David Bowie and Prince both had much in common—an international career as talented musicians, performers and actors; and sadly, untimely deaths this year (January and April, respectively). But possibly the most significant thing they didn’t share were wills. While Bowie had an estate plan and a will, Prince reportedly died without one.
We understand that discussing financial matters for some people is difficult—and that contemplating what will happen when you’re gone can be even more unpleasant. However, without proper planning, you stand to lose a significant amount of the value of your estate to state and federal taxes, not to mention legal fees. It’s estimated that Prince’s $300 million estate will pay $120 million—or more—in taxes.
Consider this: without a directive after your death, a judge could award your spendthrift step brother (whom you never liked) an equal share of your hard-earned assets as those awarded your children. Or, your alma mater may not be able to help fund the scholarship that was so important to you.
A comprehensive wealth management plan will give you the power to live the life—and pass on the life—that you want.
The legal term for dying without a will is “intestate.” Depending on the situation, it can be a lengthy, difficult process to sort out if you are managing it for a family member or friend—or if they are managing it for you.
To save effort, it’s key to understand what assets are not passed through in a will. These are assets where beneficiary(ies) are assigned or where there is co-ownership, and can include:
- Life insurance policy proceeds;
- Retirement plan funds in IRAs, a 401(k) or other retirement plans;
- Assets held in a living trust;
- Joint tenancy or community property funds with right of survivorship, such as real estate or bank accounts;
- Funds or property held in a transfer-on-death account.
States Rule Over the Feds
The federal government has a specific tax percentage they levy on the amount of an estate. But what every state requires for probate and levies for taxes is different.
Generally, spouses, registered domestic partners and blood relatives will inherit under a certain state’s intestate laws; unmarried partners, friends and charities are not eligible to receive an intestate distribution. If there is a surviving spouse, he or she usually receives the largest portion of the estate. And if no relatives can be found, without a will, the state becomes the heir and takes any remaining assets.
In the case of Prince, who was divorced and had no living children, his one full-blooded sibling and five half-blooded siblings will all share in his estate.
If you have minor children or loved ones with special needs, it’s especially important to have a will and other estate planning instruments in place to care for them. You don’t want to leave important guardianship decisions up to a judge who knows nothing about you, your family nor your wishes.
The Bottom Line
A will for anyone at the minimum is essential. A comprehensive estate and financial plan is even better. Changes in life invariably happen so make sure your plan is up to date. If you don’t have one, talk to us today.