Among the tremendous amount of questions being asked in light of Prince’s sudden death on Thursday, many deal with the future of his immense fortune.
After several decades in the entertainment industry, Prince’s net worth is estimated at $300 million. For any person, but especially someone as wealthy as the late entertainer, creating a trust or will for when one passes is important.
“The question is, is there some document that says here’s where my stuff goes and here is who controls my stuff when I’m gone?” Los Angeles-based attorney Laura Zwicker, a partner at Greenberg Glusker who specializes in clients worth more than $100 million, told Business Insider.
The thing is that entertainers are more likely to avoid making such a plan.
“My experience with people in the music industry is, even more than other people, they think they’ll live forever,” the estate attorney said. “So, getting them to focus on a plan is really a challenge.”
If Prince hadn’t created a trust or will, Zwicker told us what we could expect for the distribution of his estate.
“Prince was a careful planner, at least in respect to his music interests,” Zwicker said. “That suggests he was a lot more thoughtful and sophisticated than other entertainers. He would seem more likely to have made a will or trust. If he didn’t plan, then this can get very messy.”
Who has claims on Prince’s estate?
Since Prince was not married and had no children and his parents are deceased, his estate would next go to his siblings and their children, followed by other relatives in the absence of a will or trust, according to the office of theMinnesota state attorney general.
Prince had six siblings, two of whom are reportedly dead. Reportedly, his estate would mostly likely go to his sister, Tyka Nelson. The 55-year-old was close to her brother.
Beware the unknown relative: Zwicker said that people claiming to be related to an artist after death happens “all the time. ‘Prince is my dad!'”
“Even if you have planned appropriately, those kind of things can happen,” Zwicker added. “In a lot of cases, they end up having actual illegitimate kids that nobody really knew about.”
What about control over Prince’s future earnings?
- Kristian Dowling/Getty
Celebrities have extra levels of their estate that most others don’t have to worry about, such as future earnings. For Prince, that could take place in unlimited ways and result in an endless amount of earnings.
Prince was very protective of his music copyrights. Last year, he pulled his music from Spotify and other services. Also, his videos are very hard to find on YouTube. One of the few places one can find them legally is on Jay Z’s Tidal service.
So what’s at stake when it comes to his music interests?
Royalties: Not only does Prince have all of the hits he has released, but The Purple One has written hit songs for other artists. For example, Prince wrote Sinead O’Connor’s “Nothing Compares 2 U,” The Bangles’ “Manic Monday,” and Chaka Khan’s “I Feel for You,” among many others.
His music vault: Reportedly, Prince has a vault of unreleased songs. Which ones did he consider unfinished? Or did he want them released in a certain way? And just how much should they go for and to whom or to which company?
Licensing: If Prince were alive, would he want one of his songs used in a commercial for zit cream? If he didn’t craft a plan, then whoever inherits his estate could license his vast library of songs to any advertiser, streaming-music service, or artist to re-record.
His name and likeness: For celebrities, their physical appearance is worth a fortune. With today’s technology, Prince’s appearance could still be used in commercials and other artists’ music videos in the form of holograms and on product packaging.
“People are using hologram technology in advertising, so he could be in a coke commercial,” Zwicker suggested. “His intellectual property is immensely valuable. As we’ve seen with the Michael Jackson estate, sometimes it’s more valuable after death, than it was during their lifetime.”
In Robin Williams’ case, he left his estate to his foundation and put a 25-year ban on the use of his intellectual property, name, and likeness for publicity after his death.
But if an artist doesn’t have a plan, “Everything they stood for could vanish after their death,” Zwicker warned.
And then there are other costs of being Prince.
- Thomson Reuters
His ex-wives: First, if he was providing payments to one or both of his ex-wives, Mayte Garcia and Manuela Testolini, then whomever inherits his estate would be responsible to continue those payments.
Zwicker said: “If the divorce agreement said, ‘I agree to pay my spouse $10,000 for the rest of her life without regard to whether I’m living or not,’ then that meant that $10,000 a month would continue to have to be paid. That really depends on what the divorce agreement said.”
The government: It seems unfair that one is taxed all their life, and then they’re taxed again after they die. But that’s reality. Zwicker said that the US government takes about 40% of the estate, which is due nine months from the date of death. Whoever takes over Prince’s estate will be responsible for that payment.
The Michael Jackson estate really brought this into stark contrast for people because his estate valued his name and likeness and his music catalog at virtually nothing, a couple thousand dollars. The IRS had come in and said, “No, it was worth hundreds of millions of dollars.”‘ So, now they’re in tax court with a tax bill that I believe is almost $300 million and there was no planning done for that … If you don’t plan, then somebody will have to sell your music catalog at a bargain-basement price just to pay all the tax on it.
The one way around this estate tax is to leave one’s fortune to a charitable organization. For someone as charitable and religious as Prince – he was a devout Jehovah’s Witness – there’s a chance he planned to support a charitable organization with his estate after death.
“Everybody talks about how much Prince gave back to the community and the Twin Cities, so it’s possible that he could’ve, if he had planned, left money to organizations, not only to his church, but outreach programs in the community that provide music training or something like that,” Zwicker suggested.
Money owed to other countries: For the wealthy, this can become quite a problem. In 2012, the French government sued Prince for unpaid taxes on income made there while touring. In cases like that, the person who controls Prince’s estate would be responsible to pay those taxes.
And in the case of a death, foreign-estate laws can be very different from US estate laws – especially if you own any assets in that country.
The attorney said:
In the United States, you can leave your estate to anyone you want. There are no rules. But in many European countries, there are what are called forced heirship rules, where your spouse is entitled to this percent of your assets, and your kids are entitled to this percent. And if you don’t have a spouse and kids, these are the people who are entitled to share in your assets – even if you have a will.