The reign is purple
As you may know, I’ve developed some great connections with other fiduciary financial planners around the country over the years. Periodically we share resources and information.
I invited Greg Johnston, a fee only financial planner in Peoria Illinois to share his thoughts on Prince’s estate planning mistakes.
Prince’s estate planning mistakes
In April of this year, the world mourned the loss of Prince. He was one of the most prolific songwriters and performers of his generation.
At the time of his death, he was 57 years old and a resident of Minnesota where he was born. Prince was survived by six siblings: one full sibling and five half siblings.
His sister has reported to the court that Prince never executed a will. What lessons can be learned from this?
The short answer is that Prince has lost total control of who receives his assets, how the assets are received, and will have to pay the government vast sums in estate taxes.
Prince’s estate plan was not to have a plan
When one dies without a will that is known as dying intestate. A judge will appoint someone to handle the allocation of Prince’s assets.
Minnesota state law will dictate how Prince’s estate is distributed. In Prince’s case (since he was not married, his parents pre-deceased him, and he had no living children), it likely means that Prince’s full and half siblings and the daughter of a pre-deceased sibling will share in his vast wealth. Even if you were estranged from these siblings they will likely be entitled to receive his assets.
When you die intestate, the whole process (known as probate), as well as your assets are public. Anyone can see exactly what you are worth and your holdings (including the tabloid press).
Probate is public, everyone knows your business
For families of celebrities, this can be a major concern. Family disagreements over the disposition of assets will be public and debated in court.
Probate is lengthy and complicated. In Prince’s situation the settlement will likely be very difficult and could take years to sort out. One thing the administrator will have to do, is to value Prince’s assets including existing music rights, unreleased songs, and other intellectual property. The valuation of these types of assets is very challenging.
Prince’s beneficiaries likely to lose more than half of his estate
The financial cost will be enormous. Prince’s estimated wealth has been reported to be upwards of $300 million. Given the nature of his assets (difficult to value), and the reported amount of previously un-released music, his estate could be worth significantly more.
Because he did not do the proper planning, the value of his assets on the date of his death will (roughly) be subject to a federal estate tax of 40% and 16% Minnesota estate tax. That will likely cost his heirs over $150 million.
Because the assets will pass outright to his siblings, the assets will be included in each siblings’ estate and will also be subject to their creditors and spouses (think divorce). With proper planning, assets could have been removed from his siblings’ estates and they would have been protected from creditors / spouses.
Get your estate plan in order!
In summary, by not having a will, Prince lost control of where his vast fortune goes. Estate planning allows people to control their property while they are alive, take care of themselves and their loved ones if they are disabled, and give what they want to whom they want, how they want, with the least possible cost and hassle.
On our website, there are links to a variety of estate planning information and articles.
About the Author
Gregory A. Johnston, CFA®, CFP®, CPWA®, QPFC, AIF® has over 25 years of investment and comprehensive finanical planning experience. He started Johnston Investment Counsel in 1997 as an independent, fee-only investment management and comprehensive planning firm located in Peoria, Illinois. His clients include individuals, retirement plans, and endowments / foundations.