In April 2016, the world-famous singer known as Prince passed away, leaving hundreds of millions of dollars of money, property, instruments, and more. His family was shocked to discover that he had died without a will, leaving the court to determine to whom Prince's fortune belonged. There was no easy answer to this, as Prince left no children. Instead, his six siblings and half-siblings had the best claim to Prince's estate. There was an even bigger problem as well. Before the state could determine who received what asset, everything Prince owned had to enter probate. It would then fall upon the state to appoint an administrator and decide how best to divide the estate.
What resulted from this basic lack of estate planning was almost six years of conflict, as relatives of Prince vied for his fortune. The estate continued to go through probate, racking up millions of dollars in lawyers' fees and more. Even once the state appointed an administrator, the process took so long that multiple banks took the position of administrator and later resigned. Once it was time to decide how much of the estate would be taxed, the administrators of the estate declared its value to be about $82.3 million. The IRS disagreed, stating that the value of the estate was actually about $163.2 million. This led to months more of conflict, as Prince's estate clashed with the IRS before reaching a compromise.
On January 17, 2022, the Prince estate finally settled, and with the settlement finally came the decision dividing the assets. The administrator would divide Prince's fortune between three of his siblings and a music publishing company that worked closely with Prince's family. The process had taken so long that, in the intervening six years, two of the six siblings with claims to the inheritance had died.
The story of Prince's estate is a lesson in the dangers precipitated by a lack of estate planning. Had Prince left even a simple will, distributing his assets might have taken years less tha it took. Because he did not provide even the smallest hint of his intentions, this distribution was instead fraught with conflict and likely ended in a result that he would not have wanted.
The example is an extreme one, but it makes an important point. Even the most basic will goes a long way towards distributing an estate in a timely and stress-free manner. It also ensures that everyone gets the assets that the deceased wished for them to have.
But what if Prince had wished to divide up his estate even faster than that? A simple will would certainly have dramatically decreased the time spent in court, but the process could go still faster. If Prince had created one or more trusts, then his estate would never have had to enter probate or involve a court. Instead, whomever he designated to manage his trust (the “Trustee”) would use the trust to pay off any of Prince's remaining debts and then distribute the estate according to Prince's instructions. Tax planning might have reduced the amount that went to the IRS.
An estate as big as Prince's likely would have saved millions of dollars in taxes and legal fees with proper estate planning. But rock stars with multi-million-dollar fortunes are not the only ones who will benefit from estate planning. Depending on what is important to you, even if your main assets are a house and a car, a will or trust can help. With a trust, there is no probate, making it a much faster process. Because trusts are so varied and flexible, trusts can accommodate most people's unique situations. From putting limits on how much inheritance money a child can access to minimizing estate and income taxes, trusts are useful in many ways.
For these reasons, it is imperative that anybody who owns a few valuable assets should have some kind of plan in place for their death, even if it is only a simple will. It is especially important for those with families to prepare a will or a trust so they can feel sure that if they suffer an untimely death, their family will not suffer financially from their lack of planning. The cost for an attorney to prepare a will or a trust is trivial compared to the value gained from a smooth and fair transfer of wealth in accordance with your wishes.
The lesson of Prince's estate and the horror stories of a hundred other messy estate lawsuits illustrate one vital point. Estate planning is not a luxury for the rich; it is a necessity for almost everyone.