Posted September 6th, 2016

Lessons Learned from Prince’s “Estate Plan”

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Educating your donors about the importance of making estate plans can help ensure participation in those plans.

Many were shocked earlier this year by the unexpected death, at the age of 57, of the well-known musical icon and entertainer Prince. Then, within days, we were further surprised to learn he had apparently passed away without a will or other estate plans. As tragic and surprising as these events are, there may be some lessons here that will be beneficial to gift planners and the donors with whom they work.

If there’s a will, there’s a way

First, Prince has lots of company in dying without a will (intestate). A number of national surveys indicate that between half and two-thirds of adults do not have a will. Without a will or other legal provisions, a person’s estate will be settled according to the law of the state(s) where he or she was a resident or owned property.

Prince was not married and reportedly had no children, so who will benefit from his estate? Under the laws of intestate succession, his sister and a number of half siblings are his closest relatives and legal heirs, but it is likely to take years to settle his estate in the probate courts.

Further, Prince’s largest single beneficiary is likely to be the IRS! Even though the estate tax exemption is currently $5.45 million, his estate has been estimated to be worth hundreds of millions of dollars. The current federal estate tax rate is 40 percent, so if the taxable estate were $300 million, the check to the IRS could be just under $120 million. In addition, Minnesota residents can pay up to 16 percent in additional estate tax, resulting in many millions of additional dollars in tax on Prince’s estate. Then there are legal fees and other probate expenses.

Because Prince died intestate, his estate will be subject to a lengthy and expensive public probate proceeding. The decisions that will be made for the estate will not provide for friends or charities, and it would be as likely as “Purple Rain” for the Minnesota intestacy laws to align with Prince’s personal wishes.

Family feuds

There are other lessons to be learned from celebrity estate stories. James Brown, the Godfather of Soul, died in 2006. His estate was not settled for a decade following his demise. His will stipulated a large percentage of his wealth be given to charity, but it appears he never informed his family of his wishes. Upon learning of the provisions in his will, several of his family members were taken by surprise and decided to contest the will.

One lesson to be learned from celebrity estates is the importance of loved ones being aware of the decedent’s intentions before death. While many donors will want to keep their intentions private, some will appreciate the suggestion that they share their charitable plans with loved ones.

Prince and James Brown are in some very high profile company in the battle for inheritances. Though he was trained as a lawyer, President Abraham Lincoln had no will when he was assassinated at the age of 56. Conflicts continue to haunt the legacy of Martin Luther King, Jr., who also died without a will at the age of 39. Legal battles surrounding their estates lasted more than 30 years for musicians Bob Marley, who died at the age of 36, and Jimi Hendrix, 27 years old at his death.

Perhaps it is less surprising when younger individuals such as Marley and Hendrix pass away at young ages without wills. Kurt Cobain and Amy Winehouse join Hendrix as being only 27 when they died without estate plans. More surprising are the stories of Howard Hughes and Pablo Picasso. The $1.5 billion legacy ($6.4 billion in today’s dollars) of billionaire Howard Hughes was split among nearly two dozen cousins when he died intestate at the age of 70, and family members of Pablo Picasso, who passed away at the age of 91, continued fighting for shares of his estate for more than 20 years.

One thing is perfectly clear: every adult should make the minimal effort to control the eventual distribution of assets. Whether they are wealthy or of more modest means, the time spent planning their estates and discussing them with their families will help to ensure that their wishes for family, friends and charitable interests will be carried out. Gift planners can be valuable resources by encouraging the planning process. ■

Tips for Educating Donors on Estate Plans

  • National Estate Planning Awareness Week, led by the National Association of Estate Planners and Councils, is October 17-23, 2016. Their website features helpful information you may consider adapting in your donor communications.
  • Coordinate with a local trusted expert (perhaps someone on your board?) to host one or a series of estate planning seminars.
  • Share estate planning articles and tips in emails and on social media sites in October as a way to help educate older donors who are online.
  • Consider a mailing to donors over a certain age incorporating information such the Sharpe publication An Estate Planning Quiz. You might also include a reply card offering additional information from the Sharpe information library and providing an opportunity for donors to inform you if they have included your organization in their estate plans.

If you don’t already have one, a professional advisors committee can be very helpful in offering suggestions and resources for educating your donors. (See “How to Create a Professional Advisors Committee” in May 2016 Give & Take.)

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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