It may take years to determine who are all of the true heirs to music icon Prince’s estate; in addition siblings and half siblings, multiple people have come forward claiming to be his children.Nonetheless, we already know who will be the BIGGEST heir.
Nope, it’s not a family member. It’s the government.
Between Minnesota’s top death tax rate of 16 percent, combined with the federal government’s 40 percent rate, more than 50 percent of Prince’s estate — estimated between $300 and $500 million — will go to the government.
Via The Daily Signal:It appears that the pop star Prince may have died without a will, leaving behind a multi-million dollar and growing estate. Although Prince has one full sister and five half-siblings, Prince’s family members will not be his biggest heirs.
Both the federal government and Minnesota’s state government will assess so-called “death taxes” or estate taxes on Prince’s assets, taking away more than half his estate. Between his physical assets—cash, investments, home, etc.—and his future royalties, Prince’s estate has been estimated to be between $300 and $500 million.
If Prince were married, more of his estate would have been protected from so-called death taxes.However, without a spouse, only $1.6 million of Prince’s estate will be free from Minnesota’s death tax and only $5.45 million will escape the federal death tax.
The combination of Minnesota’s top death tax rate of 16 percent, plus the federal government’s 40 percent rate, means that over 50 percent of Prince’s estate will go to the government.Had Prince known ahead of time that he would die at such a young age, he may have been able to reduce the government’s reach into his estate through tax planning, but with a fortune as large as his, the government’s claim to his estate was inevitable.
While Prince was probably not all that concerned with the death tax—particularly since his early death was unexpected—he probably didn’t change his behavior all that much in response to the death tax. But most people who pay the death tax are not like Prince—they don’t have hundreds of millions of dollars, and some don’t even have a hundred thousand dollars in cash if their assets are all tied up in the value of their family business.
When the owner of a family business dies without leaving behind a large pile of cash or other liquid assets, the family often has to sell the business to pay the death tax. That can have devastating employment consequences. A 2014 analysis of the death tax by The Heritage Foundation found that its harmful effects on savings, investment, and capital reduces employment by 18,000 jobs each year.
Of course, most citizens have nowhere near the wealth that an icon like Prince left. The harsh reality is that the death tax actually devastates so many families, small businesses and their communities.
Currently, fifteen states and the District of Columbia have an estate tax, and six states have an inheritance tax. Maryland and New Jersey have both.
Check out your state in the chart below:
GOP presidential candidate Donald Trump has said he will eliminate the federal death tax, though that still leaves crippling death taxes in many states — like Prince’s and my home state of Minnesota. Way to reward a life of hard work, eh?
Even for someone like Prince, for whom the estate tax might not devastate his heirs (likely to be siblings and/or half-siblings), before his death the singer was using a portion of his wealth for good in many cases — whereas now a huge chunk will just go to big government.
Another sad facet of an already tragic situation.
[Note: This article was written by Michelle Jesse, Associate Editor]