Prince was the latest in a string of celebrities who passed away without having an estate plan in place. When someone passes away without an estate plan, the government has a set of default rules regarding who will receive the deceased’s estate. Many times, this may include people you may not want to receive your “Raspberry Beret.”
Prince’s estate was ultimately valued at $156 million dollars. Because Prince did not take steps to protect himself, his full estate is subject to estate taxes. On the federal level, we are all entitled to a “Lifetime Unified Credit Exemption.” This is the amount of our estate we can protect from estate taxes at our death. In 2022, the exemption amount is $12.06 million for a single person and $24.12 million for a married couple. This means if you are married you can pass $24.12 million to your beneficiaries federal estate tax free. Any assets over the exemption amount are subject to the federal estate tax. The estate tax is 40% after the first $1 million is taxed. Prince’s estate owes over $60 million in federal estate taxes. (*Prince’s exemption amount was $5.45 million)
Because Prince resided in Minnesota at the time of his death, his estate also owes state estate taxes. Minnesota is one of 12 states that impose a state estate tax. Luckily, California does NOT have a state estate tax.
Due to the complexity of Prince’s estate a private fiduciary was appointed to administer his estate. This fiduciary, Comerica Bank, received $3 million for the 6 years of work they performed for the estate. This amount is statutory in California- meaning the state decides how much the fiduciary is paid based on the amount of assets in the estate.
If Prince would have taken the time to plan, he could have saved his beneficiaries over $80 million in estate taxes alone. Estate planning with wealth can be complicated. Our firm is happy to discuss your options and review your specific estate planning goals! Book a free consultation of give us a call at 909-334-1425.