Who doesn’t hate taxes – raise your hand. Anyone? Anyone? That’s what I thought. As all of you should know be now, Prince passed away recently in his home from a currently unknown cause. He is survived by a sister and a slew of cousins, aunts, and uncles – as well as an Estate estimated at $300-500 million. And, oh yeah, NO ESTATE PLAN! No will, no trust, nothing.
Without a will, his estate will pass through Minnesota’s intestacy laws and, without any tax planning, will be subject to BOTH federal and Minnesota estate taxes. Ouch.
If her were married, he could have passed the entire estate to his surviving spouse tax-free (until she passes, at least), but since he died single, only the first $1.6 million will pass free of Minnesota estate tax and the first $5.45 million will avoid federal estate tax. The other $298-498 million? It will be subject to 16% Minnesota estate tax and 40% federal estate tax. Again: Ouch.
Obviously Prince is not your everyday intestacy scenario, but his death illustrates what can happen when someone with wealth passes without an estate plan. Prince’s Estate will likely have to sell off a substantial portion of its assets in order to pay that tax bill. Likewise, if a business owner passes without an estate plan and is subject to estate tax, their estate may be forced to sell all or part of the business in order to pay the estate tax liability – and then what is the family left with?
Point being: plan ahead. Don’t let an unexpected and untimely death derail your family’s future.