Kansas and Missouri Estate Planning

Why is the Prince Estate Still a Mess?

The Minnesota courts are still dealing with Prince estate.

No, really.

April 21, 2016.

This is the date Prince was found dead.

We are rapidly approaching the two year anniversary (and the 102 anniversary of the date Manfred Albrecht Freiherr von Richthofen was shot down and killed* over the Western Front in France ... but I digress).

Surely, the estate would be settled completely in two years.

Nope.

Not so.

According to a recent Minneapolis Star-Tribune article titled “Minnesota Supreme Court rejects two Prince heirs,” the courts are still sorting through assets and heirs.

What is the most recent development?

The Minnesota Supreme Court has denied two individuals the right to be heirs.

These are the first to be rejected by the Supreme Court.

Others have been rejected in the Court of Appeals.

Who were these individuals?

The first was Darcell Gresham Johnston.

The second was Venita Jackson Leverette.

What do they have in common?

Both claimed to be a half-sibling of Prince.

Johnston and Leverette both claim to share the same father as The Artist (formerly known as Prince).

Why is this estate causing so many issues?

Prince did not have a will.

As a result, many are trying to get a share of his $100 million to $300 million dollar estate.

Who made the cut?

Heirs will be Prince’s sister, Tyka Nelson, and his half-siblings, John Nelson, Sharon Nelson, Norrine Nelson, Omarr Baker, and Alfred Jackson.

Many delays and demands on the court could have been avoided had Prince simply made a will.

Even a very "simple" will at that.

Do not leave your loved ones a similar mess.

Work with an experienced estate planning attorney to create a plan to meet your specific goals and needs.

So, how do you find an "experienced" estate planning attorney?

First, ask around. Friends, family and other professional advisors are trustworthy sources.

Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").

Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.

How?

Two helpful online resources are just a mouse click away to assist with your due diligence:  Avvo.com and Lawyers.com.

Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.

In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

*There was in 1918 (and continuing to this day) considerable controversy regarding whether the bullets that felled the storied "the Red Baron" were fired from ground or a pursuing Sopwith Camel piloted by a Canadian Captain Arthur "Roy" Brown.

Reference: Minneapolis Star-Tribune (November 29, 2017) “Minnesota Supreme Court rejects two Prince heirs”

What Steps Should I Take to Avoid an Estate Mess Like That of the Late Prince?

It will not take much to beat Prince in the estate planning game.

Actually, according to an article by Forbes, titled (appropriately) "Prince and Estate Planning: What We Can Learn from the Late Musician's Financial Picture," you would leave your loved ones in a better position than about 64% of the American population simply by drafting and executing an estate plan.

What fundamental documents do you need?

A good place to start are the six identified in the aforementioned article, to wit:

Beneficiary Forms.

What do these forms accomplish?

When it comes to certain assets and accounts, such as your 401(k)s, IRAs, and life insurance policies, you need to designate the individuals you intend to inherit these assets upon your death.

These designations must be kept up to date for each account.

Why?

Because beneficiary designations take priority over the directives in your will.

POD and TOD Designation.

Payable on death (POD) and transfer on death (TOD) forms function similarly. They ensure that specific assets transfer immediately to your beneficiaries when you die.

How do they differ?

A payable on death (POD) form typically deals with money in your checking or savings accounts.

A transfer on death (TOD) form/deed is typically for brokerage accounts or even a deed to your home.

Durable Power of Attorney.

With this documents, you can designate an individual to make health care or financial decisions on your behalf if you become incapacitated or unable to make them for yourself.

Living Will.

Also called an Advance Health Care Directive, the living will outlines your wishes regarding medical treatment should you become unable to communicate them yourself.

Will.

This establishes how you want your probate eligible assets divided and names guardians for your minor children.

A Living Trust.

This document can serve similar functions to a will but also involves appointing a trustee to carry out specific wishes for your assets.

Why might you opt for a living trust?

