When Minnesota artist Prince died last year, it left many people in shock. What has also turned out to be shocking is the lack of a will or other estate planning document. This past week, we learned how much of the estate will go to taxes because of the lack of an estate plan and probate litigation.
An estate plan is a valuable tool that every Minnesotan should leave for their family. Without a plan, a family's estate is subject to the same process that Prince's is, where half is lost to taxes and the remainder may not go to intended recipients. Prince's estate has been valued at around $200 Million. Because there was no estate plan, 40% will be lost to federal taxes with an additional 16% lost to Minnesota estate taxes. The remainder of the estate will be split among the six determined heirs. Whether or not Prince intended these heirs to receive anything from his estate will never be known for sure.
There are some estate planning techniques that Prince could have used to make sure his estate was distributed as he wished. These strategies work for anyone who wishes to make sure their estate is distributed in accordance with their desires. The first technique is to reduce the value of the estate. This can be done by moving assets to a trust or creating a legal entity and then moving interests in those entities to trusts for beneficiaries.
The second strategy that Prince, or anyone else, has available to them is making charitable donations and gifts. Gifts to charity at the time of death or when a person is alive can reduce an estate. An individual can also establish a foundation upon which a person can oversee and make sure that the money is going to the intended target. A person can also transfer to a trust that has a charitable beneficiary and non-charitable beneficiary. A Charitable Lead Trust can provide income to a charity for a specified amount of time and that value is deductible. The remainder of the trust can be given to a person's intended heirs.
All of this is to say that there are ways to protect one's assets upon his or her death to maximize one's intentions. To learn more about estate planning, Minnesotans may want to consider speaking with an experienced legal professional.
Source: Forbes, "Why Uncle Sam is Prince's biggest fan", Gary Borofsky, Jan. 18, 2017