IRS says Prince's estate was undervalued by $80 million
HERE WE GO AGAIN - ELVIS, ARETHA FRANKLIN, WALT DISNEY ON AND ON. Don't let this happen to your wealthy clients. (or anyone)
https://www.nbcnews.com/pop-culture/music/irs-says-prince-s-estate-was-undervalued-80-million-n1252690
I always try to tell people that when their estate is being settled the IRS will step in and ALWAYS try to overestimate and find EVERYTHING they can that will need to be paid to the IRS. After all, they have all of the time and resources to investigate one's estate.
The estate is never ready nor hardly able to minimize the tax due post-death.
The question is, why wouldn't there have been adequate estate tax planning put in place during Prince's life? Do advisors that cater to the massively wealthy not understand what awaits the estate beneficiaries?
Could having enough Life Insurance in force at the time of death been a way to take care of most of these problems?
There are several ways to handle paying the IRS Estate Tax Payment due:
- Cash on hand (unlikely and expensive)
- The estate finds a way to borrow it (unlikely, difficult to do and even more expensive)
- Sell assets, property and rapidly liquidate at a severe loss. (this method further escalates the amount due since it is not practical that properties can be liquidated within the time frame needed by the IRS. They then add delinquency charges and interest making matters much worse
- Use of Applying a Life Insurance Contract to pay the IRS at the precise time a tax is due. This method offers the most financially sound and prudent approach because of its ownership designation options, named beneficiary and tax-favored nature.
A. It is a Tax Payment Completion Plan - paid for in full during the life of the decedent.
B. The use of Discounted Dollars further reduces the net due to IRS
C. Positioning the Life Insurance Contract away from personal ownership removes massive amounts of money from the taxable estate and shifts estate value from Tax Due to Tax-Deferred.
Many people are also misguided when it comes to understanding the value of having DEBTS (think mortgages), and other liabilities in place at the time of death. These liabilities offset and reduce the gross taxable estate and can greatly help a family maintain asset ownership and not be forced to liquidate assets, as is the case most of the time when cash on hand or life insurance payments (paid in cash and tax-free) is not available.
OTHER MAJOR BENEFITS OF LIFE INSURANCE:
Since cash payments (death benefit proceeds) are made payable to a "named beneficiary" the entire value of that amount is considered a NON-PROBATEABLE ASSET and this feature alone save the estate even further estate administration costs, allows for more efficient transfer of properties, and ends any family or other business partner interests, in-fighting, ownership control issues, and financial loss.
SO, WHY NOT SET UP AN ESTATE TAX PAYMENT STRATEGY TODAY THAT INCLUDES A LIFE INSURANCE ESTATE TAX PAYMENT CONTRACT?