Last month a major pop icon left this world. He not only left a legacy and inspiring music behind- he left his fortune to the tune of $300+ million dollars. Some may assume that whomever Prince left his fortune to is quite the lucky person; in reality Prince left his fortune to no one.
He did not have a will and since he was a resident of Minnesota, the state's law dictates how his millions are split with nearly half going to the government for state and federal taxes.
The federal government assesses a 40% tax on estates over $ 1 million with $5.45 million exempt in deaths that occurred in 2016. Minnesota's estate tax is between 10-16% with $1.6 million exempt in deaths that occurred in 2016. This means that assuming Princes' estate is worth $300 million approx. $146.7 million will be paid to satisfy taxes.
The state rules that the remaining $153.3 million will be divided among his sister and five half siblings since Prince was not married and did not have any living children.
This situation is seemingly odd. Prince exercised control over all aspects of his lifestyle, music, and career; he was the sole producer of his music and refused to allow social media to be a part of his image. Yet he left his financial legacy to be determined by total strangers in a court room.
This international story is a lesson that everyone has the right to have a say on what happens to their money after they pass away. There are legal documents such as wills and trusts that can help to manage who, how, and what happens when you pass away, including some of the tax advantaged strategies available.
At the very minimum, talk with your financial advisor and ensure you have established beneficiaries on all investment accounts, retirement and non-retirement. With the unpredictable nature of life, it is never too early to plan what your financial legacy will be and to take ownership of what will happen when you pass away.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).