The death of pop star Prince last week at the age of 57 leaves his family, friends and fans with many questions, not only about what caused his death but also about what will become of his estimated $300 million estate and future revenues it might generate.
Prince was not married and did not have children or living parents who would inherit his estate. His only sister, Tyka Nelson, reportedly has requested a probate case be opened in Carver County, Minnesota, where Prince lived. Nelson says that to her knowledge, Prince had no will specifying his final wishes.
Under Minnesota law, Prince’s estate could go to his sibling and half siblings if there is no will.
“I find it incredulous that someone of Prince’s stature, who was so meticulous in preserving his image and rights to his music and clearly had engaged lawyers to do this in the past, wouldn’t have had the simplest of estate planning documents,” said Darren Wallace, a trust and estate attorney with Day Pitney.
Alternately, “it is quite possible that a family member, even a close family member, could be unaware of planning that a relative put in place prior to death,” said Laura Zwicker, partner with Greenberg Glusker, where she counsels high-net worth individuals.
In the absence of a will, the court typically appoints someone to act in the role of the executor or administrator.
“If there’s no will, it’s not uncommon for a family member to take on that role,” said Wallace. “But there’s a lot that goes into Prince’s estate beyond just receiving the estate assets. They would control his entire intellectual property, including licensing Prince’s image and likeness, releasing unreleased tracks, etc., so it’s more than just how his fortune gets divided. It’s really control of his legacy.”
If Prince did create an estate plan, his membership in the Jehovah’s Witnesses could have influenced how he chose beneficiaries.
There has been plenty of speculation and conversation about Prince’s estate. But Wallace says the general public may never know all of the details because there may be structures in place, such as trusts and corporate entities, that don’t have to be made public.
Like many artists, Prince’s estate includes intellectual property and music, including a reported underground vault full of unreleased tracks, which could continue to generate income for decades. That income will be subject to continuing taxation. In addition, who will control rights to the use of his image and likeness going forward and how revenues from that usage will be taxed will be part of estate settlement procedures.
Wallace said the death and estate of Michael Jackson could prove to be analogous to Prince’s estate.
“They were contemporaries, they both died young, there are similar image and likeness issues,” said Wallace. “To me, the analogy there between how their image and likeness will be controlled and the value of it and what the estate tax result will be, that to me is something of interest.”
Michael Jackson’s estate is currently embroiled in litigation with the IRS over the value and taxation of the singer’s image and likeness. The estates of other artists such as David Bowie and Tupac Shakur also could hint at what’s to come for Prince’s estate.
“There’s a tremendous amount of value with respect to the works they’ve created and they generate significant revenue for licensing after their death,” said Wallace. The estates are “not necessarily controversial, but the business aspects of these celebrities who die with tremendous value not just in what they’ve created but in what could be released after their death and how these celebrities will continue to be part of our culture is interesting because through the estate mechanism they can continue to be releasing works and producing revenues for their beneficiaries.”
In some cases, celebrity estates do prove to be messy. Despite having a clear and well-articulated will, Robin Williams‘ estate ended up in court when his widow contested some of the provisions outlined in his will. With no will in place, estate settlement can become extremely messy.
Zwicker said celebrities and non-celebrities alike can follow a few steps to ensure their assets are protected and their final wishes are carried out.
“Like others, celebrities can best protect their assets and their beneficiaries by using proper trust and business entity structures that (1) protect the privacy most have jealously guarded during their lifetimes, (2) designate a clear line of fiduciaries who are well suited to manage their assets in accordance with their wishes, (3) set out clear guidelines for the management and exploitation (or non-exploitation) of their intellectual property following their deaths, and (4) designate how their assets are to be distributed to or used for the benefit of individuals and institutions that they care about,” she said.
Everyone needs a will
“I think the first thing that applies across the board, not just to celebrities but certainly anyone with wealth or unique assets, is that you are going to be better off with a thorough, well-documented estate plan that’s up to date,” said Wallace. “It’s not just for celebrities. Everyone needs a will.”
Significant wealth and special assets can introduce tax issues and intellectual property rights that continue beyond the death of the individual. A properly drafted estate plan can provide significant guidance and direct how things should play out.
“If an individual dies without any estate planning documents in place, he or she has not only given up the almost complete privacy and control that can be maintained when estate planning is accomplished through trusts but has also allowed the state to write his or her estate plan by allowing the intestacy laws to govern who gets what share of his or her estate,” said Zwicker. “This is especially problematic where control over a celebrity’s complex intellectual property rights pass to a group of relatives who may have competing interests and agendas. In addition, where there are no planning documents in place, there is no opportunity, without court involvement, to limit who may claim to be entitled to share in the estate as a child, sibling or other intestate taker.
“Using a will or trust allows a client to specifically name those he or she wishes to benefit and specifically disinherit any other person making a claim against their estate,” said Zwicker. “Because of the complex contractual and tax issues that artists, musicians, actors and writers face during their careers, they usually have a team of legal and financial advisors who ensure that there are appropriate estate planning documents in place. However, it can be very difficult to face your own mortality and, even with good advice, there are celebrities who have died with no estate planning in place. Tupac Shakur, Sonny Bono and Jimi Hendrix all died with no estate planning documents in place.”
Celebrity doesn’t make an estate any more likely to be contested than a non-celebrity estate, although public interest in celebrities means their estate situations are better known.
“I don’t think the celebrity piece of this is going to drive whether there is controversy or not,” said Wallace. “It will really be driven by how well everything was documented and planned. And then from there probably the more interesting question is what happens next. Who is named in the will as the executor, who will be in control of the music and any unreleased music and prince’s image and likeness or were there other entities in place — corporate structures or trusts — where it will be their role in taking Prince’s vast intellectual property rights and administering them over the next half a century or more.”