I’ve been thinking a lot about Prince lately. His music has been a soundtrack to my life (“When Doves Cry” will forever remind me of an unfortunate lip syncing performance by a friend at a camp talent show), and I was fortunate enough to see him in concert twice. I’ve always been impressed by his business savvy—he took on Warner Bros. to protest the nature of their contracts with artists (including changing his name) and always seemed to me to be on top of his affairs.
Now that he’s died, we know that my impression was wrong. Like a reported 64 percent of Americans (according to a 2015 Rocket Lawyer estate-planning survey by Harris Poll), Prince died intestate (or at least, no will has surfaced as of this writing). That shocks me. How could someone who was seemingly aware of the value and importance of contracts, not to mention the value of his music, who found ways to release his own music and arranged phenomenally successful tours, not have a will? It appears, based on the Petition for Formal Appointment of Special Administrator, filed in Carver County, Minn. on April 26, that Prince had a relationship with a corporate fiduciary, or at least with the banking arm of a qualified trust company. So why did no one ever advise him to create an estate plan? Alternatively, if they did advise him, why didn’t he do it? It’s hard to believe that he didn’t care where his money went; speaking personally, I’ve yet to meet anyone who didn’t care about that. And as smart as he was, didn’t he realize that if he did nothing, the state would make decisions for him regarding where his money would go, using the laws of intestacy as a will substitute? And perhaps most shocking, didn’t he care who controlled his music and his musical legacy?
The Tax Side
And then, of course, there’s the tax side. We all know how much the music and image of a deceased artist can be worth after the artist’s death. Elvis, whose liquid estate was worth $5 million at his death, now exceeds $55 million in earnings annually (according to Forbes). The value of an artist’s intellectual property explodes, and that leads to a ripe opportunity for the Internal Revenue Service when it comes to valuation for federal estate tax purposes. While the audit is undoubtedly inevitable, there are certainly many techniques that could be used to minimize the final tax bill. It’s hard to imagine that someone in the Treasury Department didn’t get a little bit excited when news broke that Prince died intestate. And that could have been prevented—I’m sure most of us know a good estate planning attorney or two that would have been happy to help!
What Went Wrong?
There are a couple of items here that I find especially interesting. First, it fascinates me when people opt not to create an estate plan. This applies especially to people with significant wealth, who pretty much always have an attorney helping them with other matters—in general, lawyers have to get involved in almost any (legal) venture that makes someone wealthy. An attorney I know once described a billionaire client who had complex wealth transfer vehicles in place, but neglected to create a basic will and trust to cover the non-business assets that were a part of his wealth.
I also wonder a lot about whether those conversations among Prince and his bankers or wealth management team ever actually covered the need for an estate plan. It strikes me that such a conversation should be “low hanging fruit” for any client conversation—do you have a current estate plan? Are you comfortable with its terms? As estate planners, having such a conversation seems obvious and fundamental—but obviously it isn’t. And since clients don’t generally see their estate planner until they’ve made the decision to talk about their estate plan, that basic conversation has to happen well before anything occurs in the lawyer’s office.
Scare Them Into Action
So what can we do about it? I think the best we (as estate planners) can do, is talk about these issues with our friends and associates who aren’t estate planners. I’m sure I’m not alone in having friends tell me that they just don’t have time to do their estate plan or can’t figure out who to choose as a guardian and how to allocate their money, so they instead opt to do nothing. Even our wealthiest clients use these excuses. We owe to them to pull out our favorite war stories and scare them into action.
And now, if you’ll excuse me—I have to go back to listening to “Little Red Corvette.”