It was revealed after Prince’s death that despite owning an estate worth an estimated $150 to 300 million, he never wrote a will.
Despite that fact, there will be at least one primary benefactor of the Prince estate: the government. Due to the Estate Tax, Prince’s estate will have to undergo a third-party valuation, which would estimate the total value of the Prince Estate as of the day of his death. After that, the job of the IRS is as simple as sending in the tax bill.
As for the size of those taxes, according to Forbes: “The IRS is going to be a partner with the estate for a long time to come to the tune of 40 cents on the dollar,” explains Martin Neumann, a partner at Weinstock Manion with expertise in probate and estate planning. With a maximum federal tax bill of 40 percent and a maximum state tax of 16 percent, the taxes temper out to a 50 percent tax bill. For an estate worth a reported $300 million by current estimates, it could be paying up to $150 million in taxes. “So part of what will be handled is an agreement with the taxing authority with how the estate taxes are paid and over what period of time,” Neumann explains.
The government taking half of Prince’s earnings wasn’t enough for them apparently! Plus, keep in mind that the Estate Tax was put in place to raise revenue during WWI in the event that we were to join the war – I think it’s safe to say it’s outlived its original purpose.
There is a silver lining for Prince fans however, as this tax liability is going to force his studio to liquidate assets or bring in more revenue. It’s likely that the latter will become reality. As ABC News reported:
The seven-time Grammy Award winner reportedly left behind a vault containing so much music his estate could put out an album a year for the next century. There are over 2,000 songs in total.
State law says that if Prince didn’t have a will or trust, his estate is set to be divided between his sister Tyka Nelson and his five half-siblings.
Assuming the IRS brings in a full $150 million from the Prince estate, they’ll have managed to pay for about twenty minutes of our Federal government’s daily spending. Whoopie.
[Note: This post was authored by The Analytical Economist]