Who Will Manage Prince’s Legacy? by [email protected]
Judith Younger and Mitchell Gans discuss the legal issues facing Prince’s estate.
Iconic musician Prince left a huge legacy on the music industry when he died suddenly last month. While fans around the world are still reeling from the loss, the courts in his home state of Minnesota are already grappling with the disposition of his estate. Prince’s sister has said the singer did not leave a will, which puts his reported fortune of $300 million in flux. There are also reports that Prince left a vault of unreleased music behind in his studio at Paisley Park. During a recent segment on the [email protected] show on Wharton Business Radio on SiriusXM, Judith Younger, a University of Minnesota law professor who specializes in wills and trusts, and Mitchell Gans, a law professor at Hofstra University, tried to untangle the legal knot.
An edited transcript of the conversation appears below.
[email protected]: What could we potentially hear out of the courtroom in this case?
Judith Younger: … This gives everybody who is interested an opportunity to appear and make themselves felt. It looks to me as if there is no will, which is terribly surprising for a person who was supposed to have been so careful about his properties and controlling them. His heirs are his brothers and sisters. He has no present spouses, no descendants, no children, grandchildren. His parents are dead.
[email protected]: Mitchell, what do you expect?
Mitchell Gans: … This is just the beginning of the administration of the estate. It’s kind of surprising that he didn’t have a will. As a result of that, the estate will pass “through intestacy,” which essentially means to his close relatives. In this case, it sounds like it would be his sibling and half-siblings. But I think there’s a long way to go. This is just the beginning.
[email protected]: This case obviously will play out in the media, but it comes back to the point that not having a will is a very dicey situation for this estate. But whether you’re a blue-collar worker or a multimillionaire, if you don’t have a will, you’re really asking for trouble.
Younger: I think you’re absolutely right. Everybody should have a will, even if there’s no property presently. Never know when you’ll win that lottery.
[email protected]: From the tax perspective, how will this play out for the heirs?
Gans: Before I jump into the tax issue, let me just say I think that it’s very good advice for people to certainly think about having a will. There are a variety of reasons for people to have a will. I usually tell my students, one important reason is perhaps you have minor children and you want to provide for a guardian who will actually raise them. In this estate, we don’t know all the details yet. In this estate, at the end of the day, it may not be that problematic. It will go to his sibling and half-siblings. Of course, we don’t know what he would have preferred. Maybe he would have had a different plan in mind. We’ll never know that. But it may not be that problematic as a practical matter. There’s obviously an interesting tax issue in terms of valuing his assets. When a person dies, we have a federal and a state estate tax. Federal tax is 40% above a certain exempt amount.
Younger: And Minnesota is about 16%.
“Everybody should have a will, even if there’s no property presently. Never know when you’ll win that lottery.”–Judith Younger
Gans: So, that can be up to about 56%. But it doesn’t actually come out to 56% because there’s a tax deduction on the federal return for the state tax. Probably somewhere around 48% or close to 50% would be the tax. I think it’s important to emphasize that the federal estate tax only applies to people who die [in 2015] with an estate of over $5,430,000. I don’t know about the exemption in Minnesota. But people who die with less than that don’t have to worry about the federal estate tax at all. Indeed, even if you have more than that, if you leave it all to your spouse, there’s absolutely no federal estate tax. Sometimes people can get nervous about the tax, thinking, “Oh my God, I have $1 million — or even a few hundred thousand dollars or less than that — and I’m going to be paying the federal estate tax when I die,” which is not true.
Younger: What about his right of publicity, which I understand to be the right to control commercial exploitation of name, image and persona? We don’t recognize that overtly, at least in Minnesota, as an inheritable or divisible property right. Does that still get included in his estate value for federal tax purposes?
Gans: Given what I know about Minnesota law, I actually think it’s not likely that the estate will pay a state tax on the value of his publicity right. And I can explain why.
In the Michael Jackson estate, his executor filled out his estate tax return and put down about $2,000 [as a value for Jackson’s image rights.] They didn’t want to leave it blank, right? They didn’t want to put down zero and be too aggressive. They didn’t want to give anybody the impression they overlooked it, so they put down $2,000, and the IRS is claiming that the value is somewhere in the $400 million-plus range. It’s going to be a rather intense and interesting dispute about the value. I think that the interesting thing about this from a lawyer’s perspective is that whether or not this publicity right is taxable depends upon where you lived when you died. That seems to be the rule. Professor Younger is saying there may not be a post-death right to publicity in Minnesota, and we can talk about what that means.
Younger: We have no statute or case law on the distinct right of publicity as an inherited property right.
Gans: Many states have adopted it. There actually was a huge litigation involving the Marilyn Monroe estate. I think it was a result of that litigation that California adopted a statute. In New York, where we also do not recognize this right, a bill was introduced within the last year or so that was also precipitated, in part, by the Marilyn Monroe litigation. The bill has not passed, and I don’t think there’s much likelihood it will pass at the moment.
[email protected]: The interesting thing about this whole situation is the fact that you have his estate, but you have so much that you don’t know the value of. Like all of this [unreleased] music that we’ve heard about that’s held up in his private studio inside Paisley Park. It’s very hard to put a value on something that you don’t know the content of.
Younger: That’s true, and that’s part of the need for a special administrator to hear testimony on valuation and so forth. It’s hard to assess the value of it before it’s released. Maybe it’s rotten stuff.
Gans: Yes, absolutely. And this could be a huge dispute for tax purposes where you have to determine the value of the