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May 2016
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May 02, 2016

Prince's Death: A Lesson on the Importance of Estate Planning

"We could all die any day." — Prince, "1999"


On April 21 the world was stunned to learn that Prince, one of the world’s most legendary performers, passed away at his Paisley Park recording studio at the age of 57. Conversations about Prince’s brilliance as a musician, however, soon became interspersed with another topic: his lack of an estate plan. 
 
Nearly a week after his death, Prince’s sister filed court documents asking that a special administrator be named for the estate, stating she had no knowledge of a will and had no reason to believe Prince created one. A Minnesota judge confirmed that the renowned singer died without a will, introducing a multitude of questions and problems surrounding Prince’s estimated $300 million estate.
 
What happens when a person dies without a will?
 
If a person dies without a will, state law governs who will inherit that person’s estate. Prince died with no spouse and no living children or parents. Under Minnesota law, Prince’s sister and seven half-siblings will inherit equal shares of his estate. Because two of Prince’s half-siblings are dead, the shares for those individuals will pass to their respective children. 
 
It doesn’t matter whether Prince had personal relationships with his sister, half-siblings or nieces and nephews – because he left no will, they will all share equally in his massive estate.
 
What’s more is that Prince’s estate will have to pay a hefty tax. The current federal estate tax is calculated at a rate of 40 percent and Minnesota imposes a top death tax rate of 16 percent. That has the potential to reduce his $300 million estate to $162 million.
 
With some planning, Prince could have taken steps to reduce this enormous tax bill. Before his death, Prince donated generously to various charities. By failing to have an estate plan in place that continues these charitable gifts, not only will Prince’s estate lose out on tremendous tax savings since charitable gifts are a deduction for estate taxes, but the government rather than charities will benefit financially.
 
Finally, the lack of a proper estate plan means that Prince’s estate will be complicated by costly legal fees and uncertainty as to who will administer his estate, and the estate proceedings will be open to the public.
 
So what can we learn?
 
While the lack of a proper estate plan may seem more problematic for a mega-million-dollar celebrity, the truth is that these same issues affect everyone. 
  • If you have specific loved ones you want to inherit your estate, you want to specify who will be in charge of and administer your estate, or you have minor children, you need a will.
  • If you are over 18, you should have a patient advocate designation allowing another to make your medical care decisions if you become disabled.
  • If you own property of any type, you should have a durable power of attorney allowing another to manage that property on your incapacity.
  • If you prefer privacy, a trust allows you to specify who will receive and administer your estate without the publicity or cost of probate proceedings. 
Is now the time to create an estate plan? The answer is yes. Death can often come unexpectedly and you don’t need to be wealthy to benefit from estate planning. By planning now you can make things easier for, and better protect, the people you care most about.
 

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