Last week we learned that the late pop icon Prince may have died without a will. This means that settling his estate could get very messy and it almost certainly means paying a lot of estate taxes.
Prince’s estate administrators will have nine months to estimate his net worth which could be a point of contention with the IRS. For example, Michael Jackson’s estate was filed with a value of only $7 million while the IRS claimed it was worth more than $1 billion. Some have estimated Prince’s net worth at $300 million or so but it will be difficult to place a value on rumored unreleased music and the future profit potential from his name and image.
Whatever the value turns out to be, he faces a 40% Federal estate tax rate and one of the highest state rates of 10-16% for Minnesota estate tax. His heirs will likely need to sell assets to be able to write a check to the government for over $100 million.
Prince has no surviving spouse, children, or parents which means the next in line to inherit his wealth will be his one full sister and seven half siblings. It might be more common than you think to die without a will. Last year a CNBC poll said that over 30% of people with net worths of $1-5 million had not put together an estate plan.
– Jason Gunkel, CFA, CFP®, CAP®