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Over half of Prince's estate will go to taxes

Nevada fans of the musician Prince may be aware that he died without leaving a will. This will result in his estate being split equally between his six siblings under applicable intestacy law. It also means a hefty tax bill. The estate's estimated worth of $200 million is reduced to approximately $88 million after paying 40 percent in federal estate tax and 16 percent in Minnesota estate tax.

Presumably, splitting the estate equally between his siblings and paying over half its worth in tax was not Prince's intention. This outcome could have been prevented with an estate plan. Furthermore, there are a number of vehicles he could have taken advantage of to reduce how much his estate paid in taxes. These tools would have helped him to reduce his estate's value.

Prince could have created a Grantor Retained Annuity Trust with some of his self-created assets. On an artist's death, their creations might suddenly increase in value, and a GRAT helps prevent that. Charitable giving might also have been employed to reduce the value of his estate. For example, he could have created a foundation that he managed during his lifetime. He could also have created charitable lead trusts or charitable remainder trusts. These types of trusts can still benefit beneficiaries along with charities.

Estate planning is important even for people whose financial worth is far less than that of Prince. Without a will, the state will decide how a person's assets are distributed, and their distribution might be delayed. Furthermore, even people who have few assets may want to appoint someone to make medical decisions in the case they are incapacitated. Other estate planning vehicles are appropriate for many income levels such as the special needs trust that provides care for loved ones without reducing any public benefits they might receive. An attorney can suggest other documents that could fit a client's family and financial circumstances.

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