There have
been a number of high profile deaths this year that illustrate the importance
of having an estate plan. David Bowie and Prince both left behind large estates
that will be distributed very differently. Bowie’s Estate will pass pretty much
in the manner he wanted, while early indications suggest that the resolution of
Prince’s estate may result in conflict.
There is
an inherent difficulty in comparing the estates of these two performers because
their circumstances, like the general public, were different from each other. David Bowie was a little older and suffered
from terminal cancer for quite some time. Prince had health issues, but he was
younger and from what we know, did not suffer from a terminal illness. Prince
may have felt that he had “time.” The
reality is we do not know how much time we have. As a result, the manner in which their
respective estates are to be distributed are quite different and illustrate
some crucial points in estate planning that can apply to all of us.
The truth is that we all
have a plan when we die. We either die with a
will, or intestate (without a will).
When we have a valid will, the named executor is appointed and the will
determines how the estate will be distributed i.e. who inherits our assets.
When we die intestate, an Administrator is appointed by the court and the
Administrator follows the rules for intestacy for the state in which the
deceased lived. David Bowie died with a
will and we have heard very little about the related proceedings. The Surrogates
Court of Minneapolis, on the other hand, recently appointed a bank to be the
Administrator of Prince’s estate, and the bank as Administrator will rely upon
the state of Minnesota’s laws relating to intestacy to resolve issues related to
the Estate and ultimately distribute its assets.
The
question of whether Prince wanted his estate divided amongst his siblings is an
open question. Nevertheless, the task of the Administrator in dealing with the
myriad of issues related to his personal and business life will require a lot
more time an additional expense than if he had planned ahead. Not to mention
substantially delay the distribution of his estate. It’s unlikely to be a
smooth or neat process.
There are
potential substantial tax implications as well.
Both Bowie’s and Prince’s sstates exceed the current federal threshold
for estate tax purposes. At least a portion of Bowie’s estate could potentially
be passed to his wife through the use of marital deductions and other rules
that permit married US citizen couples to shield their estates from taxes. Prince’s estate - on the other hand – is
likely to be diminished by federal estate taxes as high of 45% on the value of
his estate exceeding 5.45 million dollars, the exclusion amount for 2016.
These two
examples are instructive for all of us even if we are not millionaires. Having a plan in place removes uncertainty,
lessens conflict and lowers the ultimate cost of managing our affairs when we
are gone. A Will combined with Health Care
Advance directives and a financial power of attorney go a long way toward this
goal. If you are not willing to take the
time required to put a plan in place, do it for those closest to you. You won’t
regret it.
If you
want to start thinking and planning about protecting your loved ones, take a
look at our e-Guide on estate planning for families on our website
(www.robertmaherlaw.com).
