Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

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Death, Taxes, and the Business of Dead Celebrities

Prince, the artist formerly known as Prince Rogers Nelson, died on April 21, 2016 at the age of 57. While people all over the world are mourning the loss of this music icon, his surviving family and the lawyers for his estate may soon be mourning his lack of legal planning for his death.

According to CNN, Prince’s estate is estimated to have a value of at least $300 million, and that likely doesn’t include the use of his unique name, likeness, and unreleased songs and other creative materials contained in his personal vault after his death. During his life, Prince exercised a great deal of personal control over his music and the rights to its use, including removing nearly all of his songs from most online streaming services in 2015. Nevertheless, it appears that Prince did not execute a will, which leaves the distribution of the assets of his estate subject to Minnesota’s intestate statutes.

Prince has one surviving full sibling, Tyka Nelson, and five living half-siblings, as identified in the intestate probate filing initiated by Ms. Nelson in Carver County, Minnesota shortly after Prince’s death. Because Prince had no surviving spouse or children, and because his parents predeceased him, Minnesota’s intestate statutes default to a distribution of his assets to Prince’s six siblings (half-siblings are treated as full siblings under Minnesota law), leaving them jointly in charge of Prince’s copyright and royalty interests. A woman claiming to be Prince’s half-sister has already emerged and filed claims against Prince’s estate, and more purported relatives will likely appear to make additional claims.

Any amounts in Prince’s estate over $5.45 million will be subject to the federal estate tax, and the majority of that portion of his estate will be taxed under the highest federal estate tax rate of 40%. Furthermore, Minnesota has a separate estate tax which applies to any amounts over $1.6 million for persons dying in 2016, and which applies a top marginal tax rate of 16% on amounts over $10.1 million. In the absence of pre-death tax planning, Prince’s estate stands to pay millions of dollars in estate taxes to both the IRS and Minnesota. Post-death planning in the form of charitable contributions (perhaps to the Jehovah’s Witnesses, with which Prince was very active) could help to substantially offset federal and state estate taxes. Without a valid will, trust, or other testamentary document specifically directing such contributions, however, the special administrator for Prince’s estate and the individuals eventually determined by the court to be his heirs will have to decide whether to share any of Prince’s sizeable estate with any charitable organization.

Prince’s heirs may also have to fight for the right to control the rights to his likeness and his musical and artistic creations, both released and unreleased. The estates of celebrities can only control their names and likenesses if the state they were domiciled in recognizes a “right of publicity” after their death. While a federal appellate court has ruled that Minnesota state residents have such a right, the court but did not address whether that right survives death, and there are no laws in Minnesota which create such a right of publicity.

Yet another issue for Prince’s heirs and his estate’s special administrator is the daunting task of putting a value on the business of marketing his legacy. The rights to Prince’s name and likeness, not to mention his unreleased work, are highly valuable in large part because Prince died at a relatively young age, with a large, relatively young, and healthy fan base which can continue to spend money on his work. But how do you value a unique business or project that doesn’t really exist yet? Like the estates of Elvis Presley and Michael Jackson, Prince’s estate will likely generate substantial revenue after his death, and one or more of his heirs will end up in control of that revenue stream. Prince’s estate, however, must be managed without the guidance of a will or a trust. Michael Jackson’s estate, which has generated substantial income in the years after his death, is headed for trial in the U.S. Tax Court in February of 2017 in an attempt to finally determine the taxable value of his estate. The outcome of that trial could have far-reaching implications as to the taxable value of the estates of other deceased celebrities, including Prince’s estate.

The challenges faced by Prince’s heirs could have been avoided in large part with good estate planning during Prince’s life. The current status of his estate clearly highlights the potential consequences of dying without a will or a trust, even for those with modest assets, and especially for artists and other members of the creative class whose estates may generate income long after their death. While it can be hard to contemplate our own mortality, the effort of putting an estate plan in place is worthwhile to ensure that surviving family members aren’t faced with enormous tax and administrative burdens after a death.

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