In this financial page sometimes it’s advantageous to use real life examples to assist, educate, and motivate others with their own planning.
On April 21, 2016, one of the most prolific musicians of all time died an untimely death at the age of 57. Prince’s music spanned a 40 year period and he was declared one of the richest music entertainers of all time.
Prince was very meticulous about being in control of his music career. He owned both the recording and publishing rights to all of his compositions and, because of one of his many wonderful talents, also played most of the instruments on his recordings.
Unfortunately, that same meticulous attitude was not used with the thought of someday taking his last breath on this Earth. So the very voice that was needed to direct his dollars, copyright proceeds, property, and songs that had never been recorded,was no longer there. Someone other than Prince is now in control of his estimated $300 million estate. That someone turns out to be the state of Minnesota and the IRS. Without a will, Minnesota follows the line of descendants, which in Prince’s case would be a sister and 5 half-siblings. These six would split the proceeds evenly. His parents pre-deceased him, and he had no children. So this may or may not be what Prince would have intended to happen.
Establishing a will or trust essentially enables your voice to still be there to direct your entire life’s earnings exactly where you want them to go after your death.
The problem lies in the fact that as humans, we think we’re indestructible and that we’ll always have another day to do this very important planning.
It has been communicated to Prince’s sister, Tyka Nelson, that she has an obligation to at least try to locate Prince’s will. However if you were in line to inherit one sixth of $300 million, how hard would you be looking? So, at a time when everyone should be grieving the loss of a loved one, instead they are working on locating a will, and dealing with all the business aspects of someone exiting this world and leaving assets behind. With the proper planning ahead of his death, a value could have been established for the many things that weren’t just green dollars. How do you put a value on a vault full of unpublished songs, or the copyright capability of his music extending on long after his death and the revenue that this would have provided? This all could have been established long before this wonderful musician’s death with the help of Prince and the IRS.
And because of the lack of planning Uncle Sam is likely to take half of the estate, and they don’t want music manuscripts, or copyrights which undoubtedly were a substantial part of his estate, but rather green dollars. Will some things have to be liquidated in order to pay the government close to $150 million? Probably so, and the IRS doesn’t give you long to come up with these dollars. Proper planning would have avoided many of these challenges facing the loved ones and their representatives, now.
Complicating these issues, there very well could be lawsuits that appear as different relatives try to claim their expected or promised share. If Prince’s voice remained, even with his absence through a will or trust, there would be no question as to where his proceeds would go.
Understand it does not necessarily have to be a famous musician in a far-away state, and certainly $300 million is not required to do some planning ahead of time. When is the best time to do this? The time is now, as you take care of it and don’t have to concern yourself with it anymore, unless you have substantial changes in your financial picture. Why now, because now is better than later, and that later as is evidenced in Prince’s case, never happened.
In your search for a proper attorney to help you in these matters, make sure it is someone that does this kind of work all the time. If you were having brain surgery, you would certainly not want a surgeon that just performed surgeries 10 percent of the time. There are attorneys that specialize in criminal cases, divorces, land acquisitions, etc. but it would be in your best interest to secure an estate tax attorney that does this kind of planning 100% of the time. With all of the ever-changing rules, it would be preferable to have someone that is current on all these requirements. It is puzzling to think that some very famous musicians, athletes, and entertainers that have access and funds available to have the very best planners in the estate tax area, have done little or nothing to prepare for the inevitable, and that is their death.
Prince is gone, his music lives on, and hopefully this is an example that motivates you to take the proper action to avoid many of the aforementioned issues. Good luck!
Tim Schumacher represents Strategic Financial Partners in Hays.