It’s been a year and a half since Prince’s passing, but the probate of his estate–the legal process for determining how to reallocate his property–continues. Some of Prince’s heirs are now requesting that a new administrator take over the process, accusing their current administrator of mismanagement that has cost them millions of dollars. According to the heirs, the administrator told them that it could take as long as 14 years to finalize Prince’s estate.
When the iconic musician passed away unexpectedly in the spring of 2016, it was soon learned that he had never created a will. This situation has led to months of court proceedings and complications associated with his probate and estate administration. Dozens of individuals have come out of the woodwork, making claims on Prince’s estimated $200 million estate.
While the Prince estate is an extreme case, it serves as a lesson on the importance of estate planning and how to avoid the costly and time-consuming process of probate in the first place. There are four main ways of transferring your property without involving the probate system:
- Joint property ownership: Simply put, if you own property together with another person, then when you pass on, the co-owner’s “right to survivorship” enables them to inherit the property directly, without probate.
- Death beneficiaries: If you designate a beneficiary for your financial assets (retirement plan, annuity and life insurance policy), then your beneficiary inherits these assets in the event of your death.
- Revocable living trusts: By setting up an RLT, you give up ownership of your property while you are living and transfer it to a trustee, but you establish the terms and conditions of how your property is used. (You can still revoke the trust at your discretion.) You can instruct the trustee how to further transfer your property in the event of your death.
- Gifts: You can also give away your assets in advance of your death. This option can be used for smaller, less expensive assets because gift taxes are added for gifts above a certain value.
No matter how you choose to distribute your assets, Prince’s case is a sobering reminder of the importance of having an estate plan in place. Proper planning will serve and protect your family and friends when they need it most.