Estate Planning: Learning from Prince’s Untimely Passing

    Estate Planning: Learning from Prince’s Untimely Passing

    By Chris Morris

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    The sudden passing of musical icon Prince was sad and shocking enough, but the news that the singer/songwriter/actor may have died without a will1 was, in some ways, even more surprising.

    The artist who fought so hard over control of his music while he was alive left this earth with no apparent instructions on how he wanted his estate and legacy handled and it could result in both a long legal fight amongst his heirs and a significant financial bite.

    Prince, of course, is hardly the first celebrity to die without proper estate planning. Amy Winehouse, who died in 2011 from alcohol poisoning, did not have a will. Neither did Bob Marley, whose family spent decades fighting about the singer's songs and likeness2. A similar battle was waged after Jimi Hendrix passed away in 1970, with court battles over his estate still taking place in 20153.

    Even if your estate will be just a fraction of the ones left behind by these artists, it's no less critical that you adequately prepare for your inevitable passing. While it's never fun to face one's mortality, failing to prepare an estate plan will put the government in charge of your financial afterlife. (Related: Wills and the Basics of Estate Planning)

    It's called intestate succession — and the particulars vary from state to state. But generally, said Kimberly Hanlon, an estate planning attorney in Minneapolis, most states give top priority to a surviving spouse, followed by adult children. But if you're unmarried and have no kids, as was the case with Prince, then things get a bit murkier.

    "Prince left no one but siblings — and as far as the court is concerned, a half-sibling is treated the same [as] a [full] sibling," she said in an interview. "Each of those has equal standing to serve as [administrator of the estate]. If there's not alignment in the family, it could happen that one sibling is fighting with another about who is appointed to that role."

    Family squabbles on the scale you often see occurring following a celebrity's death are less common among average people, but they do happen, generally when tensions have already been running high in the family before a person dies.

    "The thing about probate cases is there's an element like family law," said Hanlon. "With divorce, you only have two people, but in these cases you can have multiple players — and sometimes they group together in alliances, similar to a reality TV show. There are all sorts of long standing family dynamics that are the undercurrent of what's happening. There's no other area where 'mom always liked you best' is something that really arises in a case. They can be very difficult cases for the court to sort out and manage — and they're difficult for the families going through them."

    Wills aren't everything when it comes to estate planning, of course. Many people also set up trusts and foundations to avoid certain tax liabilities — and shield their net worth from the public.

    Put simply, a will lets you divide your assets however you'd like, but gives you no say as to what's done with them beyond that. A trust is an entity that holds property and lets you establish rules around what's going to happen to your assets (i.e. dictating how money will be used or what's to happen to specific assets).

    Given his penchant for privacy, it might seem that a trust would be the route Prince would have preferred. And while it's possible there is one, financial planners say the absence of a will would suggest otherwise.

    "They could have done ancillary planning to create trusts and foundations and transfer copyrights, but it would be unusual to go through that sort of sophistication and not have a will," said Allen Porter, a partner at Miller Porter & Muller, P.C., in Princeton, New Jersey. "It's possible, though unlikely, to think to do all those things and not do the basics."

    Having an estate plan isn't a set it and forget it procedure, either. It's important to regularly review your plan to adjust it for changes in your life. This was illustrated when actor Philip Seymour Hoffman died in 20144. The actor put his will together in 2004, when he had just one child. But in the ensuing years, he had two more children who weren't named in the will.

    Hoffman's will allowed for the creation of a trust for his assets, but named his first child as the sole beneficiary of it, creating potential problems down the road for the other two. (Heath Ledger, similarly, neglected to update his will to include his daughter — though that situation was resolved when his parents and siblings relinquished their inheritance to the then 3-year-old.)

    "You should at least review it periodically to make sure it says what you thought it said or what you want it to say," said Porter. "Relationships evolve and people change and die — so you want to draft a will so it’s good not only for today, but so it has some durability. You might name not just one executor but a few backups as well."

    Comprehensive estate planning isn't cheap. Prices vary widely by location and your need, though a range of $1,000 to $1,200 isn't unusual5. That, sometimes, can be an added hurdle for people who have put off making a will.

    But the short term cost, say estate planners, is far outweighed by the long term security and peace of mind.

    "The price of having that estate plan done is minimal compared to the value of the decisions that you get to make and having your estate be in order for your family and not leaving a mess behind," said Hanlon. "I have people who come to me to do estate plans and as soon as we're done, they breathe a sigh of relief."

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    1 CNNMoney, "Prince had no will, says his sister," April 26, 2016

    2 USA Today, "6 legendary stars who died without wills," April 27, 2016

    3 Rolling Stone, "Jimi Hendrix's Estate Settles Licensing Legal Battle," Aug. 15, 2015

    4, "Philip Seymour Hoffman's Will Raises Legal Problems," Feb. 14, 2014

    5 NOLO, "How Much Will a Lawyer Charge to Write Your Will?"