Yesterday, Prince’s estate had to file an estate tax payment plan. Since his estate was valued at about $200 million, the taxes are expected to be about half of that – 40% to the federal government and 16% to the state of Minnesota. Allowable deductions and exclusions will reduce that amount to 50%.
If Prince had an estate plan with trusts to benefit relatives and charities he chose, the amount of taxes due would have been very low. Instead, only about 50% will go to his six siblings and the government will take the rest.
Prince’s estate didn’t have to actually have to pay the entire $100 million yesterday; it can make payments over time. That’s a good thing since Prince’s estate isn’t very liquid. There are many entertainment assets which are still being valued and it can take a long time since their actual worth will be determined.
It’s not clear whether the IRS and Prince’s estate will agree on the value of his music catalog; it’s difficult to put a dollar value on this kind of asset. The estate can learn from the experience of Michael Jackson’s estate. He died in 2009 and yet his estate is still not settled. The tax case will go on trial in Los Angeles next month where there will be a dispute about more than $700 million in taxes, interest and penalties.
You probably aren’t worth this kind of money but even if your estate is only worth a few hundred thousand dollars, you should still have an estate plan. It will make it much easier for your heirs and will enable them, rather than the government, to share in the total value of your estate.
For more information about estate planning, go to our website https://www.diesmart.com.