The settling of the estate of the late artist Prince,provides a look into a high-asset situation where the decedent did not leave a will. For Ohio residents considering their estate plans, the Prince case highlights the consequences of neglect. In the end, more than half of the late artist’s estate will go towards state and federal estate taxes.
Federal estate taxes will claim 40 percent of the excess of the estimated $200 million fortune over the applicable exemption and the state of Minnesota gets another 16 percent. The remainder will be divided equally among Prince’s six brothers and sisters, per Minnesota’s rules of intestate succession. Had Prince developed an estate plan prior to his death, he may have been able to reduce the tax obligation of his estate by reducing the value of taxable assets or by taking advantage of charitable deductions.
More specifically, Prince may have been able to reduce his estate tax obligation by transferring some of his assets during his lifetime. One strategy popular among high net worth individuals is to establish a grantor retained annuity trust, which allows for an income stream for a fixed period of time. He may also have been able to take advantage of valuation discount planning.
Charitable giving may have reduced the tax bill as well. Prince could have made gifts either during his lifetime or on death, including the establishment of a private foundation, to ease his estate tax obligation. Additionally, charitable lead trusts can be effective in lowering estate taxes. Individuals who have questions about how wills or trusts may help them preserve and protect more of their assets for their heirs may want to meet with an estate planning attorney to discuss their particular situations.