10 Estate Planning Mistakes to Avoid
Estate Planning Mistake #1: Dying Without a Will — Prince
If you do not choose who inherits, state law chooses for you.
The Prince estate planning story begins with the most basic estate planning mistake.
Prince died without a will.
The musician died unexpectedly in April 2016 at age 57. Soon afterward, his sister filed a probate proceeding in Minnesota. Court records stated that no valid will had been found.
After an extensive search and proceedings to identify potential heirs, a Minnesota court formally determined that Prince died intestate.
That meant Prince did not get to use a will to say who should inherit his probate estate.
State law made that decision for him.
Prince Died Intestate
Prince was not married when he died. He had no surviving children, and his parents had already died.
Under Minnesota’s intestacy laws, his closest surviving relatives therefore stood to inherit.
In May 2017, the probate court identified six siblings and half-siblings as Prince’s legal heirs.
The result may—or may not—have been exactly what Prince wanted.
We cannot know.
That is the problem.
A will creates evidence of your choices. Without one, a court applies the succession rules written by the legislature.
Intestacy Decides Who Inherits
Every state has intestacy laws.
Those laws are necessary. Someone must decide what happens when a person dies without a valid will.
But intestacy laws are designed for everyone.
They are not designed for you.
The statute does not know which sibling you are closest to.
It does not know whether one family member already received substantial gifts during your lifetime.
It does not know whether you wanted to benefit a friend, unmarried partner, charity, employee, or other person.
It does not know who you trust to manage your affairs.
And it does not know whether an outright inheritance is appropriate for a particular beneficiary.
A properly prepared estate plan can address those questions.
Intestacy generally cannot.
Prince’s Estate Took Six Years to Resolve
Prince’s estate was unusually complicated.
It included real estate, business interests, music rights, royalties, his name and likeness, and an enormous catalog of released and unreleased music.
The estate also faced a major valuation dispute with the Internal Revenue Service.
The estate’s administrator initially valued the estate at approximately $82.3 million. The IRS valued it at approximately $163.2 million.
The parties ultimately agreed on a value of approximately $156.4 million.
The probate proceeding finally reached its conclusion in 2022, more than six years after Prince died. The Minnesota Star Tribune.
During that period, lawyers, accountants, bankers, consultants, and other professionals worked to administer the estate. Published reports indicate that legal and administrative fees reached tens of millions of dollars.
But an important distinction is necessary.
A will would not have made Prince’s music catalog easy to value.
It would not have eliminated federal and state estate taxes.
And it would not necessarily have prevented disagreements involving valuable intellectual property.
Those problems arose in large part because Prince owned an unusually complicated collection of assets.
The estate planning failure was different.
Prince left no written testamentary instructions telling everyone what he wanted done with those assets.
His Heirs Could Make Their Own Choices
Another development makes Prince’s story particularly interesting.
Some of Prince’s siblings eventually sold all or part of their interests in the estate to Primary Wave, a music publishing and management company.
By the time the estate was ready for final distribution, ownership was divided roughly between family interests and Primary Wave.
There was nothing inherently improper about an heir selling an inheritance.
Once someone receives property outright, that person generally has considerable freedom to decide what to do with it.
But Prince could have planned differently.
For example, a trust could have established rules governing ownership, management, and disposition of particular assets. It could have identified trustees or other decision-makers. It could have separated economic benefits from management authority.
Whether Prince would have wanted any of those arrangements is impossible to know.
He left no document telling us.
A Will Does Not Avoid Probate
There is another important lesson here.
Simply having a will does not avoid probate.
A will is ordinarily administered through probate.
If Prince had signed only a will, his estate could still have required substantial court involvement.
But the will could have answered several fundamental questions.
Who should inherit?
Who should administer the estate?
Should particular people or charities receive specific gifts?
Should beneficiaries receive property outright or in trust?
Who should control important intellectual property?
A revocable trust and other planning could potentially have added additional privacy, continuity, and management options.
The point is not that one document would have solved every problem.
The point is that Prince could have made those decisions himself.
New Jersey Also Has a Plan for You
New Jersey has its own intestacy statutes.
Under N.J.S.A. 3B:5-3 and 3B:5-4, the identity of the people who inherit depends on which relatives survive the decedent.
A surviving spouse or partner may receive some or all of the intestate estate.
If there is no surviving spouse or partner, the law generally looks first to descendants, then parents, and then descendants of the decedent’s parents.
That means siblings, nieces, or nephews may inherit in some circumstances.
But the statute does not ask who you want to inherit.
It asks who fits within the statutory family tree.
That is a very different question.
The Prince Estate Planning Lesson
Prince’s circumstances were extraordinary.
His estate was worth more than $150 million. His music and intellectual property presented valuation and management problems that most families will never encounter.
But the underlying estate planning mistake was ordinary.
He died without a will.
You do not need Prince’s wealth to have people you care about, property you want protected, or opinions about who should manage your affairs.
A basic estate plan allows you to make those choices while you can.
It can identify beneficiaries.
It can select fiduciaries.
It can provide trusts for beneficiaries who should not receive property outright.
It can address charities, friends, unmarried partners, and others who may receive nothing under intestacy law.
And it can create a written record of what you actually want.
If you do not create an estate plan, the law still has one for you. The problem is that you did not write it.
This article discusses publicly available information concerning Prince Rogers Nelson and his estate for educational purposes. The absence of a will does not establish that Prince had no nonprobate assets, beneficiary designations, contracts, or other lifetime arrangements.
How long has it been since you reviewed your estate plan with an attorney?