J. Kelly Kennedy, Attorney/CPA, PLLC

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Attorney and CPA

Prince's estate illustrates the need for smart planning

Florida residents who are considering whether they need a plan for their personal property after they have passed might not be able to relate to the famous and ultra-wealthy. However, there is much to be gleaned from the news when a prominent person dies and ownership of the estate and assets are in dispute. It's important to understand how money that could have been protected might be lost, why children can be affected, and how the decedent's wishes need to be detailed.

After musician Prince died last spring, investigators found that his failure to adequately plan his estate has led to massive tax bills. The estate is believed to be worth approximately $200 million. Around half of that may be taken by the federal and state governments because Prince did not leave a will. Had he prepared one, steps could have been taken to shield his assets.

Had Prince set up a plan for his estate, he could have established trusts to help his relatives and provide certain financial gifts to charity. This could have avoided these onerous taxes. The singer had six siblings and they are expected to divide whatever remains after the government takes its share. If the estate is worth less than $5.45 million for an individual and $10.9 million for a couple, there will not be federal estate taxes. However, since Prince was so wealthy and has such an array of properties that are immense value, the taxes will go beyond what is protected. Much of Prince's assets were not liquid, so it will take time to sift through and determine the value.

While Prince's situation is being settled in Minnesota, the basics apply across the country and go beyond those who have a large amount of money. Having a coherent and well-organized plan for the future is an intelligent and necessary strategy. To protect children and others who are set to receive some or all of the estate of a decedent, speaking to an attorney about formulating a plan to avoid the tax pitfalls is a must.

Source: bigstory.ap.org, "Tax deadline looms for Prince estate; government to get half," Steve Karnowski, Jan. 17, 2017

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