As a NY estate lawyer with more than two decades of experience litigating and probating estate matters for New Yorkers, I have been following the Estate of the Artist Formerly Known as Prince very closely. Since the legendary song writer and artist’s passing in April of 2016 his estate has had to bear many costs and hardships. Almost all of these burdens stemmed from the fact the Artist Formerly Known as Prince, hereinafter will be referred to as Prince, did not have a will. For anyone wondering what it means to pass with an estate in excess of One Hundred Million ($100,000,000.00) dollars , unknown heirs and without a will, you need look no further than to Prince’s estate.
The first hurdle was identifying all of Prince’s heirs, next of kin, where more than forty-five people initially came forward claiming to be his siblings. After six years of litigation it has since been determined that Prince was only survived by six (6) siblings.
Another even bigger complication is the fact Prince did not do a single piece of estate planning to protect his assets from dreaded Federal and State Estate taxes. As of 2016, the Federal Estate Tax Rate of 40% applied to any and all estates in excess of Five Million ($5,000,000.00) dollars. As for Minnesota, where Prince resided and passed away, at the time of Prince’s death, a similar estate tax structure to NY existed. As such any and all estate assets in excess of $3 million dollars are taxed at the rate of 16% at the time of Prince’s demise.
It was recently determined by the IRS that Prince’s Estate is valued at One Hundred Fifty Six Million ($156,000,000.00) dollars. This means Prince’s Estate will have to pay a head spinning Thirty-Nine Million ($39,000,000.00) dollar federal estate tax bill. Unfortunately the pain for Prince’s Estate will not stop there as this Estate will also have to bear an addition Nineteen Million ($19,000,000.00) dollars in Minnesota state estate tax as well. As such Prince’s Estate will get stuck paying a total of Fifty-Eight Million ($58,000,000.00) dollars in combined federal and state estate tax liability all of which was entirely avoidable.
What is the NY estate tax?
As a NY estate lawyer one of the questions I am most frequently asked by clients is how much NY estate tax do I owe? Most of the time I am happy to report that NY estates under Six Million ($6,000,000.00) dollars, as of the date of this article, owe Zero ($0) dollars in either state or federal estate tax. This makes most inheritance proceeds nontaxable in New York. However as a NY estate lawyer I have to caution you that as of the date of this article thirteen states in the union still have a tax on estate proceeds and NY is one of them.
So in 2022 when do estate taxes kick in? Most NY estate lawyers will tell you that the federal estate tax has an exemption of Twelve Million Sixty Thousand ($12,060,000.00) dollars per individual. At the state level New York imposes a Sixteen (16%) percent levy on any and all NY estates in excess of Six Million One Hundred Ten Thousand ($6,110,000.00) dollars.
Historically, both the federal estate and state estate taxes were more onerous, usually applying to any and all NY estates in excess of One Million ($1,000,000.00) dollars. Eventually with the legislature realizing that the estate tax burden is almost always shouldered by middle class heirs, the group who are the least able to absorb this expense. While the wealthy have armies of high priced NY estate lawyers on retainer to implement estate tax strategies to minimize or completely avoid any and all estate tax liability, the middle class does not. That is why there has been a steady trend to lift the exemption rates for estates at both the federal and state levels.
With a simple NY estate lawyer drafted will most anyone can protect their NY estates for future generations. Unfortunately for Prince’s heirs he failed to draft such a will and incorporate the estate planning strategies which could have minimized if not completely eliminated his estate’s tax liability. The clearest example any NY estate lawyer can give you is illustrated within Prince’s Estate. First, Prince failed to draft a will appointing an executor and leaving the bounty of his estate to named individuals. This lead to 4 years of litigation to determine the identity of Prince’s rightful heirs, the appointment of a Public Administrator and countless millions of dollars in legal fees. To make matters worse Prince failed to form any trusts to remove assets from his estate and further avoid costly estate tax liability. The latter mistake cost Prince’s Estate nearly sixty million ($60,000,000.00) dollars. The real crime here is that each of these two missteps were easily avoidable with a simple will and trust formation. As a NY estate lawyer nothing makes me sadder than knowing these mistakes were avoidable and whoever managed Prince’s finances failed him and his heirs.
If you or someone you love is trying to plan their NY estate feel free to call an experienced NY probate lawyer at The Law Offices of Jason W. Stern & Associates, at (718) 261-2444 for a free consultation. Our Queens estate lawyers have nearly years of combined NY estate law experience drafting and probating NY wills in the counties of Queens, New York, Kings, Bronx, Westchester, Rockland, Nassau, Richmond, Orange and Dutchess.