Outside-IN

What the loss of Prince can teach us about estate planning

For any estate where there is no concrete plan, a number of complications can arise

May 5, 2016 @ 11:45 am

By Bill Ringham

For many people, thinking about what will happen to their estate after they die is too uncomfortable or too complicated of a topic to tackle. Some decide to wait. Some decide that a plan is not necessary. Others simply never get to it.

But for any estate where there is no concrete plan, a number of complications can arise. Unfortunately, many of those complications have been brought to light in the wake of the untimely death of musical icon Prince.

As far as anyone can tell, Prince did not have a will. In Minnesota, where he resided, any estate for which there is no will is subject to the intestate probate process. In other words, rather than divide the assets according to someone's wishes, the laws of the state of Minnesota determine who will get what from the estate.

Taxes are another important consideration. The actual size of Prince's estate is still unknown, but various news reports peg it at somewhere between $300 million and $800 million. In addition to federal estate taxes, many states levy their own estate tax, and Minnesota is one of them. That means that in the absence of any sort of action — such as bequests to charities — to reduce the taxable value of the estate, the amount left over might only be half of the starting value.

In fact, anyone hoping that a portion of their estate will go to charity should know that one of the more unfortunate aspects of a state probate intestate process is that no charitable bequests will be made out of the decedent's estate. The intestate rules of Minnesota are clear on who will inherit assets, and charity is not an option. The only way to ensure that the causes you care about can receive a gift from your estate is to clearly spell out those wishes beforehand.

Perhaps more unfortunate, however, is the fact that the probate process makes what many would prefer to be a private matter quite public. Court proceedings and the final determination of how the assets will be divided all become public in probate court.

To avoid this, many public figures use “revocable living trusts” to transfer their estates in a more discreet manner. As the name indicates, a revocable living trust allows the person who created the trust (known as the grantor) to revoke it or amend it up until their death or should they become incapacitated. When there is a revocable living trust in place, all assets are distributed privately, outside of the probate process, to the individuals and charities listed as the grantor's beneficiaries in the trust document. In addition to avoiding a probate process, when there is a revocable living trust in place, the trust document does not become a public record at the death of the grantor.

Anyone planning the transfer of their estate should not assume, however, that by having a will in place their heirs can avoid the public probate process. A will simply spells out which heirs receive which assets. The probate process is the means through which those assets are dispersed. So, without further planning — such as the creation of a revocable living trust — the details of the distribution would be a matter of public record.

Most people never intend to leave the fate of their estate in the hands of people who never knew them. But with a little bit of planning, anyone — regardless of the size of their estate — can ensure the things they've worked hard for are left in the hands of the people they love and benefit the causes they care most about.

Bill Ringham is vice president and senior wealth strategist at RBC Wealth Management-U.S.

0
Comments

What do you think?

View comments

Upcoming event

Nov 19

Conference

New York Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

Target-date fund design may be wrong for retirees

Researchers suggest the funds don't adequately hedge against sequence-of-returns risk in retirement.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print