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Press Release

Death Tax Could Claim over Half of Prince's Estate

Leading Tax Attorney Shares Tips to Avoid the Estate Tax Fallout

May 6, 2016 / PRZen / DETROIT -- The untimely death of pop star Prince has put the "death tax" or estate tax back in the spotlight. Both the federal government and Minnesota's state government will be assessing estate taxes on Prince's assets, which may take away more than half his estate, estimated to be worth between $300 and $500 million, from his heirs in the absence of a will.

According to The Heritage Foundation, had Prince married before his death, he could have passed on the entirety of his estate to his spouse tax free. However, in the absence of 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. With Minnesota's top death tax rate of 16 percent, plus the federal government's 40 percent rate, over 50 percent of Prince's estate could end up in government hands.

"The fallout from estate taxes is a misfortune I've seen too many times with families; especially with family businesses," said Venar Ayar, the principal and founding tax attorney for Ayar Law Group in Southfield, Michigan. "If a family business owner dies without leaving behind enough cash or liquid assets to cover the death tax, the family often has to sell the entire business just to pay that tax. The consequences have a big impact on the family, local employment, and the community at large."

Federal estate taxes are expensive (historically, 35% or more) and they must be paid in cash, usually within nine months after death. State estate taxes vary throughout the U.S., but Michigan has not imposed a state inheritance or estate tax on residents since 2004.

According to Ayar, there are a number of trusts and Limited Liability Company/Family Limited Partnership strategies to reduce or eliminate estate taxes. Here are three of the simplest ways to help protect your family and the family business before a death occurs:

1. If you are married, use both estate tax exemptions.

If your spouse is a U.S. citizen, you can leave him or her an unlimited amount when you die with no estate tax.

2. Remove assets from your estate before you die.

Gifting assets before you die is a good way to reduce the size of your estate. Appreciating assets are best to give because any future appreciation will also be out of your estate. Federal law also lets you give up to $14,000 tax-free to whomever you wish each year.

3. Buy life insurance to replace assets given to charity and/or pay any remaining estate taxes.

Buying life insurance can be an inexpensive way to replace an asset given to charity and/or to pay any remaining estate taxes. In order to keep the death benefits out of your estate, you should not be the owner of the policy. Be sure to have a trustee purchase it.

Granted, most people don't have hundreds of millions of dollars in their estates like Prince, but if their cash and assets are tied up in the value of their family business, the tax impact on their heirs and business is relative.

For press inquiries, please contact SherrieHandrinos@gmail.com or call 734-341-6859.

About Ayar Law Group

Ayar Law Group, an award-winning, boutique tax law firm, represents individuals and businesses with tax problems that require creative resolutions. Because our focus is exclusively on tax problem resolution, we have the experience and knowledge to minimize clients' financial exposure and protect their assets whether those assets are in the United States or abroad. Our offices are located in Southfield, Detroit, Troy, Novi, and Farmington Hills, Michigan. For more information, visit www.ayarlawgroup.com.

Source: Ayar Law Group

Press release distributed by PRZen
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