Prince's lack of estate planning turns into a royal pain

September 28, 2016 by Erik Ortega

About the author:

Erik Ortega

Account executive

Erik's focus is on empowering advisors to drive productivity and profitability with our tools, strategies, and resources. He is a graduate of the University of Wisconsin – Madison School of Business and former member of their Division I Men’s Soccer Program. Prior to working at Advicent, he spent 5 years in banking and has since decided to pursue helping advisors improve their practices through technology solutions.

The recent death of musical legend Prince has left us with many questions, most with respect to the current absence of any will or estate plan. How can somebody whose life was elaborately planned and purposeful not leave behind a will or plan for his estate? How could he not have considered the burden that would be placed on his family when having to deal with dividing up his estate, estimated to be in the range of $300-800 million? In life, Prince had famously fought for control over his personal privacy and musical creativity in many instances. Although it seems very unlikely that an individual that was so calculated in life would not have planned for death, we still have not uncovered any evidence of any estate plan. Assuming this to be the case, what worth was his financial planner for not incorporating an estate strategy into his plan?

While your clients' estates may not be as large as Prince's, it is still essential to plan ahead for death. Life is unpredictable, and it is your duty to help your clients prepare financially for anything that may come their way.

Consider these strategies to help your clients avoid the same unfortunate financial unpreparedness that Prince's death revealed:

1. It is never too early to start planning your estate.

Have your clients start by making a list. Who do they want to leave their estate to? Do they want some family or friends to get a bigger piece of the pie? These factors need to be very clear in order to avoid any problems with dividing up the estate. Make sure to learn as much as you can or have colleagues in your network that you can rely on for advice in these estate dispersion conversations – many advisors will team up with a local, trusted attorney in order to build both practices through referrals. By implementing these kinds of conversations into the planning process, you become more valuable and will be less likely to lose a client to more well-rounded shops. This becomes even more important with clients in or nearing retirement, as many will decide to drop all but one of their advisors as they drift off into their sunset years.

In Prince’s case, there is no clear path for the distribution of his estate, thus creating a nightmare for his friends and family. First off, he could have avoided millions of dollars of inheritance, estate taxes, and income taxes associated with the division of assets. Secondly, without a living trust on record, probate fees must be paid to create a public record upon death. Therefore, if you do not want to make your affairs public – which Prince likely did not – you must prepare.

2. Select someone you can trust to execute on your wishes

Once you have guided your clients in selecting who they want to pass their estate along to, you then must go through the process of designating individuals to see those wishes through. This person is called an executor and can be anyone the client would like – they just need to be certain that person can be trusted to perform these duties after the client is gone.

Secondly, your client will need a durable power of attorney (POA). This will allow their family to be able to take care of the housekeeping, so to speak, like paying bills in your name.

3. Assign a medical POA

This one is quite simple. If your client becomes incapacitated and cannot make decisions on their own, a medical power of attorney gives someone the legal right to make their decisions for them. This is another individual your clients should choose wisely and scrupulously, for obvious reasons.

4. Update and maintain correct beneficiaries

As a practice, make sure you periodically check in with your clients regarding those they have designated as beneficiaries for particular accounts. Relationships with friends and family are ever-changing and your clients do not want to make the mistake of granting incorrect or abused benefits from their estate. Having the right beneficiaries will help to avoid an immediate income tax hit on your client's entire estate all at once upon their death.