With much chatter lately about how the recently departed American legend Aretha Franklin did not leave behind a will, Sound Royalties wanted to revisit the topic of why an estate plan is vital for musicians to ensure their legacy lives on as planned.
Below is an op-ed on the importance of a will from CEO Alex Heiche, previously published in industry blog Hypebot on the 2nd anniversary of Prince’s passing.
Read more below:
Lessons from Prince’s Estate, Still Unsettled On 2nd Anniversary Of His Death
By Alex Heiche, CEO and founder of Sound Royalties
While the creative genius of the late, legendary pop star Prince provides countless models of success for current musicians to emulate, one element of his career provides a glaring example of what not to do.
April 21, 2018 will mark the two-year anniversary of Prince’s death. Yet, a whopping 24 months later, his estate is still not even close to settled. Undoubtedly, Prince would have envisioned a very different future for his estate and his heirs.
With no will left behind and no precautions taken to shelter his assets from taxes, chances are high that his heirs will be left with staggering state and federal tax bills that may claim nearly half of the estate, estimated to be worth upwards of $100 – $300 million.
In addition to the hefty taxes, an ongoing battle ensues between three of his heirs and the administrator and lawyers paid to settle the estate. The former claim that the latter are draining the late star’s bank account with excessive legal fees and petitioning the court to review the billing practices.
Legal bills to date have reportedly reached nearly $6 million. A single invoice for responding to petitions totaled almost $150,000. When the heirs petitioned in December to have the administrator removed for alleged mismanagement of millions of dollars, it was rejected by the court and the estate was reportedly billed close to another $150,000 for the administrator to fight the case.
In the meantime, there have been a few cringe worthy deals made regarding Prince’s music and brand assets. But without thought-out instructions in a will or power of attorney given to the heirs, who knows what Prince would have wanted? Let alone what the heirs might want. The power is not currently in their hands.
Sadly, we at Sound Royalties see cases like this all too often. As a result, the assets of the estate are often liquidated and the copyrights to the artist’s beloved works, which Prince like many creatives fought so hard to keep, go up for sale.
A 2016 inventory of the Prince’s estate showed relatively little in liquid assets, with only around $110,000 in cash and $830,000 in gold bars. No stocks, bonds or other notable investments were listed, other than a substantial amount in real estate at $25.4 million.
At the time, his entertainment assets were still being valued. It’s important to note that the IRS and the estate may not agree on the value of those assets, as much is left to interpretation when valuing the net worth of illiquid assets and royalty streams.
In a similar case, the executors of Michael Jackson’s estate continue to battle with the IRS over the valuation of his assets. This may leave his heirs with a potential tax bill of up to $700 million including interest and penalties.
What Prince could, and very arguably should have done, would have been to create an estate plan denoting his wishes and set up trusts to shelter his assets and coveted masterpieces. He could have chosen who would share in the wealth of his success, what would happen to his works and if there were any charities he wanted to see benefit, as well.
Prince was known to be constantly writing and recording in his studio until his very last days. After his death in 2016, many fans were eager to hear the unreleased recordings left in his vault and the stories he still had to share through his music. Instead, it’s been two years of legal battles and a lingering hope to potentially hear new music “soon.”
Like everyone, music professionals want their heirs to benefit from their success, not to leave them with unending legal headaches and massive bills to pay. To do so, creatives must let the world know through a will and estate planning what they want to have happen to their music and take steps to shelter the artist’s legacy and works from taxes.
Heirs and administrators of estates should also know there are alternatives to selling away valuable entertainment assets. Companies like Sound Royalties provide creative-friendly advances that allow the copyrights to remain with the heirs and much of the future income to still flow through to them in perpetuity.
Hopefully, for the sake of his heirs and his legacy, Prince’s estate will be settled in the near future and without having to go down the path of the worst-case scenario. However, the complications to date, stress the importance of a will, and of musicians planning ahead for the benefit of their loved ones and the future of their music.
Alex Heiche is the CEO and founder of Sound Royalties, a company working to transform the way that music professionals fund their creativity.