After nearly six years of legal wrangling, parties to Prince's estate have finally agreed on its value: $156.4 million.
That's far more than the $82.3 million appraisal by the estate's administrator, Comerica Bank & Trust, but not much less than the tax collector's assessment. The Internal Revenue Service in 2020 had valued the estate at $163.2 million.
With an agreement between Comerica and the IRS — with the OK from Prince's heirs — the process of distributing the star musician's wealth could begin in February.
"It has been a long six years," L. Londell McMillan, an attorney for three of Prince's siblings said at hearing Friday in Carver County District Court.
Prince died of a fentanyl overdose in April 2016. He did not have a will.
Since then, a phalanx of lawyers and consultants have been paid tens of millions of dollars to administer his estate and come up with a plan for its distribution. Two of Prince's six sibling heirs, Alfred Jackson and John R. Nelson, have since died. Two others are in their 80s.
In the end, the estate will be almost evenly divided between a well-funded New York music company — Primary Wave — and the three oldest of the music icon's six heirs or their families.
The IRS and Comerica settled last spring on the real-estate portion of Prince's estate. But the trickier task of valuing intangible assets such as rights to Prince's music was not completed until October.
The value of that settlement — $156.4 million — was disclosed Friday in a filing in Carver County probate court.
As part of the agreement, the IRS dropped a $6.4 million "accuracy-related penalty" it had levied on Prince's estate. The Minnesota Department of Revenue, which agreed on the estate's valuation, also has jettisoned an accuracy penalty, the filing said.
Tax collectors will take a bite out of Prince's fortune that will run into the tens of millions of dollars.
A bit more than $5 million of Prince's estate will be exempted from taxes under federal law, but thereafter the tax rate is 40%. In Minnesota, the first $3 million is tax-exempt; after that, much of Prince's estate will likely be taxed at 16 %.
In mid-2020, Comerica sued the IRS in U.S. Tax Court, saying the agency's calculations of the estate's value were riddled with errors. A tax trial set for March in St. Paul has been canceled because of the settlement.
Comerica, in a court filing Friday, said that while the IRS settlement was "fair and reasonable," it believes it would have "prevailed" in the tax court case. Comerica said it told Prince's heirs that if lowering estate taxes was their "primary interest" they should continue pressing the IRS and — if need be — go to trial.
"Instead, the members of the heir group have uniformly communicated to [Comerica] their strong desire that the estate settle with the taxing authorities," the filing said.
Primary Wave bought out all or most of the interests of Prince's three youngest siblings, including Jackson, who died in August 2019. Three older siblings — including John Nelson, who died in September — rejected offers from Primary Wave.
The three older siblings last year transferred an undisclosed portion of their stake to McMillan and Charles Spicer, who have represented them in estate proceedings. McMillan is a veteran New York entertainment lawyer who worked with Prince for several years; Spicer is a New York musician and producer.
As complex as Prince's estate proceedings have been, they could be a lot more convoluted.
Singer Michael Jackson died in 2009, and seven years later his estate administrator valued his wealth at $7 million. The IRS weighed in at $1.1 billion before eventually dropping its appraisal to $482 million.
Last spring, a U.S. Tax Court judge finally settled the matter, valuing Jackson's estate at $111 million.