Building Legacies that Last Estate Planning and Elder Law

Prince’s Estate Must Sell Property To Pay Estate Tax

laptop and glasses on a wood tableSome of the mystery about what will happen to Prince’s property has begun to clear up as his estate has asked for permission to sell some of his real estate holdings.

It has been estimated that the total estate tax bill that Prince’s estate will have to pay will be in the neighborhood of $150 million. The bill is that high because Prince did not have an estate plan that accounted for either the federal estate tax or the Minnesota estate tax.  Like Minnesota, Maryland estate tax is lower than the federal at $2 million.  This estate tax threshold includes the entire value of your house, without regard to the  the size of your mortage. With the high property values for housing in Maryland, life insurance and retirement accounts, many middle class Maryland families, who do not do Maryland estate planning, may force heirs to sell assets, just to make Maryland estate tax payments.

Since Prince died without an estate, there was alot  of speculation that some of the musician’s estate would need to be liquidated to pay the tax, but what portions of his estate would be sold has not been known.

It now appears that some of what will be sold includes the musician’s real estate holdings, as TMZ reports in “Prince Everything Must Go…Estate Ready to Dump Properties.”

The special administrator for the estate has filed a motion with the court seeking permission to sell some of the real estate and says it will not accept an offer that is less than 90% of fair market value. The musician is known to have had real estate holdings in several different states, but which properties might be sold has been sealed.

Ultimately, the judge will have to approve of the plan to sell before the properties are listed.

If the judge approves the plan, it will likely not be the last things of the musician’s that will be sold. The estate tax bill is high enough that much more will likely need to be liquidated in the next few months so the estate can pay the taxes on time and avoid fines and penalties.

Reference: TMZ (Aug. 1, 2016) “Prince Everything Must Go…Estate Ready to Dump Properties.”

Maryland Estate Planning for the Demographic Shift

Bigstock-Elder-Couple-With-Bills-3557267[1]The next few decades will see a tremendous transfer of wealth from one generation to the next and then to the next. It is important to have an estate plan to make sure that everything goes smoothly within your family.

In the next few years an extraordinary amount of wealth is expected to be transferred to the Baby Boomer generation by their parents. It is then expected that the Baby Boomers will be retiring in ever greater numbers and passing that wealth on to their children as Huffington Post Canada discusses in “Estate Planning For A Significant Demographic Shift.”

While the article is about Canada, the exact same shift is going to occur in the U.S.

This demographic shift and the transfer of wealth it will bring makes estate planning more important than it has even been at any previous point in human history. Americans are more prosperous than any other people in history. Billions of dollars’ worth of real estate and financial instruments will be changing hands between generations.

Families that have not planned regarding how that generational transfer will occur risk losing a lot of wealth, if not all their wealth, as the legal system sorts out who gets what.  In Maryland, in 2016, if you leave more than $2 million to your heirs, without estate planning, you will pay estate taxes on every dollar over that threshold.  And the $2 million includes the total value of your home, regardless of your mortgage.  With the cost of housing, life insurance policies or retirement accounts easily could make you eligible forMaryland estate taxes. Your children may have to sell the family home you leave without careful estate planning. To learn strategies for leaving more to your children and less to Maryland estate taxes contact my office.

Since you know the transfer of wealth will occur, make plans for it. Decide now how your assets will be transferred to your children and other heirs.

Planning for it will take a lot less time and cost a lot less money than not planning for it and letting the next generation sort it out with the assistance of probate courts.

Reference: Huffington Post Canada (July 11, 2016) “Estate Planning For A Significant Demographic Shift