Prince's estate and the potential tax implications

California music fans have now for the most part had enough time to come to terms with the sudden passing of Prince. Now, attention is turning to the star's estate. In addition to questions about who stands to inherit, there are also interesting tax considerations that may come into play.

Prince's full sister filed a document with the probate court handling the matter stating that the star did not leave a will or trust behind to her knowledge. If one is not discovered, she and Prince's half-siblings will share his estate in equal amounts under Minnesota's law of intestacy. Prince's parents predeceased him, he died without a spouse and his one child also predeceased him.

It will be interesting to see how the estate values his music catalog as well as how the court handles the right of publicity for it. In Minnesota, no statutory right of publicity exists, and it is unclear whether such a right is one that can pass to heirs under common law principles. It will also be interesting to see if the estate arrives at a value to that is significantly different than the one the IRS calculates. This happened in the case of Michael Jackson when his estate placed a de minimus value on his catalog and right of publicity while the IRS valued it at $434 million. That case is still pending in court.

Another interesting consideration regarding Prince's estate is if he truly did not leave a will or trust in order to try to protect his substantial assets. His estate, conservatively valued at $300 million, is far above the federal and Minnesota estate tax exemptions. If no estate planning documents were drafted, the state and federal government stand to collect a significant amount of estate taxes. This is another reason why many attorneys stress the importance of having at least a basic will or trust.

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