Inheritance Tax

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Prince Has Died: What About His Estate?

Prince Has Died: What About His Estate?

Purple Rain


As we all know by now, legendary musician Prince unexpectedly passed away recently at 58.  While the circumstances of his death are unclear, what is also unclear is who will get his estate, whether he had a will or a trust set up and the particulars of who will be in charge of what has been estimated to be a $300 million estate.

Most celebrities are surrounded by a team of professionals looking out for their best interests.  In the case of legal matters, Prince undoubtedly had a trusted lawyer to assist him with legal matters.  Part of the advice I would have given Prince some time ago would be to get his affairs in order, to get an estate plan.  That would have been an easy recommendation considering his age, wealth and the fact that he was not married.

Since he died living in Minnesota, the laws of that state will largely govern the administration of his estate.  If he died without a will, that could be a big deal, because the intestacy laws of the state would control and Minnesota allows half-relatives to inherit.  He was married and divorced but, as in most states, ex-spouses do not inherit in a situation where there is a will and only inherit if a will specifically states that they do.

Most people close to Prince knew him as a smart man who was very aware of his circumstances and that weighs in favor of him having created an estate plan.

If Prince created a trust, then the trust would name a trustee in charge of all the assets held by it.  It would also name beneficiaries to receive property and that could be right away or over time.   Prince was also known to be a philanthropic person, so it’s possible he left funds for the creation of a foundation or several foundations for issues close to his heart.  When people create a will they can also leave money directly to a charity or to a church either as a specific bequest (the “Little Red Corvette” for example) or as a general bequest (a set amount of money).

If Prince did create a trust or several trusts, were they funded with his assets?  This is yet another issue.  Funding a trust requires that titled assets like accounts, homes, vehicles, stocks and life insurance be set up so that the trust either becomes the owner right away or becomes the owner at death through payable on death and transfer on death beneficiary designations.

Another issue for his estate would be estate taxes.   Unfortunately, Minnesota (unlike Missouri – hooray!) has an estate tax which appears to kick in after an asset exemption of nearly $2 million dollars at a top rate of 16%.  Since I am not a Minnesota licensed attorney, I can’t talk too much about that, but needless to say, the state will likely pick up a large check from Prince’s estate.

On a federal level, the estate tax exclusion for an individual dying in 2016 is $5.45 million (up $20,000 over 2015).  The tax owed will depend on what estate tax planning if any he put in place, but the estate tax rate is 40% based on the expected size of his estate.  That means 40% over the exempt amount of $5.45 million could go to Uncle Sam.  Wow.

Don’t feel too bad for Prince’s heirs and beneficiaries.  That still leaves several hundred million dollars for their benefit.  That amount doesn’t include the future value of his music which potentially could double or even triple the value of his estate.   How the federal government and the state of Minnesota value these assets for estate and inheritance tax purposes might be the subject of litigation and more complexity.

As an estate planning practitioner (and admitted fan of Prince’s early work) it should be interesting to see what happens on this subject in the next several months.  Hopefully, Prince, like anyone reading this, planned ahead.

Do you need a Living Trust?

Do you need a Living Trust?

Estate Planning Analysis

Do You Need A Living Trust?

A common question for many people coming into my office to discuss estate planning is “Do I need a living trust?”  My usual response is that it depends (a favorite response of most lawyers).  Well, in this case, it really does depend.  Here are a few factors?

#1  What is the value of your estate?  If your estate is worth more than $500,000 (assets – liabilities) you are a candidate for a living trust.  Why?  The more you have the more you can protect with a trust.  Oh, and when figuring your net worth, don’t forget to include any potential inheritances from your family.

#2  How many titled assets do you have?  Just as important as the value of your assets is the number of them.  Case in point:  I have had clients who have $500,000 spread between three cars, two homes, a boat, two trailers, six bank accounts, an online investing account, two retirement accounts and the certificated stock of five companies.  These are all titled assets and the more assets you have the more sense it makes to have a trust.

#3  Are you concerned about your beneficiaries blowing their inheritance?  If you pass away with or without a will, everything is going to pass relatively immediately to your beneficiaries through the probate process.  Is that what you want for your children?  Do you trust them to take the windfall of your legacy to them and invest it to improve their lives or are you afraid they will waste the money (and opportunity) your legacy provides.  Make no mistake, an inheritance is an opportunity.  With a trust, you can ensure that a trustee manages the inheritance of your beneficiary for as long as is necessary to provide you peace of mind.  One tip…do a life chapters distribution.  Give some of the principal at one age and so much of it a few years later.  This is the real value of a trust.  It protects beneficiaries from themselves.

