Tax issues related to Prince’s estate
Florida fans of Prince were likely saddened by his sudden death. As people have come to terms with his passing, other issues are now emerging that can serve as lessons, especially when it comes to estate planning and estate tax.
On April 26, it was reported that Prince’s sister filed paperwork with the probate court indicating that Prince did not leave a known will. This could have significant implications on a variety of matters. The administrator of Prince’s estate will need to get valuations of his estate completed, including a valuation of his music catalog and the right to publicity for it.
In the case of Michael Jackson, his estate claimed the rights of publicity for his body of work had only a value of $2,605, arguing that the stigma surrounding allegations that he had molested children made his work virtually worthless. The IRS disagreed, instead placing a value of $434 million on the rights of publicity for Michael Jackson’s music catalog. In Prince’s case, there may be an issue regarding whether rights of publicity can be passed to surviving heirs since the state does not include a statutory right. While his catalog is conservatively valued at $300 million, experts believe it is much higher.
His estate will have a major federal estate tax issue if he truly did not have a will in place. The exclusion amount in 2016 is $5.45 million, which while more than adequate for most people, is a minuscule amount compared to the size of his estate. Unless there is a will that hasn’t yet been found that contains a provision leaving some of his assets to charity, his heirs, who will be determined under Minnesota’s intestacy law, will bear that burden.