When high-profile celebrities with a lot of money pass away, the press knows that people are interested in the estate details. They dig through them if they are available, and they are widely publicized. This is an intrusion of privacy, but mistakes that are made can be instructive.
This dynamic definitely applies to the 2016 passing of the music icon Prince, we will revisit the matter now that it has finally been settled.
Intestacy
Prince did not have a will or a trust when he passed away, so he died intestate. In these situations, the probate court will supervise the administration of the estate. An administrator is named by the court, and in this case, it was Comerica, which is a financial services company.
We touched upon the loss of privacy in the opening. When an estate goes through probate, the records are available to the public, including the press. This is why details become available when a famous person dies without a will.
The administrator will pay final debts and identify and inventory the assets that will eventually be distributed to the heir or heirs. In an ordinary case, this may be a bit time-consuming, but it is not a Herculean task.
When you are talking about an artist that is a multimillionaire with royalty rights, the situation is extremely complicated. It took six years, but early in February, the Prince estate was finally closed.
Estate Tax
There is a federal estate tax in the United States that carries a 40 percent maximum rate, so it can have a significant impact on a large estate. In 2022, the estate tax exclusion is $12.06 million. This is the amount that can be transferred before the estate tax would be applicable on the remainder.
Back in 2016, the exclusion was much lower at $5.45 million. After lengthy negotiations, the heirs to the estate and the IRS came to an agreement with regard to the taxable value of the estate. They agreed on a figure of $156.4 million, and the taxes were paid.
If you are a high net worth individual with an estate that is going to be exposed to the estate tax, there are steps you can take to facilitate tax efficient transfers. Many millions of dollars would have been preserved if Prince would have worked with an estate planning attorney to implement an estate tax efficiency strategy.
Unintended Consequences
Even if estate taxes are going to be a factor for your family, intestacy should be avoided. Probate is time-consuming as we have stated, and there are costs that reduce the value of the estate before it is distributed to the beneficiaries.
There is also the matter of unintended consequences. Ultimately, the court will order the distribution of the assets according to the intestate succession laws of the state of Connecticut.
When it comes down to this, your assets may be distributed in a manner that is not consistent with your actual wishes. There is no reason to take chances with intestacy when estate planning guidance is just a phone call away.
Escheat Laws
In some cases, a person will pass away intestate without any living relatives. Under these circumstances, the court will attempt to locate a next of kin for a period of time. If no one can be found, the state can absorb the resources under escheat laws.
Back in 2012, a 97-year-old Holocaust survivor name Roman Blum died with a $40 million fortune. He did not have a will, and many people have made claims to the estate, but they could not prove their connection to the deceased. As a result, the state is still in possession of this estate.
Take Action Today!
Today is the day to end the procrastination if you are going through life without a plan. You can schedule a consultation appointment at our Glastonbury or Westport, CT estate planning offices if you call us at 860-548-1000, and you can use our contact form to send us a message.
Mr. Nirenstein lives with his wife, Ellen, in West Hartford where they have been lifelong residents and active participants in community activities. They have two children, Joy and Ross, who are starting careers of their own.