Tax deadline looms for Prince estate; government to get half
ASSOCIATED PRESS
In this May 19, 2013 file photo, Prince performs at the Billboard Music Awards at the MGM Grand Garden Arena in Las Vegas. The Minnesota judge overseeing Prince’s estate holds a hearing Thursday, Jan. 12, 2017, on whether to declare his siblings as his heirs, and who should manage the rock superstar’s estate going forward. No will has surfaced since Prince died of an accidental painkiller overdose in April 2016.
MINNEAPOLIS >> “Money Don’t Matter 2 Night,” Prince once sang. But his money matters a lot to the IRS, and the case provides a cautionary tale not just for the wealthy, but not-so-rich Americans as well.
Prince’s estate has until Saturday to file an estate tax payment for the late rock superstar, and the taxes are expected to ultimately swallow nearly half the estate’s estimated $200 million value, meaning a likely windfall of roughly $100 million for the government. Estate law experts say Prince could have prevented that. Here are the issues:
WHY THERE’S SO MUCH MONEY
Prince left no known will when he died in April of an accidental painkiller overdose, and apparently did nothing to shelter his assets from the taxman. So, federal and state taxes will claim roughly half of it, said Mark Bakko, leader of the tax practice in the Minneapolis office of the accounting firm Baker Tilly, which is not involved in the case.
The value of Prince’s estate when he died is subject to a federal tax of 40 percent and Minnesota’s tax of 16 percent. With exclusions and deductions, the total bite will be closer to 50 percent. The estate can seek an extension for filing the return but can’t delay the first payment.
DAMAGE COULD HAVE BEEN LIMITED
Experts say Prince could have set up an estate plan with trusts to benefit any relatives and charities he chose — while leaving little if anything to be taxed.
“The reality is there are only three options,” said Robert Strauss of the Los Angeles estate law firm Weinstock Manion, which isn’t involved either. “There’s family and friends, there’s charity, and there’s Uncle Sam. And most clients would rather that Uncle Sam got less.”
Instead, Prince’s six siblings are expected to equally split what’s left.
Estates worth under $5.45 million for individuals and $10.9 million for couples aren’t subject to federal estate taxes. But David Herzig, a tax law professor at Valparaiso University, said the case is a reminder that there are good reasons to have a will and estate plan, even if taxes aren’t an issue, because they can set up trusts that keep assets private and out of the probate process.
“(People) think they have to be as rich as Prince before they need estate plans,” said Jeffrey Scott, a St. Paul estate attorney. “If your net worth is a couple hundred thousand dollars, you need some kind of estate plan.”
COMING UP WITH THE CASH
The estate doesn’t have to pay the entire bill by Saturday. Big estates can make payments over time.
That helps because Prince wasn’t very liquid. A recent inventory listed about $110,000 in cash, about $830,000 in gold bars but no stocks or bonds. It also listed real estate worth about $25.4 million. That inventory doesn’t include his entertainment assets, which are still being valued.
LESSONS FROM MICHAEL JACKSON
It’s not clear whether the IRS and Prince’s estate will agree on the value of his music catalog because it’s difficult to put a dollar value on such assets.
The experience of Michael Jackson’s estate suggests a long slog in court if they can’t agree. Jackson died in 2009. The tax case finally goes to trial in Los Angeles next month over more than $700 million in taxes, interest and penalties.
Follow Steve Karnowski on Twitter at https://twitter.com/skarnowski. His work can be found at http://bigstory.ap.org/content/steve-karnowski
20 responses to “Tax deadline looms for Prince estate; government to get half”
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The government needs the cash because they know how to spend your money better than you can.
And Faster!
Right now they are pretty much mostly subsidized by the middle class with the upper and lower classes pretty much paying nothing in taxes.
That’s just not true; anyone who has a salary pays taxes, although people with little income have them largely paid by their employer, and some working poor get more than they pay with the EITC, which is an incentive to keep working. The 1% pay on average 20 times more per person than the average taxpayer, it’s only as a percentage of their relative income that they pay less than an average taxpayer, likely because they have investment income (often taxed also as corporate profit) in addition to salary. Some ultra rich pay no income taxes because they avoid getting any direct income, but their corporations, trusts, and other legal entities always end up paying taxes on their profits. Anyone who buys anything also pays consumption taxes, like our GET.
BINGO! Well said!
We owe our society and our fellow man and woman something. He made his money from society. He gave back. And he should have. When I see the large number of huge Lexus cars and Mercedes rolling around Waikiki and Manoa I know how little those people likely do for the needy.
No way Hon. Giving to the tax leaches is not giving back. Had he talked to a good estate planner he could easily avoided taxes. Could have given to family and the charities of his choice.
Fact is the government does not need your money. As we have seen for decades, give government extra money and it will be spent/wasted. It’s what they do.
Typical “D” Libtard Socialism mindset! He owes nothing to anyone.
If you win the lottery Allie, is it fair you give 50% to the government? If so, tell us why?
How, exactly, do you suggest that the government pay for the military and other essential services?
klastri, as usual, you love to twist the facts. I never once mentioned we should cut essential government services like the military, police, fire and paramedics.
The probate process is the bugaboo that requires a lengthy process in distributing the assets of a deceased. In many states the probate process can be avoided by creating a “living trust” such as we have in California. The transfer of all estate assets is immediate to the trustee(s) without regard to the probate courts. Thus avoiding the need to inventory(marshaling of asset) the estate’s assets, determination of heir/beneficiaries and other necessary antiquated probate court processes. as contrasted by a living trust, the transfer of estate assets is accomplished upon the death of the grantor. I am not a lawyer!
Good advice. May I also add if you have stocks and bonds in your name only and want to transfer it to a beneficiary upon your death, set up a TOD—Transfer on Death with your brokerage firm. Your stocks will remain yours until you pass away.For bank accounts, you can set up a POD—Payable on Death for your accounts. In most cases, it’s free to set up and some may allow you to do it on-line.
When the government can take half your estate, we have serious problems with the IRS.
The IRS has nothing to do with it, other than to act as a collection agency for Congress. Congress developed the estate tax law.
This only applies to very wealthy people.
The leviathan must eat. And it’s time for we the people to starve this beast. It’s time to end the irs.
WOW, our Government sure is messed up. Lets see what Trump does about this, think we will see lots of changes in the next 8 years !
We thank his estate for the taxes it’ll be paying to the Federal government to support and arm our military defense forces in Hawaii.
Estate taxes are only levied on the very wealthy, so this is an issue for folks with net assets above about $5 million for an individual and $10 million for a couple. There is no limit on what may pass to a spouse without being taxed. There are lots of ways to shelter that money.
This is an issue for a tiny fraction of the population, and that tiny fraction has access to the legal horsepower that can prevent a large tax burden. Prince, unfortunately and unbelievably, died without have done anything to shelter his estate. Terrible planning.
How about that terrible planning by devout “D” states like California, NY or HI? Last I heard their pensions were in the $hi!!er with massive unfunded liabilities and in much worse shape than Prince’s estate which actually has assets to be looted!
This is why we moved my assets out of country legally and head quartered it out of reach of the IRS legally. I still pay personal taxes though. Our gov really screws people. Next is renouncing my citizenship. Then asta la vista. I’ll probably have to give up my MoH’s and the stipends. Oh well. – Prince was a reallt cool fun fuy. Hung outbeith him before.