“’Money Don’t Matter 2 Night,’ Prince once sang. But his money matters a lot to the IRS, and the case provides a cautionary tale not just for the high-net-worth, but the not-so-rich Americans as well.”
Prince’s estate has just a few days left to file an estate tax payment, and the taxes are expected to ultimately take nearly half the estate’s estimated $200 million value. That’s about $100 million for the government, but Prince could’ve prevented that. Trust Advisor’s recent article, “Planning Fail: Government is Taking Half of Prince’s Estate,” breaks down the issues.
Prince left no known will when he died and apparently did nothing to shelter his assets from taxes. The value of Prince’s estate when he died is subject to a federal tax of 40% and Minnesota’s tax of 16%. With exclusions and deductions, the total hit will be about 50%.
While the estate can ask for an extension for filing the return, it can’t delay the first payment.
Prince could’ve easily worked with an estate planning attorney in Chanhassen, Minnesota or in the Twin Cities to create an estate plan with trusts to benefit any relatives and charities. This would’ve left much, much less to be taxed. There are only three options: family and friends, charity, and the government. Most of us prefer that Uncle Sam gets less. But with the rock star, his six siblings are expected to equally divide what is left after the tax bill.
Estates worth under $5.49 million for individuals and $10.98 million for couples aren’t subject to federal estate taxes, but in Prince’s case his $200 million estate was hit—and hit hard.
It’s a good reminder that there are several reasons to have a will and estate plan, even if taxes aren’t an issue. Simply put, trusts can keep assets private and out of the probate process.
Some folks believe they have to be as rich as Prince before they need to start thinking about estate plans. But everyone should look into an estate plan. At Family Security Law Group, APC, our Thousand Oaks estate planning attorneys are here to assist you, feel free to contact us.
Reference: Trust Advisor (January 19, 2017) “Planning Fail: Government is Taking Half of Prince’s Estate”