Being a Minnesota native, my first thought on hearing about Prince’s passing was “how can this be?! Is it a horrible hoax?” He was an icon in Minnesota, and growing up in the ‘90s meant I was practically raised on his music. My senior class song was even “1999” (yes, that is the year I graduated too). Being a former estate planner, my second thought was “I’d love to take a look at his estate plan” with all those royalty agreements, real and personal and intellectual property . . . oh the paperwork that one would have! When I heard there was none, I was shocked. How can this iconic figure, who was known to be incredibly charitable and a pillar in the community, die without having put anything in place for his estate? And what does this mean?!
As you no doubt have heard, the family is already fighting. There is one full blood sister and a handful of half siblings. The Minnesota statutes covering intestate succession start at 524.2-101, and section 103 states who gets what when there is no spouse (Prince was not married). First would be any descendants, but he did not have any known children; then would be the parents, but they were both deceased as well, so the “descendants of the decedent’s parents or either of them by representation.” This means that half siblings get a slice of the pie. The term “by representation” means that each member of the same generation receives an equal share – so every half sibling and full sibling will get the same amount.
Speaking of amounts – about how much will that be? Well, because there was no estate planning done, good old Uncle Sam is going to get a nice big chunk . . . actually almost half! Minnesota has a state estate tax with an exemption amount of only $1.6M, with the estate tax rate of 16%; the federal exemption amount for 2016 is a little more generous at $5.43M, but the tax rate is a whopping 40% – this means anything over the exemption amount is taxed at that rate!! Say Prince’s estate is valued at around $300M, the government is getting $117,800,000+, leaving “only” $182,200,000 for the siblings to squabble over.
While the siblings will all still get a nice share, the take home points are these:
(1) Do you really want the state you live in deciding who gets your money and your stuff when you die? If the tabloids can be believed, one of the half siblings wasn’t even allowed to come to the memorial service because no one liked him – presumably not even Prince. Furthermore, Prince gave a lot to the community and to communities all over, did he really want his money going to siblings and half siblings, and did he want to create family turmoil?!
(2) Taxes. I’m all for paying my taxes and contributing my part, but all that money in Prince’s estate, he’s already paid taxes on (Minnesota does have income taxes), so why pay them again? Also, he was a known Jehovah’s Witness, which means he did not get involved with politics or formally acknowledge the government (although they do obey laws so long as it does not conflict with religious beliefs) – now, that government is getting a big portion of all he worked for.
You may not be on the same financial level as Prince, but you should learn from this. Protect your assets, protect your family relationships, and talk to your estate planning attorney about setting up an estate plan. For referrals to an attorney in your area, contact Legacy Trust.