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No Estate Planning Means Prince’s Estate Hit with 50% Tax

CalculatorPrince’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.

Reference: Trust Advisor (January 19, 2017) “Planning Fail: Government is Taking Half of Prince’s Estate”

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A List of Must-Have Estate Planning Documents

Young couple taking selfie"Why Now Is the Best Time to Plan"

Millennials are not discussing end-of-life care with their parents. Nevertheless, to save your loved ones avoidable pain and legal wrangling at your death or if you become incapacitated, you should begin your estate planning today and that includes a conversation with your millennial children.

Benzinga's recent article, "Millennials and Estate Planning: How to Get Started," says that when you do begin discussing end-of-life care, you need to understand the documents involved.

Here is a list:

Wills: A will describes who will be in charge of your estate at the time of your death and to whom you want your assets to be given. You can also use a will to nominate a guardian for your minor children.

Living Trust: This is a common way to transfer assets upon your death and without probate. Typically, a trust will have property titled in it and will document what should happen to the assets upon your death.

Durable Power Of Attorney: This ensures that an individual you select has the authority to make decisions regarding your financial life in the event that you are incapacitated or unable to make decisions on your own, such as financial and legal matters.

Health-Care Proxy: Like a durable power of attorney, a medical power of attorney give a person you designate the authority to make medical decisions on your behalf if you can't make those decisions yourself.

Advanced Health Care Directive: This allows you to list your healthcare preferences and can be used, along with your health-care proxy, to make certain that your medical wishes are carried out.

HIPPA Release Form: This allows those listed on your advanced health care directive and your health-care proxy to access your healthcare information so they can handle issues on your behalf if you are unable to do so.

Tax Documents: Can you believe that death does not stop taxes? Most taxpayers don't have to worry about federal estate taxes, but some must be aware that an estate over $5.45 million is liable for estate taxes, with some exceptions. Some states also have a state death tax in addition to federal estate taxes.

Plan now so that your loved ones don't have to face legal obstacles and stress that could have been avoided. Speak with an estate planning lawyer and help your loved ones avoid unnecessary expenses, legal headaches and additional pain.

Reference: Benzinga (February 08, 2016) "Millennials and Estate Planning: How to Get Started"

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