Purple Rain of Fees, Taxes and Unintended Beneficiaries
When Prince died last week he did so without a will or Trust in place. Prince’s Taxable Estate is estimated to be worth 250 Million Dollars. Because Prince died intestate (without a will or trust) all property that was owned by him will have to pass through Probate, a court process that determines who will get what by the Probate Code of Minnesota. Probate is a time consuming process that is public and everyone gets their cut including Courts, Appraisers and Attorneys. Minnesota does not have a statutory fee schedule so Attorneys get their fee based on “just and reasonable” fees that will basically add up to 7 percent or more of the Estate. Seven percent of 250 Million Dollars equals $17,500,000.00. Not too bad for filing a couple of forms and waiting for the judge to rubber stamp the process.
Estate Taxes – State and Federal
The State of Minnesota has its own separate Estate Tax which allows the Decedent a 1.2 Million Dollar exemption towards the 250 Million Dollars which would make the taxable amount 248.8 Million Dollars. The rate at which the State taxes the estate is 16 Percent. The total amount of Estate Taxes owed to Minnesota on the Estate of Prince would be $39,808,000.00.
The Federal Estate Tax applies a 5.45 Million Dollar Exemption to the decedents estate which would make Prince’s Taxable Estate $244,550,000.00. The Federal Estate Tax Rate is 40 Percent which would equal $97,820,000.00.
Total Amount of Estimated Tax on Prince’s Estate $137,628,000.00
Because Prince died without a will The State of Minnesota will dictate who gets what. The only Family remaining is a full blooded sister and Five Half Blooded brothers and sisters. The Minnesota Probate Code designates that Half Blooded siblings are to be treated as Full Blooded siblings for the laws of intestacy. That means the estate will be split six ways. Prince had a very tumultuous history with his half-sister who he locked horns with over his Father’s Estate who also died without a will. The sister claimed that the Estate was grossly undervalued and tried to have him removed. The case eventually settled. Now she stands to gain millions from his estate…
Learn from Royalty
- A Trust would have saved the Estate Millions in Fees, kept the matter private and years of time trying to settle the matter in the courts.
- Estate Taxes would have been dramatically reduced with a trust and Prince probably would have been advised to keep his domicile in a state that does not have State Estate Taxes.
- A Trust would have designated beneficiaries that would shield them from creditors and preserve the cash for intended purposes like Education and Charity.
- A well drafted trust would have protected the 250 Million Dollars; No Trust reduces the Estate of Prince by an estimated 150 Million. Heavy Price to pay for not talking to a qualified Estate Planning Attorney.