however, demonstrated a lot less clarity in terms of estate planning.
His sister, Tyka Nelson, filed court documents Tuesday asking for a special administrator for the artist’s estate, stating that she had no knowledge of a will and had no reason to believe Prince created one.
If that is the case, whoever inherits the estate may find themselves with the autonomy to do as they please with the late artist’s assets. So control over Prince’s music, including a rumored trove of unpublished material, could die with him.
“Any intent that he may have had to control his publicity and likeness is moot if he didn’t document that in a legal estate planning forum,” said Richard Behrendt, director of estate planning at Annex Wealth Management and a former estate tax attorney with the IRS.
“That’s the ultimate irony,” he added.
Losing control of his music is just the start, however. If Prince did not have a will, he is unlikely to have done much in the way of estate planning, said Michael Kosnitzky, head of the tax practice at Boies, Schiller & Flexner.
That means his estate will owe taxes on whatever the IRS and the administrators agree on as its value. Various estimates place that figure around $300 million, not including the unpublished music. And with a federal estate tax rate of 40 percent and a Minnesota tax rate of 16 percent, roughly half the estate could go to the government. (State taxes would be deductible against the federal tax bill.)
With forethought, there are steps Prince could have taken to reduce that enormous tax bite, Kosnitzky said. For example, if Prince had placed his unreleased music in a dynasty trust, he would have paid a gift tax on the value of the music at the time of the transfer. But after that, the value could increase with no tax implications, and the trust assets would not count as part of his estate upon his death.
“If you have assets with value that will accrue substantially after your death, you should be engaged in estate planning strategies that take that into account now, especially for someone who is not married,” he said.