Stephen P. Will
What can we all learn from the recent death of superstar performer and songwriter Prince? Despite amassing assets conservatively estimated to exceed $300 million, Prince died without a will. What does this mean?
First, he lost his opportunity to designate the persons or organizations that he wanted to receive his estate. If you die without a will, known as intestacy, the state dictates who will receive your assets. As a general rule, the state names your logical next of kin. For a married couple, the surviving spouse is generally the sole beneficiary. Next in order of succession would be children, parents, and then siblings. In Prince’s case, he had no spouse or children, so his siblings acquired his entire estate, including a number of half-siblings. Is this what he would have truly wanted? Unfortunately, we will never know because he did not have a will to provide directions. Intestacy may create additional problems depending upon your circumstances. For example, in today’s world of second marriages and blended families, when a person dies leaving a surviving spouse and children from a prior marriage, the spouse only receives one-third of the decedent’s estate and his children receive the remaining two-thirds. This can frequently cause problems within the family and those problems can be magnified if the children are under eighteen (18) years of age.
Secondly, Prince failed to take advantage of his opportunity to designate the person or entity that would manage the distribution of his assets. In a will, you designate an executor that will handle the administration of your estate. If you die intestate, the Court appoints a person or entity to perform those services. In Prince’s case, the Court appointed a trust company as opposed to a family member or close friend. In his case, that may very well be an appropriate decision, but in most cases, people prefer that their assets be distributed by someone with whom they are acquainted and have a full understanding of how they want their assets distributed.
Thirdly, Prince missed the opportunity for planning that could have saved his estate significant expenses. Several years ago, the federal government raised the exclusion from federal estate taxes to $5 million. As a result, most Americans no longer have to pay estate taxes. In Prince’s case, however, his estate will face significant tax obligations that could have been greatly minimized by proper estate planning and charitable donations. With a Federal estate tax rate in excess of 40 percent, his estate will likely pay well over $100 million in estate taxes. Most of us do not have that problem. However, a will can save anyone money. In the case of intestacy, the court appointed administrator of the estate is required to post a fiduciary surety bond through an insurance company to guarantee the performance of his obligations. This bond fee frequently runs into the thousands of dollars. A simple will can waive the requirement for surety on that bond, effectively saving the estate those expenses.
If a person dies without a will, leaving beneficiaries under the age of eighteen (18), the Court will be required to appoint a guardian for the children’s custody and to manage their assets. A will permits an individual to designate and to appoint a trustee to manage the assets on behalf of the minor beneficiary. In addition, a person may elect to have the funds distributed to the beneficiary at an older age than eighteen (18), when the beneficiary may be more mature. The will can also authorize the trustee to make distributions on behalf of the beneficiary for items designated in the will, such as education and medical costs.
I am frequently asked when a person needs a will. My response is if they have a family and care who receives their assets at their death, they need a will. Do not make the same mistake as Prince. Please consult with an attorney and make an estate plan that will ensure that your wishes are known and that your family receives the maximum benefit from your estate.