#4  Are you concerned about estate taxes? Unless you are very rich at the moment, estate taxes are probably not a concern.  Notice I said “at the moment”…that’s because estate taxes change over time.  Until recently, the estate tax affected many more people.  You want the ability to adjust your trust to take advantage of and/or plan for the latest changes in the estate tax.

#5  Is privacy important to you?  A will is a public document filed in probate court of the county where the decedent was living when they passed away.  Open for public inspection at any time.  A trust, on the other hand, is a private document, and is not filed with the court.  You want privacy?  A trust is the only document that can give you that.

Just a few considerations.  There are many factors that go into whether or not you need a trust.  Our office can meet with you and make that determination pretty quick and explain why.  If you live in O’Fallon, Lake St. Louis, St. Peters or St. Charles, give us a call today.

Starting an estate plan…

Death and Taxes


Estate planning can be intimidating.  Most people don’t like to talk about death and taxes and studies show that about 55% of people die without a will or estate plan.  That number is entirely too high and I suspect that is because many people don’t have a good idea of how to start the estate planning process.

Here are a few tips:

1.  Don’t worry about talking about your death.  We’re gonna spend more time talking about your life.  And, unless you are really wealthy, you’ll be surprised at how little taxes will be discussed.

2.  Estate planning is sort of like grocery shopping.  There are some things you need, but many things that you don’t need.  That’s where I come in…I will help you figure out what you need.  I will help you make a grocery list.  Once we have that, the process is much easier.

3.   Identify your assets.  Write down what you have and the approximate value of each asset.  Don’t worry about getting exact values.  Use Kelly Blue Book for a vehicle and the latest share price for stocks. works just fine for estimating the value of your home and remember that the value of your home is the estimated sales prices minus the mortgage.

4.  Think about the people in your life that you would want to step into your place if you were to pass away.  Who would be the guardians of your children?  Who would make decisions for you if your spouse couldn’t?  Who would you want to be in charge of a trust for your kids if you were gone?  This step is crucial, especially if you are married.  You’ll want to know before you meet with an attorney that you are either in agreement with your spouse or you don’t have agreement and need the advice of your estate planner.

5.  Remember, the goal of estate planning is to not only protect your family but to get peace of mind.  To resolve that nagging worry that your affairs are not in order or that you don’t have your “ducks in a row”.  That’s the goal.

Estate taxes and inheritance taxes…

Clients are often understandably confused about the effect of so-called death taxes on their estate planning.  To start, the term “death taxes” usually refers to two separate taxes:  estate tax and inheritance tax.  These taxes are different, as explained below.

An estate tax is a tax imposed on the estate (not the beneficiary of the estate) by the federal government and some state governments.   The gross estate of a person who has died is all the property owned at death by the person, along with certain property transferred during that person’s life in which an interest was retained and property transferred in contemplation of death.   This would include all joint property, retirement benefits and life insurance proceeds.

Estate taxes are chargeable to the estate of the deceased after deductions and exemptions.

The federal government has an estate tax.  Currently, less than 20 states have an estate tax and Missouri is currently not one of them.

For 2013, the federal estate tax only kicks in if a person dies with an estate of higher than $5.25 million dollars, which is the exempt amount for an individual.   The rate is 40%.  As an example, if a single person died with an estate worth $6 million, they would have a taxable estate of $750,000 ($6 million less $5.25 million), leaving an estate tax bill of $300,000.

It should be noted that couples now have “portability” in their exemptions.  This means that when the first spouse passes away, their individual $5.25 million exemption is transferred to the surviving spouse and when the surviving spouse dies, their exemption is actually $10.5 million.

The problem with the estate tax is that it is subject to change.  As I often tell my clients, while it’s reassuring to know that the estate tax currently only affects multimillionaires, as recently as a few years ago, the federal estate tax kicked in at $675,000.  In 1981, the estate tax kicked in at $175,000.   We simply don’t know what the future holds in terms of estate tax rates and rules.  As everyone knows, our country is deeply mired in debt and at some point this debt will either come due or the federal government will institute higher taxes to pay down the debt.  Whether that would include lowering the exemptions for estate tax is anyone’s guess at the moment.

An inheritance tax differs from an estate tax in that an inheritance tax is imposed on the beneficiary rather than on the estate of the person who passed away.  Depending on the state, it is generally calculated based on who received the inheritance and how much they received.  Typically, immediate family members (children for example) are taxes less than less immediate family members (siblings, uncles, cousins for example).  Only seven states currently collect inheritance tax from beneficiaries and Missouri is again currently not one of those states.  Inheritance taxes are generally taxed at a much lower rate, as are state income taxes.