Unlike a will, assets held in a trust are exempt from probate. A trust can help manage your assets and property while you are still alive, but incapacitated.

If you are serious about avoiding the same mistake Prince made, contact an experienced estate planning attorney.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Forbes (April 29, 2016) "Prince and Estate Planning: What We Can Learn From the Late Musician's Financial Picture"

If Prince Didn’t Need a Will, Why Would I?

You may not be worth millions of dollars, but proper estate planning is priceless to your loved ones.

News of the mortality of Prince shocked his fans.

As an estate planning attorney, news of Prince having no will did not surprise me.

He is but another in a long line of princes and paupers (sorry, I just could not resist) who have failed to face their own mortality and make proper plans for the inevitable.

It turns out that this musical genius was either ignorant, arrogant or in denial when it came to his finances.

Despite knowing his health was failing, Prince did not draft a will.

According to an article in The Huffington Post titled "Like Prince, A Majority Of Americans Don't Have A Will," wills are important for anyone.

I could not agree more.

Why?

This legal document:

1. Establishes beneficiaries;
2. Decides who gets what (and how much of the pie); and
3. Precludes the state from choosing what happens to your property.

In short, your will advocates for you when you cannot. It is a set of legally recognized instructions for leaving your estate to the ones you love.

Although Prince not having a will did not shock me, what makes me uneasy is that he is not a minority.

According to a 2007 lawyers.com survey, 55% of American adults do not have a will prepared.

Similarly, a 2011 EZLaw estate planning survey confirmed this lack of personal responsibility and those polled gave the same excuses for having no estate plan.

1. They were too busy.
2. Estate planning was too complicated and cost too much.

The truth?

Not having a will is much more complicated for all parties involved and will cost you more—both in money and peace of mind.

A do-it-yourself, “back of a napkin” will does not protect you or your family from the unfortunate consequences attending poor estate planning.

You get what you pay for.

As for Prince, all he left was a multi-million headache and an avoidable windfall to the IRS.

An experienced estate planning attorney is a must.

So, how do you find an "experienced" estate planning attorney?

First, ask around. Friends, family and other professional advisors are trustworthy sources.

Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").

Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.

How?

Two helpful online resources are just a mouse click away to assist with your due diligence:  Avvo.com and Lawyers.com.

Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.

In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Huffington Post (May 3, 2016) "Like Prince, A Majority of Americans Don't Have A Will"

What is Michael Jackson "Worth" These Day$?

With the death of Prince, the topic of celebrity deaths and estate planning (or lack thereof) is all the news.

Not to mention the values of such estates.

As I noted in yesterday's blog post, Michael Jackson's estate is claiming a value of $2,105 ... but the IRS number is in excess of $434 million.

They are at an impasse.

Since his death at age 50 in 2009, Jackson has experienced a commercial resurgence thanks to the savvy executors who have managed his assets.

For example, the documentary This Is It grossed $261 million, a Cirque du Soleil tribute show sells out in Las Vegas, plus money continues to roll in from albums, video games, and other lucrative memorials.

But now the IRS wants its "fair" share.

The Service argues that the value of Jackson's name and image upon his death amounted to more than $434 million.

Again, what did the estate claim as the valuation? Just $2,105.

The Hollywood Reporter, in its recent article titled "Michael Jackson Estate Faces Billion-Dollar Tax Court Battle," notes that lawyers estimate the estate (which is scheduled for trial in 2017) could be worth more than $1 billion, with interest and penalties.

Some tax specialists even wonder whether the IRS will seek criminal tax evasion charges.

The outcome could affect celebrity estate planning.

What matters most for tax purposes is the value of Jackson's name and likeness at the time of his death—not in the present day, after his executors have worked their magic.

Adam Streisand, a probate attorney who has worked with celebrity estates such as those of Ray Charles, Marlon Brando and Marilyn Monroe, thinks the IRS will not successfully point to the post-death earnings of other celebrities as part of the valuation process.

