Prince’s Legacy and Estate Complications

Discover key takeaways from Prince’s estate and how proper planning could have prevented it. Gain actionable tips on estate planning, asset valuation and liquidation strategies to secure your legacy. Read on for expert advice that will help your heirs with a clear, conflict-free inheritance process. 

Key Takeaways:

• Prince's lack of a Will led to prolonged legal complications. 
• Complex assets, like music rights, require additional estate planning. Consider any hard-to-value assets in your estate. 
• Work with an estate planning professional to gain clarity, outline your estate, plan for asset valuation and prepare for potential liquidation. 

Prince is an iconic name in the world of music. With legendary hits like “Purple Rain,” “Kiss,” and “Raspberry Beret,” Prince incorporated a wide range of musical styles into a popular package for mainstream audiences. He sold more than 100 million albums during his lifetime, creating a catalog of over 600 songs. But sadly, when Prince passed in 2016, his $156.4 million estate fell into turmoil. Without a Will to guide the distribution of assets, many decisions were put in the hand of the Executor, which may not have been the decisions Prince himself would have made. In this article, we’re going to look at the details of Prince’s estate and actionable steps you can take to avoid a similar situation.

The lack of a Will is one of the most common estate planning oversights. It can also lead to significant legal challenges and financial impacts.

Prince’s Estate

At the time of his passing, Prince held a wide-ranging estate which included:

• Music rights 
• Unreleased music
• Real estate properties, both in the US and abroad 
• Other personal and business assets 

However, Prince died intestate (without a Will). This fact, along with the complexity of his estate, led to a lengthy legal process involving Minnesota estate law and the laws of intestacy.

To arrive at a resolution, attorneys had to negotiate across three critical areas:

1.  Heirs: The first challenge with Prince’s estate was establishing who the legal heirs were. 

While numerous parties stepped forward claiming to be heirs, ultimately, under Minnesota law, Prince’s siblings were his closest next of kin. This meant his full sister and five half-siblings shared equal claims on his estate assets. But without a Will to dictate the inheritance, Prince gave up his ability to specify who he may have wanted to inherit his assets—which may not have been where they ultimately ended up. Sadly, two of Prince’s half-siblings passed away during the lengthy estate process. This introduced another series of heirs – further complicating proceedings. Ultimately, the lack of a clear estate plan led to millions in legal fees as all six heirs retained their own legal counsel. 

A simple Will would have cleared up the conflict between heirs.

2.  Valuation: The second challenge was valuing the estate. 

While real estate can be easily valued by appraisal, the worth of Prince’s music and other intellectual property was much more difficult to size. Not surprisingly, the estate tax return was audited, as is frequently the case with hard-to-value assets. The estate tax return was filed by the Personal Representative at a value of $82.3 million, while the IRS valued the estate at $163.2 million. After much back-and-forth, the parties settled at a $156 million valuation.

3.  Liquidation: The final challenge was determining the best way to monetize the assets to generate funds to pay the estate taxes due. 

A good portion of Prince’s estate value was in his catalog of music assets, including unreleased songs. These assets carried significant value, but the heirs agreed that they did not want these assets sold. But most of the heirs did not have the expertise as to how to best realize the value. They were not in the music industry. Moving forward after closure of the Estate, all decisions would have to be made with agreement between Primary Wave and the heirs who retained an ownership interest.

The more complex your assets, the more important estate planning and succession planning becomes. Don’t leave your heirs guessing on how to move forward.

Lessons Learned

Six years and millions in legal fees.

That was the cost of Prince dying intestate. And, in many cases, these challenges could have been avoided with strong estate planning.

Let’s consider each of the challenges in this case:

1. Heirs: A Will would have definitively settled the allocation of assets, rather than leaving it to the intestacy laws of Minnesota. Prince’s heirs would have known exactly what they were receiving and why. 
2. Valuation: Working with an estate planning team, Prince could have established in advance awareness of the value of his holdings. He could have undertaken pre-death planning in efforts to reduce estate taxes. 
3. Monetization: Lastly, Prince could have planned for liquidation or monetization of this assets based on the terms that he would have wanted to occur, rather than those determined by an independent Personal Representative. Recognizing the significant tax bill and the needs of heirs, the estate plan could have included provisions for sale or license of music rights to specified parties, as well as distributing money from these activities to his heirs. 

Estate planning helps you avoid legal disputes and fees.

Action Items

As you plan your estate, keep these steps in mind:

1. Outline your wishes. Take the time to name your heirs and establish their inheritance in a Will. Further, explain your thought process to heirs, either in writing or in discussion, to avoid confusion and arguments. 
2. Plan for the complexity of your estate. If your estate includes assets that can be difficult to value, build in contingencies. 
3. Build in plans for liquidity. Where you know assets will need to be liquidated to cover taxes or set the heirs up for success, integrate this process into your estate documents. Plan for liquidation events and the process for turning complex assets into easily transferable ones. 

Lastly, consider working with a professional. The right estate planning advisor will help you think through the steps of your estate planning and prepare your heirs for the future.

Documentation and communication are key to a successful estate plan.

Secure Your Estate

Work with the estate planning advisors at Comerica Wealth Management. Our knowledgeable advisors can help guide you through the estate planning process that can save your family time, money and emotional strain. Contact your Comerica Relationship Manager or contact Comerica to request to speak with a professional today.