Episode Transcript:
Hey there, Legal Tea Listeners – fancy having you here! This is your host, Jenny Rozelle. I’m honored to have you here for our first REAL episode of Legal Tea – today’s topic is estate planning with the rich and famous! Ohhhhh – ahhhhh! Today we are talking about …. PRINCE!
Prince passed away in April 2016 at the young age of 57. If you can even believe it, he passed away without a Will. When I say Will – I mean, a Last Will and Testament. It’s a common estate planning instrument that helps get assets distributed after someone passes, to the person’s designated beneficiaries (listed in the Will.) So …. He wasn’t married (pause) he had no children. No real “easy” default beneficiaries, right?
Like, I meet with a lot of people that their estate plan consists of assets distributed to the spouse – then everything to the kids – and if not to the kids, to the grandkids. Etc. But ol’ Prince … since he wasn’t married nor did he have kids, who knows who he would have wanted his assets distributed to and HOW they were distributed. That is what an estate plan (like a Will) accomplishes – without a Will, things get a little hairy.
Every state (I would assume every state does – my state of Indiana does, here in Minnesota, they do….) has what are called “intestacy statutes.” Just a fancy name for someone passing way without a Will. The state has its very own default estate plan for people who pass away without a Will – so that’s what a lot of Prince’s scuttle-butt is about. He DID leave behind several siblings, who will likely end up getting most of his Estate, if not all of it (after legal fees, taxes, court costs, etc.).
To get those assets distributed to his siblings, his Estate has to be opened up in probate Court. Can you even imagine? This has got to be one of the largest and most complicated proceedings in Minnesota. (By the way, I have a ton of family in Minnesota – so shout out to my fam in Mina-sota!)
Back to probate…
With probate, there is a piece of the process that allows any individual to make a claim on the Estate to say that he/she is an HEIR of Prince. So while he had his siblings as his likely-closest blood relatives, I’m sure you know where this is going….
Shortly after the probate case was filed, people were coming out of the WOODWORK, I tell you. Trying to say they were related to Prince in some type of way – a/k/a so they get a cut of those Estate assets! The stinky part is all this determination of assets and heirs is charged against the Estate – even if the claim is baseless. Think of that next time you hear Purple Rain! That royalty probably just paid some lawyer bill… I digress…Hey, I can make that sort of comment since I am a lawyer.
Actually … you know what. … retract that “I digress..” Let’s talk numbers…
There are reports all over the place on the value of Prince’s Estate, I’ve seen as low as $100M and much, much, MUCH higher. Like $300M even. Maybe more. Maybe less. According to Star Tribune – As of January 2021, the IRS and representatives of the Estate were disputing the value of his Estate – YOU KNOW Uncle Sam wants his piece of the pie! The more the Estate value, the more Uncle Sam wins – the less the Estate value, the less Uncle Sam wins. You get the point…
According to a blog written by Grant Gangestad, an attorney, in May 2020, so keep in mind that was more than a year ago from today in mid-2021, he shared that at that point legal bills were around $10 million dollars; Comerica has spent $45 million in attempting to get the estate settled; and an enormous tax bill – about 40% due to the feds and 16% due to the State of Minnesota. SO.MUCH.MONEY. that could have very likely been saved with APPROPRIATE ESTATE PLANNING!
In a probate case, there’s always someone leading the charge – sometimes people call them Executors or Administrators; in Indiana, we call them Personal Representatives. Anyway, so here – the Minnesota Court ruled that Comerica Bank and Trust would serve as Administrator of Prince’s Estate.
According to Mike Traywick’s blog, who is an attorney in Michigan … Subsequent to Comerica’s appointment, Comerica struck a deal to stream Prince’s music – if you’re a fan of Prince, you know that he consistently fought against streaming his music. So while Comerica is tasked with operating in the best interests of the Estate (does that mean more MONEY?!), it breaks my heart to see that this has happened to Prince – someone who would’ve never wanted his music streaming. HEY, he could have done some estate planning and specifically said “no streaming!” of my stuff, people! But he didn’t…
So where do things stand today? Well, the biggest thing going on right now is determining the value of the Estate – like I shared, the IRS wants it worth more; Comerica, as the Estate’s representative wants it worth less … as do the siblings. According to an article on JD Supra, the IRS (quote) officially determined (quote) that his Estate was worth an estimated $163 MILLION – while Comerica and the Estate reported $82 MILLION on the estate tax return.
The difficult thing here in Prince’s Estate is that sometimes assets are legitimately hard to value – one would think it’s easy to come up with, like “x” is the value of my home, I have “y” in my bank account, but think of some tangible and maybe intangible things – like the value of Prince’s music. Or maybe more in the real world, you can buy Waterford crystal brand new for $100s of dollars, but if you sell it through an estate at an auction, maybe you get $60. Or worse. That’s what’s going on right now with Prince’s Estate – what in the world are all these things valued at?!
The JD Supra article further provides us direction with HOW this Estate will get valued – they claim the United States Tax Court will assist with what they call “refereeing” the experts. This will likely take years. There will be discovery, depositions, I mean a full-blown trial-like setting all to JUST determine the Estate value. In the event the IRS and Estate cannot agree to a value, the Tax Court will be the decision-maker – they can either adopt one of the party’s arguments or form their own.
It’s unlikely Prince’s siblings will see money anytime soon – after all, what if all legal-gobbly gook takes years, takes tons of money (it likely will) … Comerica is likely going to want to “keep” control of the money to afford the lawyers, the professionals, the accountants, them (as in Comerica serving in this role – they aren’t serving for free, I’m sure!). Hey, if I was Comerica’s attorney, I’d say, “NO ONE gets a penny until things are straightened out, bills are paid, and we’re in a better position.”
So what do we learn from ol’ Prince … well I hope you’ve learned a few interesting tidbits, but the big takeaway here is … DO YOUR ESTATE PLAN. That’s going to be this podcast’s tagline - #DOYOURESTATEPLAN … hashtag’ing it and everything. Yes, I understand Prince’s estate is crazy big and way more money than I can certainly dream of. But the point is, estate planning is for everyone – for the young, the old, the not-so-rich, the affluent, you get the point. There are ways to ensure you estate gets distributed to WHO you want and HOW you want – but you’re only going to accomplish that if you #DOYOURESTATEPLAN.
Next week’s topic is a cautionary tale – a real-life case I’ve personally worked on. This isn’t like Prince … this isn’t fancy-dancey celebrity estate planning. Cautionary tales will be about people like you and I, families like yours and mine, and they’re called cautionary tales for a reason … don’t let what happen to them, happen to you!
Until next time, Legal Tea Listeners…talk soon!
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