You’ve heard about the importance of having a will, but important messages bear repeating.
Proper estate planning serves a multitude of purposes: distribution of assets and sharing with loved ones are the most obvious, but another reason is that when your estate goes to probate, it can waste away in taxes and fees.
The Prince estate
When musician Prince died earlier this year at the age of 57, many were shocked at the untimely death. Those who knew him were also shocked that he had no will, which sparked many estate plan conversations throughout 2016.
It may be a new calendar year, but the unresolved estate is still an issue. Between federal estate taxes and the laws in his home state of Minnesota, it’s estimated that taxes will be nearly $100 million, or 50 percent of his estate’s overall value.
Few are as wealthy as the Purple One, but any estate worth more than $5.45 million is subject to federal estate taxes. In Florida there is no estate tax at the state level, but it doesn’t mean money won’t get lost in probate.
Even at a modest net worth of a few hundred thousand to a couple million dollars, it’s worth the time and effort to make sure that your plans are secure instead of leaving it to the government to decide.
The value of choice
Monetary efficiencies and taxes can be controlled through a carefully written trust or other estate plan where your life savings aren’t squandered on court fees and taxes. Instead, an estate plan allows personal choice to dictate every step of distribution.
A trust can allot monetary amounts and the timing of payment. A will may name individual items with personal significance. There are many plans that apply to different situations, whether you’re gifting to a spendthrift nephew, a special needs adult child or a close-but-unrelated friend. Without an estate plan, only your closest survivors, by legal relationship, will be included.
For anyone without a plan, probate court determines where the money goes. Prince’s siblings will inherit his remaining wealth equally, regardless of his personal feelings for them. Maybe he loved them all equally and it was a perfect symmetry in his family but, let’s face it, that’s rare.
No matter what your personal relations are with your close family and friends, ultimately, wouldn’t you prefer the choice?