In an example of an epic failure to plan, Prince’s estate will be paying about $100 million in federal and state taxes, as reported in Trust Advisor’s recent article, “Planning Fail: Government is Taking Half of Prince’s Estate.” This situation should be viewed as a harsh lesson on the importance of estate planning, for people in all income brackets.
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.
You don’t have to be wealthy to benefit from putting a good estate plan in place. Savvy tax planning can protect your assets, and if properly structured, trusts can be used to keep assets private and out of the probate process.
Reference: Trust Advisor (January 19, 2017) “Planning Fail: Government is Taking Half of Prince’s Estate”