Not too long ago, I discussed the estimated $70 million dollar estate of James Gandolfini, whose Will was referred to as a “tax disaster” by Forbes. His estate lost an estimated $30 million in estate taxes. Stranger yet, it isn’t hard to find large notable estates left without a single estate planning document. One such scenario is the estate of Prince.
It is an interesting fact of life that some of the most gifted and creative among us reveal, upon their passing, the absence of any kind of estate plan. Discussing the ramifications of this by looking at the estate of Prince is the subject of this week’s article…
Large Notable Estates Are Especially Chaotic When Left Without An Estate Plan For Many Reasons Including The Nature And Amount of Assets, The Existence of Business Interests, and the Potential For Heirs Coming “Out of the Woodwork”.
According to the major news outlets, the value of the estate of Prince was estimated somewhere between $150 million and $300 million and this amount is expected to soar according a story in the LA Times. As stated recently by ABC News, the Minnesota Probate Judge has determined that Prince passed away intestate, which means without a Will. This means that the Minnesota Court system is ultimately responsible for appointing “fiduciaries”, identifying the assets, identifying the heirs, and making all distributions. Worse yet, Prince’s Paisley Park Studio is an ongoing business and decisions about if and how it will continue to operate are also subject to a great deal of guesswork.
Estates with No Last Will or Trust Require Court Intervention to Appoint Fiduciaries
When Someone With A Large Estate Passes Away Without A Will or Living Trust, It Is Up To The Court To Appoint Fiduciaries For The Estate.
In the estate of Prince, the Minnesota Probate Judge appointed a company called Bremer Trust to act as a “Special Administrator” for the estate. The Judge deemed this necessary after an informal phone conference with individuals described as some of the “possible heirs”. Ultimately a Personal Representative for the estate will be appointed by the Court and at the Court’s discretion.
Estates with No Last Will or Trust Require the State to Determine the Heirs
When Someone With A Large Estate Passes Away Without A Will or Living Trust, the State Is Left To Determine Who The Heirs Are and There Is No Partiality Given for Close Relationships.
In the estate of Prince, Bremer Trust will be responsible for determining who the heirs are over the next six months or until a “Personal Representative” is appointed. A simple last will and testament would have removed this guesswork by appointing the personal representative immediately and would also have identified the designated heirs specifically.
Prince’s sister, Tyka Nelson, reportedly filed the request that the Court appoint the Special Administrator and stated that she believed Prince died without a Will. In Prince’s case, he was not married and is not survived by his parents. Prince’s only child passed away shortly after birth. So, his possible heirs include his sister Tyka and five more surviving half siblings…he had a total of seven and two have passed away. Tyka’s petition lists the half siblings as “possible heirs” or “interested persons”. The point here is that if Prince desired to leave the bulk of his estate to certain individuals, such as his sister, the likelihood of that result at this point is small due to the uncertainty and the likelihood of claims by distant family members.
Estates with No Last Will or Trust Require the Court to Determine the Value of Assets and Other Key Decisions
When Someone With A Large Estate Passes Away Without A Will or Living Trust, It Is Up To The Court To Administer The Location And Valuation of Personal And Business Assets and Make Key Decisions Concerning The Handling of Such Assets.
Prince’s sister Tyka, reportedly is concerned about business decisions being timely made, and these are the kinds of things that are discussed in advance in implementing a good Business Succession Plan. Such advanced planning discussions often include who will operate the business upon the death of the owner, as well as provisions for the valuation and sale of business interests.
When Someone With A Large Estate Passes Away Without An Effective Estate Plan, Large Estate Tax Losses Usually Follow
In the estate of Prince, this question has not even been reached as of yet; however, with an estate in the 100’s of millions and no estate plan, the federal estate tax consequences are destined to be massive. Ideal for large estates such as the Prince Estate, where the deceased was not married, a charitable planning methods methods may have been adopted to substantially reduce the exposure to estate taxes.
My intent, of course, is point out how serious these matters are, and the ramifications of opting for the “no plan” plan.