Late rock star, Prince, once sang, “Money didn’t matter yesterday and it sure don’t matter tonight.” That may have been Prince’s attitude toward money, but it was definitely his attitude about estate planning—he had none! If there had been a plan, his estate could have been settled years ago. Since there was no plan, the estate has been in limbo for six years.
Prince died of a fentanyl overdose in 2016. Since then, there’s been an ongoing fight between the IRS and the estate’s administrator about the value of the estate. Comerica, the administrator, claimed the estate was worth $82.3 million. The IRS claimed it was worth $163.2 million. Finally, after six years of haggling, both sides have agreed to value the estate at $156.4 million.
So, now that a value has been agreed upon, it’s settlement time. But as Bachman-Turner Overdrive said, “You Ain’t Seen Nothing Yet!” Because there was no estate plan, the IRS will be the biggest beneficiary of the settlement. In 2016 the federal estate exemption was $5,450.000. Subtract that from the $156,400,000 and the IRS receives 40% of $150,950,000 or $60,380,000. But wait! There’s more.
Minnesota, where Prince was a resident, also has an inheritance tax. In 2016, the Minnesota estate exemption was $1.6 million. Subtract that from the estate value of $156.4 million and Minnesota gets 16% of $154,800,000 or $24,768,000.
Let’s do the math. $60,380,000 to the IRS + $24,768,000 to the state of Minnesota, and Prince’s estate will pay $85,148,000 in taxes that could have gone to his heirs, all because there was no estate plan.
Your estate may not be the size of Prince’s, but protecting your assets and the heirs who will inherit them is just as important and that requires a plan. Having no estate plan, as Paul Simon sang, is “Still Crazy After All These Years.”