You might not see movie stars and musicians at the local grocery store, but you may have more in common than you think with famous entertainers. Just like them, you could need estate planning tools to ensure the financial legacy you leave behind is used how you want it to be. Prince’s story shows others how to make smarter estate planning choices.
No plans and huge government fees
Prince had no will, or any other estate planning documents, so the majority of his assets are going to the government. A 40% percent federal tax coupled with a 16% Minnesota state tax turn the late celebrity’s $200 million fortune into about $88 million. Since the singer was unmarried, childless and didn’t stipulate who his assets should go to, the $88 million gets divided equally between his six siblings.
As Prince was extremely wealthy, he could have established a private foundation. Giving money to charity reduces the value of an estate and comes with tax benefits, so this is an option even for those who don’t have the capital to start their own foundation.
Using a trust
One kind of trust that may have worked for Prince is a Grantor Retained Annuity Trust. A GRAT generates income for the grantor for a fixed amount of time while the remainder of assets in the trust go to beneficiaries. Assets belong to the trust instead of the grantor, so there is no estate or gift tax.
Contact us today to learn more about your estate planning options.