On the other hand, this is the first time the IRS is pursuing estate taxes for "name and likeness."

Ultimately, it is nearly impossible to nail down a number when it comes to the "Jim Croce effect." This refers to the singer who died in an airplane crash in 1973. This "effect" stands for the proposition that many entertainers are worth more dead than alive.

A judge's valuation could center on what licensors were willing to pay to be associated with Jackson, not what he actually received in sponsorship and merchandise deals.

A California law gives celebrities posthumous rights to their names and images. This law has been a boon to the spouses and children of these famous people.

And rightfully so.

Consequently, this statute codifies the concept that a celebrity's name and image is a property right like a house.

However, there have been ramifications and unintended complexities, as seen in the Jackson case.

Stay tuned. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: The Hollywood Reporter (April 20, 2016) "Michael Jackson Estate Faces Billion-Dollar Tax Court Battle"

What is the Prince Estate Worth?

That is a big question, with a potentially huge number in play.

It depends on whom you ask.

Regardless the number, the death of the musician Prince has started the estate tax clock ticking.

Time will tell just how much the IRS and the State of Minnesota will claim.

Today, however, that number is anyone's guess.

Literally.

For insiders actually involved with administering the estate, calculating the value will be a real challenge.

That much is certain.

Many in the know expect a lengthy fight with the taxing authorities.

All that noted, what is that value?

Well, according to The Investment News, in its article titled "Prince's death sets off estate planning quagmire," the most pressing issue right now is placing a value on the "intangible assets" in the estate.

Primarily, these are the "future" royalties any artist may earn from his or her body of work.

Apparently, Prince's fortune was somewhere around $300 million, but the ultimate divide between how the IRS and his estate view the present value of future royalties could be extremely significant.

The death of a popular artist can mean increased valuation and this is generally accepted by experts in the field.

Kind of like the old saw about land values: God isn't making any more of it.

And Prince will not be producing any more new music, so his body of work is what it is and what it will be.

For its part, the IRS will claim that his death will blow the royalties off the charts. Naturally, the estate's attorneys will oppose such a move.

For a recent foretaste of the battle ahead, we need only look at the estate of the late Michael Jackson.

That estate is currently embroiled in a court battle with the IRS. It valued Jackson's name and image upon his death at more than $434 million.

The estimate submitted by the Jackson estate, however, was a skosh lower at $2,015.

No, you read that right.

Moreover, it seems the IRS learned its lesson years ago after the passing of Elvis Presley.

The IRS did not foresee the ever increasing popularity of his body of work after his death in 1977.

Would you believe that in 2015 alone Elvis generated $55 million ... second only to Michael Jackson at $115 million? These are the numbers compiled by the Forbes list of top-earning dead celebrities.

There seems to be "a list" for everything, yes?

These days the IRS is taking this potential revenue stream much more seriously.

In the words of The Who, they won't be fooled again!

But wait, there is more when it comes to Prince.

According to a New York Times article, a "trove of Prince's recordings remains unreleased."

So, how to value those yet unknown works?

What lies ahead?

Prince's estate has 15 months to file a federal estate tax return (nine months plus a six-month extension), and the estimated federal estate tax is due at the nine-month date.

Since Prince was not married at death, there will be no spouse to take advantage of the unlimited marital deduction to pass the estate to her tax-free (at least until her death).

What is the potential tax damage?

The federal government assesses a 40% estate tax on estate values over $5.45 million.

Minnesota, Prince's state of residence, is one of 20 or so states that also has a state estate tax.

The Gopher State's top rate is 16%.

Taken together, the total federal and state estate tax hit on Prince's estate will be 56%.

Yikes!

If the IRS says the tax amount paid by the estate was undervalued after getting the tax return, it will propose a valuation increase.

Both sides would then enter into negotiations over the "number" and, if they cannot agree, then they go to court.

Stay tuned. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Investment News (April 25, 2016) "Prince's death sets off estate planning quagmire"