Prince's lack of estate planning will cost heirs
Many California residents were shocked and saddened when Prince passed away in April 2016. The iconic performer was only 57 years of age when he died of an accidental drug overdose, and, like many younger people, he failed to put an estate plan into place or even write a last will and testament. That oversight will end up costing his six heirs a great deal as federal and state taxes are expected to swallow up about half of the superstar's $200 million estate.
Federal estate taxes will snap up 40 percent of Prince's estate, and Minnesota will also swoop in with a 16 percent tax of their own. However, exclusions and deductions, including the federal estate tax exemption of $5.45 million for individuals that was in effect in 2016, will limit the estate's tax exposure to about 50 percent. Experts are quick to point out that most, if not all, of these taxes could have been prevented if Prince had spent a few hours with an experienced estate planner.
With no last will and testament to follow, Prince's six heirs are expected to divide what remains of his estate equally, but they could have shared a great deal more if the pop legend had placed his assets into trusts. In addition to potentially shielding assets from federal and state tax collectors, using trusts allows estates to avoid the public scrutiny of the probate process.
Attorneys with estate planning experience could explain how using trusts also provides people with a great deal of control over how their estates are administered and when distributions will be made to heirs. When loved ones are young and reckless or have substance abuse issues, trusts can be structured to limit payments until certain conditions have been met.