Published in the Hauppauge Reporter
Prince was a member of that rare breed of artists who defy easy description. His innovative songwriting, eclectic style, and extravagant stage presence ensured his induction into the Rock and Roll Hall of Fame as well as a spot on countless “best of” and “most influential” lists of the past several decades. When he passed away on April 21 at age 57, the world lost one of its most unique voices.
Prince was undoubtedly a musical genius, but unfortunately he may have made some costly mistakes when it came to estate planning. He died without a known Will, leaving his heirs—including a sizable cast of characters claiming to be his daughters, sons, brothers, a sister, half-brothers, half-sisters, nieces, nephews, cousins, and who knows what else—to battle it out in court to determine what will happen to his estate, currently estimated to be worth between $250-300 million.
If I had been fortunate enough to count Prince as a client, I would have discussed the following with him (as I do with every client):
- His family tree, up and down the generations. Who are the heirs?
- What are his assets, liabilities, and other aspects of his financial life?
- What does he want to accomplish?
Whether my client is Prince or anyone else, my job is the same. Armed with the answers to these questions, I must put in place the devices to help the client get where he or she wants to go. More often than not, a Will is one of those critical devices. Why?
- A Will lets you choose your beneficiaries.
If someone in New York dies intestate (without a Will), the Estates, Powers and Trusts Law (EPTL) contains what is essentially a “default Will” that dictates how your assets will be divided – and he or she may not like that default Will. For example, if you are married with children and die intestate, your spouse would receive $50,000 plus half of the estate, and your children would receive equal shares of the other half of the estate. If you want your spouse to receive your entire estate or you want to disinherit a child or delay when he or she receives his or her portion, you’re out of luck unless you draw up a Will saying so.
- A Will lets you designate who is in charge after you die.
In my practice, I have seen disagreements among family members and loved ones clamoring for control of an estate. Even if everyone has the best of intentions (which is not always the case), it is upsetting to have to sort through those issues when people are grieving and a Will could have resolved the matter.
- Skip the surety bond.
Without a Will, the Surrogate’s Court may require a surety bond as an insurance policy to protect the assets of the estate from misdeeds of the fiduciary. In a Will, you can specify that no bond is required, saving money, time, and effort.
- A Will lets you control the timing of asset distribution.
A beneficiary who inherits assets at age 18 may not be mature enough, financially or otherwise, to handle the responsibility. But EPTL doesn’t take that into account. With a Will, you have the option of holding money for a beneficiary’s benefit until you believe the beneficiary will be ready to handle the bequest.
- Tax planning.
For a wealthy person, a Will can provide for some substantial estate tax savings or even elimination. An experienced attorney can help with tax planning provisions to minimize the transfer tax hit.
Despite these significant benefits, some people insist a Will is unnecessary. They argue that probate (the process by which a Will is admitted into court and the executor receives power to act on behalf of the decedent’s estate) is expensive, time-consuming, and opens up personal matters to public view. To this argument I say: probate is not evil! A typical probate proceeding is not particularly onerous despite its reputation. The benefit of having your assets handled in the manner you have chosen far outweighs any costs associated with the probate process.
Another argument is that Wills govern only certain types of assets, and most people have money in assets such as life insurance and retirement accounts, which pass to heirs through beneficiary designation forms. Other assets such as real estate and bank accounts can be jointly owned or have other ownership transfer provisions. In response to this argument, I would tell my client: “Be careful. The beneficiary designations and joint owner designations may be effective for transferring those assets to the designated beneficiaries, but how does that fit into the whole plan?”
Prince was an incredible talent who left millions of heartbroken fans behind. In addition to his music, Prince also left us with a valuable lesson on the critical importance of estate planning. A Will is key if you want a say in who drives away in your Little Red Corvette.