I recently gave an estate planning presentation to the Monument Wealth Management team, focusing on the significant changes in the estate tax world in view of the $5,450,000 estate exemption, and increased income tax rates. The presentation is attached.
Prince is acknowledged as a musical genius, with fans, fame, record sales and a net worth to prove it. But for all his genius, he apparently died without a Will. Without a Will, Prince’s assets pass according to the estate plan created by the state of his domicile. Under Minnesota law, without a spouse, children or parents, assets pass to siblings, including half-siblings. Prince had several of them. Who knows whether that was his intent. Time also will tell whether Prince had children, which as mentioned above would alter the disposition of the assets. With an estimated $300 million (before estate taxes) at stake, not to mention perhaps another billion dollars flowing into the estate post-death – think Elvis and Michael Jackson - could this be the biggest estate mess since Howard Hughes?
Speaking of estate taxes, the primary estate beneficiary may be the IRS – it is estimated that the IRS will "inherit" over $100 million, perhaps significantly more depending on the ultimate value of Prince’s estate. In rough numbers, the IRS receives 40% of Prince’s estate. The other significant estate beneficiaries are Minnesota, which will likely receive significant tax and probate fees, and a number of lawyers, who will be paid to clean up all details, as Don Henley would say.
What could have Prince done? Well, in addition to leaving assets to friends and family, he could have left assets to charity instead of the IRS. Whatever is left to 501 (c) (3) charities is not subject to estate tax. It was reported that Prince was an active Jehovah’s Witness. Perhaps he would have preferred to leave $100 million to his Church. Also, Prince’s home at Paisley Park was used for concerts, recording and to house his memorabilia. Perhaps Prince could have created a 501 (c) (3) charitable Museum to receive and preserve a portion of his assets estate tax free upon his death.
I don’t know if Prince was an Opera fan, but unfortunately the fat lady did sing and it is now too late to do estate planning. But his premature death is a learning tool for the rest of us, at least in the estate world.
As Graham Nash said, teach your children well; teach your parents well.
On April 9, 2016, at the Women’s Center 30 Annual Leadership Conference in front of 750 women, I had the honor of introducing my friend, Dr. Martine Rothblatt, whose remarkable story is unlike any other. The introduction summarizes Dr. Rothblatt’s journey as the creator of two public companies, Sirius/XM Radio and United Therapeutics, her transition from a man to a woman, and the support of her wife, Bina Rothblatt and their four children. And that only begins to tell her story.
Below is the introduction and a portion of Dr. Rothblatt’s speech.