Estate Planning Horror Stories: Celebrity Edition by Kelley Way
Let’s welcome back monthly columnist Kelley Way as she shares with us “Estate Planning Horror Stories: Celebrity Edition.” Enjoy!
It’s been a long time since I last posted on estate planning horror stories that affect contemporary celebrities. An update is long overdue, so let me share what’s been happening in some of the estates I discussed in my previous article.
After five years of fighting amongst her heirs, Aretha Franklin’s probate is finally winding to a close. The dispute revolved around two handwritten wills discovered after her death.
One was thoughtful, detailed, notarized, and discovered in a locked cabinet; the later will was scribbled down in a notebook, signed, and discovered in her couch cushions.
Her sons could not agree on which one should control, and the court finally gave the matter to a jury to decide, who ruled that the latter will controlled.
Aretha was in the process of creating a more formal will with a lawyer when she died, but the court could not consider the draft since it had not been signed.
In addition to the fighting over which will would control, the estate also had to negotiate with the IRS over how much was owed in taxes and how that would be paid since the estate was low on cash funds.
They finally agreed on an $8 million tax bill, which would be paid off over time with revenues from royalties and licensing agreements.
After six years in the Probate Court, Prince’s probate issues were resolved last year. Since Prince had no will of any kind, it took a year or two just to figure out who his heirs were, with over 45 people coming forward claiming some kind of right to the estate.
Once Prince’s six siblings and half-siblings were determined as the heirs, the estate needed to determine the net worth of all the assets, what was owed in taxes, and how the remaining assets would be divided between the heirs.
Two of the heirs died while waiting for a resolution and payout; Primary Wave, a music publishing company, bought out the interests for three heirs who could not afford to keep paying their lawyers while waiting for a resolution.
Primary Wave created an LLC to hold their ownership interest in the estate, and the remaining three heirs created another LLC to hold their ownership interest.
In 2022, the court ruled that $3 million would go to Comerica Bank, the executor for the estate, to cover closing costs and expenses, and whatever remained after taxes and debts were paid would be split evenly between the two LLCs.
That said, what remains after taxes and debts are paid is in question.
The estate and the IRS eventually agreed on a value of $156.4 million for the estate at the time of Prince’s death, which means a tax bill of about $31 million.
The IRS added an “accuracy-related penalty” of $6 million to that, and the Minnesota Department of Revenue is charging their own penalty for not accurately stating the value of the estate back in 2016.
In addition, over $45 million were spent in court and legal fees over the course of the proceedings. Much of the estate’s value is connected to real estate and intangible assets like copyrights, meaning that the actual cash in the estate is likely insufficient to cover all the expenses.
The heirs may have to liquidate holdings and/or sell copyrights to pay off all the debts, though it’s possible they could make a pay-off plan with the IRS like the Aretha Franklin estate did, or perhaps they can take out a loan with better payback terms.
Time will tell.
Last but not least, while the issues in Elvis Presley’s estate were settled some time ago, the death of his daughter, Lisa Marie Presley, in January of 2023 highlights issues that often arise with inherited wealth.
Lisa Marie did learn from her father’s mistakes in some respects, creating a will and trust for a smooth transfer of her estate to her children.
However, she may have inherited her father’s poor judgment in choosing business managers.
In 2018 she sued her former business manager, Barry Siegel, claiming that he had cost her tens of millions of dollars due to financial mismanagement and self-dealing, leaving her in significant debt.
For example, at his behest, she sold 85% of her interest in Elvis Presley Enterprises for over $100 million in 2005, which had dwindled to about $14,000 after 11 years due in large part to failing to plan for the taxes associated with the sale and investing most of the funds in a single company that went bankrupt in 2016.
Siegel countersued, claiming he had done his best to save her from financial ruin due to her extravagant lifestyle and lavish spending habits (another legacy from her father, if true).
While details from her estate have not been made public, public records from a recent divorce suggest that there may be more debts than cash (though if that is the case, ongoing revenue from Graceland, royalties, and other sources could potentially resolve that issue).
These sorts of issues often come up with inherited wealth, which is why it is very rare for family wealth to last three generations and even rarer for inherited wealth to pass on to the fourth generation.
In addition to the above, Lisa Marie’s mother, Priscilla Presley, filed a motion in court to invalidate the amendment Lisa Marie made to her trust in 2016, removing Priscilla and Siegel as co-trustees of the trust and naming two of Lisa Marie’s children instead (one of whom died in 2020).
Priscilla alleged that the amendment did not follow the requirements laid out in the trust for a valid amendment, was not properly witnessed or notarized, and that the signature did not look like Lisa Marie’s, among other things.
However, Priscilla and her granddaughter Riley Keough came to an agreement out of court, where Priscilla backed Riley’s appointment as trustee and would serve as an advisor going forward.
How to Avoid A Situation
Every one of these estate planning horror stories could have been avoided, including the significant legal fees and court drama by having a lawyer involved in preparing their estate plans and later amendments.
Planning ahead by creating an estate plan with an attorney can give you peace of mind and avoid estate planning horror stories.
If you would like to work with me, I can be reached at firstname.lastname@example.org.
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ABOUT THE AUTHOR
Kelley Way was born and raised in Walnut Creek, California. She graduated from UC Davis with a B.A. in English, followed by a Juris Doctorate. Kelley is a member of the California Bar, and an aspiring writer of young adult fantasy novels. More information at kawaylaw.com.