While few of us have their wealth or complicated family situations, the tragic early deaths of celebrities such as Philip Seymour Hoffman and James Gandolfini have given us the opportunity to learn from their estate planning success and mistakes. Now David Bowie and Prince's estate plans, or lack there of in Prince's case, provide new lessons.
Bowie, whose legal name was David Robert Jones, had an estate reported to be worth $100 million. He had two children, Duncan Jones with his first wife, and Alexandria (Lexi) Jones with his second wife and widow, the model Iman. Duncan is 44 years old and Lexi is 15. Bowie left a will and an amendment to the will (a codicil).
Bowie's will gives $2 million to his friend Corinne Schwab, $1 million to his friend Marion Skene, his vacation house to Lexi, and divides the rest of his estate: half in trust for Iman, a quarter in trust for Lexi, and the balance outright to Duncan.
Leaving half the estate to Iman has tax advantages since such funds qualify for the marital deduction and will only be taxed upon Iman's death. Using a trust guarantees that what's left at her death will go to Duncan and Lexi or their children, not as Iman directs. She has a child from a previous marriage and no one can predict what she would want to do with the trust funds in the future.
The other half of the estate going to Duncan and to Lexi's trust will be subject to federal estate tax to the extent it along with the gifts to Bowie's friends exceeds $5.45 million, as well as to New York estate tax. Under the terms of Lexi's trust, the trustee has discretion to use the trust funds for her benefit. Beginning at age 21, all of the trust income must be distributed to her and at age 25 the trust ends with the balance going to her outright.
In it's basic form, Bowie's will accomplishes what most people would want in cases of second marriages, taking care of his children from each marriage and his current wife, while also making sure that his estate ultimately stays in his family. But a few tweaks may have improved the plan, namely:
- Should Lexi receive her entire share of the estate at age 25? This could be as much as $25 million. While one would hope that she will enlist qualified help to manage these funds, Bowie might have ensured this by having Lexi's trust continue longer.
- If Bowie had provided that both Duncan and Lexi's share of his estate stayed in trust for their lives, he could have reduced estate taxes at their deaths and provided divorce and creditor protection for these funds.
- If Bowie had used a trust himself, rather than relying on a will, he could have kept all of this information away from our prying eyes.
Bowie executed his will in 2004 and his codicil in 2007. We don't know if he reviewed his plan in the meantime, but we would always recommend doing so every five years, especially for people with large estates. Their circumstances and relevant laws change. Concepts that the client may not be in a position to consider at first -- such as continuing trusts for children -- may make more sense years later. In 2004, Lexi was four years old and age 25 seemed very far off. Now she's 15 and she'll have access to her entire inheritance in less than a decade.
Prince Rogers Nelson, better known as Prince, died last month at age 57, and appears to have had no will or other estate planning documents. His sister, Tyka, has petitioned for probate and the court appointed Bremer Trust, a bank where Prince did business for many years, as temporary administrator. Apparently a half-brother, Omarr Baker, appeared at the short hearing. According to the court papers, Prince had six siblings. Some individuals have already filed claims against the estate.
Without a will or trust, Prince's estate which is reputed to be worth as much as $150 million, would be divided by the Minnesota rules of intestacy which would divide it equally among the siblings. However, if someone could prove paternity, whether Prince did or did not know he was the child's father, everything would go to that child or children. Without a plan, it's more likely for people to make claims, whether or not spurious. And we have no idea what Prince may have wanted to happen. Without a trust, all of this will play out in public.
The morals of these stories: Have a plan. Review it periodically. Consider using a trust.