These are dark days at Prince’s Paisley Park studio. According to court documents filed yesterday by his sister, Tyka Nelson, the legendary musician died last week without a known will. Now the sprawling compound is one small part of a multi-million dollar estate facing an uncertain future.
Prince earned over $270 million pretax in the 14 years FORBES generated estimates for; current estimates place the value of his estate at between $150 million and $300 million. Estates of this size are usually controlled through a variety of trusts. That the artist--who so meticulously pulled his music from streaming and online platforms--died without a will or any apparent estate planning is highly unexpected.
“For significant estates, especially where the client has been really careful about their intellectual property during lifetime, it's surprising that there's no trust in place,” said Laura Zwicker, a partner at Greenberg Glusker who counsels high net worth families on estate planning.
In the absence of clear legal directives, his estate now goes to probate and falls under the jurisdiction of Minnesota. The state court will appoint a special administrator, who will help direct business interests, figure out what Prince owned and value each property--and liability. The state will then determine who will receive those assets.
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There has been speculation that ownership would fall to Prince's heirs, which include a sister and five half siblings. But before that can happen, an estate valuation must occur--and it will be closely watched by the IRS.
Besides his $7 million Paisley Park studio and a $16 million, 187 acre Chanhassen home, Prince's most valuable assets include his music catalog and personality rights to the commercial use of his name and image.
His catalog, which includes the copyrights to songs on some 50 albums, was reportedly returned to Prince when he resigned to Warner in 2014. Early estimates pegged its worth at $100 million or more--conservative in comparison to Michael Jackson's $150 million Mijac catalogue.
"It has to be an extremely valuable catalog, and when you use Michael Jackson's catalog as a measuring stick it would be at least that valuable," says Zwicker.
More difficult to put a value on is his name and likeness, sometimes called his right of publicity. It's a highly-contested asset that drove Michael Jackson’s estate to tax court--Jackson's estate valued his right of publicity at just $2,105 at the time of his death, while the IRS believes his likeness was worth $434 million based apparently on post-death earnings.
"I would put him up on a similar pedestal to a Michael Jackson as someone that has a huge body of music that appeals to people all over the world, someone who made an impact culturally and someone with instant name recognition," says Mark Roesler, Chairman and CEO of CMG worldwide, a licensing house for dead personalities."He even had a color associated with him."
For artists to become iconic after death, Roesler says, it requires a perfect storm: A distinct look, an unmistakable name, discernible values--and an untimely death. "For all of those reasons and a few more, James Dean became a legend for future generations. We see a similar situation with respect to Prince," he concludes.
Roesler sees great value in Prince's likeness. If his intellectual property rights are managed properly, it's likely Prince would end up on our ranking of highest-earning dead celebrities (Michael Jackson topped this year, banking $115 million from beyond the grave).
The problem for Prince's heirs is Minnesota has a common law but not a statutory right of publicity. This means that it's not clear whether his right of publicity can be passed on, as FORBES contributor David Herzig explained, and there has yet to be a court case in the state establishing the right's descendibility. Prince’s estate will first have to go to court to rule that the right of publicity is descendible, before it can make money with post mortem licensing deals.
The biggest liability to pay off: taxes.
"The IRS is going to be a partner with the estate for a long time to come to the tune of 40 cents on the dollar," explains Martin Neumann, a partner at Weinstock Manion with expertise in probate and estate planning. With a maximum federal tax bill of 40% and a maximum state tax of 16%, the taxes temper out to a 50% tax bill. For an estate worth a reported $300 million by current estimates, it could be paying up to $150 million in taxes. "So part of what will be handled is an agreement with the taxing authority with how the estate taxes are paid and over what period of time," Neumann explains.
There is the possibility that the estate would move to monetize some of Prince's current assets to pay off taxes. Among the potential moneymakers is a vault of some 2,000 unreleased songs, which fans would pay a premium to buy or stream.
There's the capacity to make millions more in times to come, by selectively licensing his image or going all out with a Cirque du Soleil show, à la Jackson. Since Prince does not appear to have left any detailed plans, fans can only hope future endeavors happen in a way befitting his music business legacy.
It's likely that Prince's estate inheritance will unfold into a lengthy and public saga--seemingly the opposite of what the private and particular artist would have wanted. Zwicker suggests Prince’s relative youth may have inhibited successful planning. “With younger clients--and 50-something is still young--the clients who spend their lives creatively, it's very difficult for them to face their own mortality which is what you’re required to do for an effective plan.”
Of course, the lack of a will days after his death is not definitive. There is always a chance that a will may turn up, which would then spur questions of its authenticity. Until then, his estate will remain shrouded in an indiscernible purple mist.
Additional reporting by Zack O'Malley Greenburg
Correction: this story has been updated to correctly credit the quote regarding the Mijac catalog.
