The fight and legal fees begin – that’s what.
I remain a fan of Prince, immensely talented, great music and dedicated to helping others do well in the industry. Prince was known for his tight control of his product, brand and his business interests – yet now that the ship is rudderless what happens? This is the plight of the Alpha male – they cast an impressive shadow but are so often unable to imagine their own demise and consequently they leave behind a legacy that ranges from complexity to a bloody feud.
What is Intestacy?
Prince died in the USA and the laws are subtly different so I will discuss this in the Australian context – NSW to be precise. I am not attempting to write a technical bulletin so we need to start with a disclaimer that legal advice is both recommended and necessary if you, your family or your clients find themselves in a situation similar to Prince’s family .
Intestacy simply means to die without a current or valid will. This can happen if no will exists or it has been improperly drafted or the will maker does not have legal capacity – commonly, this means not mentally capable of understanding the document being signed. A will (once validated by the Supreme Court when granting Probate) appoints the executor as your Legal Personal Representative (LPR) who then has the obligation to attend to the legitimate debts of your estate and to collect and distribute assets of your estate to appropriate beneficiaries.
If you die Intestate then someone has to apply for the LPR position via the Supreme Court. Letters of Administration are granted in this case not Probate.
Prince’s sister has applied for this role in his home state of Minnesota. As one of the first in line to receive an inheritance from Prince’s estate (estimated at up to $300 million) it makes sense for her to do this. Others may feel that same way and this is where the legal fees start!
Intestacy Has Rules
With a properly prepared will the will maker has tremendous flexibility as to the way their estate is disposed of, not so when no will exists. Every state in Australia has rules about who benefits and how, again using NSW as an example:
1. First the spouse, if there no children they can receive 100% of the estate;
2. Spouses with children? The Spouse gets $350,000 + 50% of the remainder of the estate, children and grandchildren share in the remaining 50% ;
3. If no kids or grandkids then a cascading list of beneficiaries exist:
a. Parents, then
b. Siblings, then
c. Grandparents, then
d. Aunts & Uncles, then
e. 1st cousins, then
f. The State of NSW
There are exceptions and nuances but the above serves as a rule of thumb since the law was updated in 2010. This is a concise guide in NSW, all other states and territories have similar guides:
So What Should Happen to Prince’s Estate?
Prince died without children and with no parents so his 3 sisters and 1 brother stand next in line – or do they?
Prince was actually married twice and engaged another time. He had one son who died after 7 days. Former spouses can have strong rights to claim against an estate and intestacy complicates that even further. In NSW legitimate claimants can have their legal fees to be met by the estate regardless of the success of their claim so there is an embedded bias in the system to encourage claimants to come forward.
A reminder, this is an overview – specialist legal advice is necessary in all cases like this.
What Is In The Estate?
This is not as easy a question to answer as you think. We need to understand the difference between what is owned and what is controlled by the will maker.
In Prince’s case he probably owned houses, cars and bank accounts but his music rights and royalty income could be held by trusts and companies (or LLC’s as they are known in the USA). These are separate legal entities that are often controlled by documents totally outside the scope of the will.
In Australia we use the terms “Estate Assets” and “Non Estate Assets”. Cars, houses, bank accounts and shares are commonly held Estate Assets. Superannuation, Family Trusts and Jointly Owned Property are examples of Non Estate Assets that are not controlled by a Will or the Intestacy Rules.
For the many who are asking, upon death superannuation is controlled by the trust deed and/or a binding death nomination, family trusts are controlled by the trust deed and the next trustee and jointly owned property simply ceases to be your asset and passes directly into the hands of the other owner(s).
Or so it is in all states and territories other than NSW! To make matters more complex in NSW a new idea has been introduced called Notional Estate which allows the Legal Personal Representative to reach backwards in time and potentially change decisions the will maker had made (or not made) in the 3 years prior to death.
So What Happens to Prince’s Estate Now?
Well, the estate is reported to be around $300 million so that fight is almost certainly on for young and old. Lawyers will be all too ready to take up arms in defence of their client’s right to share in the estate.
Eventually one or more people will be appointed as the Legal Personal Representative and under legal guidance or court mandate they will apportion the estate amongst legitimate beneficiaries – less debts and legal fees of course. Unless the estate is held in trusts and companies – then another set of rules will almost certainly apply.
It would have been much easier if Prince had simply planned for his own mortality. No-one can doubt his musical legacy and the joy it will continue to bring many. The legacy he has left his family is far more bitter sweet and may ultimately prove to be poisonous.
Good advice puts people first!