Learning From A Music Legend’s Not So Legendary Estate Planning
From his first No. 1 Billboard hit “Let’s Go Crazy” to the creation of popular 80’s movie “Purple Rain”, very few will doubt the music legacy Prince left when he passed earlier this year. However, family members of late music Phenom may be more concerned that he left his estate in a different direction—chaos.
What went wrong? According to Prince’s sister, he didn’t leave a will. Leaving the distribution of his assets up to the state courts, can be a long, drawn-out process for loved ones. In addition, it’s unlikely that it will be distributed according to what Prince would have preferred, had he set-up a will and testament to begin with. In an effort to help you avoid Prince’s mistake, check out these 4 planning ideas:
1. Set-up a will. Yes, this is an obvious first step – but you’d be surprised how many people avoid doing this. What many don’t know, is that without an established will, the state courts are in control of distributing your assets. Therefore, if you want your voice to be heard regarding how much, at what point, or where your assets will go, this is the first step to ensuring your assets will be handled according to your wishes.
2. Consider contributions to your retirement account. While the main point of having a will requires actually having assets, don’t let a lack of current asset accumulation deter you from setting up a retirement account. After all, having an account that you may contribute to over the course of your career is what a retirement account was created for to begin with. There are several ways to invest in your retirement, but two common ways are through a traditional IRA or a Roth IRA. The latter allows for tax free distributions of both contributions and earnings, whereas traditional IRA contributions, which can be deductible in some cases, and earnings will generally be subject to taxation. For more information about these two retirement options, check out the link below. Or reach out to us today to learn more about 401(k) options and their tax implications.
3. Maintain current retirement plan beneficiary designations. This is often overlooked once a will has been set up. However, it’s important to remember that in the event of your death, the beneficiary listed on your plan will determine who receives your retirement plan assets not your will. So if you’ve recently had a change in spouse or have additional children, make sure to update your beneficiary designations. If your retirement plan beneficiary is unlisted, it will be up to the discretion of the state courts to determine who receives your retirement plan assets.
4. Set-up a medical power of attorney. Enough discussion about financial assets… who do you want in charge of your health if you become incapacitated? If you are single and over 18 years of age, you must set-up a Medical Power of Attorney if you want legal authority over who will potentially make medical decisions for you. For example, if you were to get into a severe car accident and this hasn’t been set up, then your close family and or friends will not be able to make the medical decisions for you – not an ideal situation!
Planning for what happens after you pass away isn’t fun to think about, but if knowing where your assets will go and who’s making your medical decisions is important to you, it’s crucial to start planning now.
Still curious to learn more? Reach out to our team today!
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Delap LLP is one of Portland’s largest local tax, assurance, wealth advisory, and consulting accounting firms, located in Lake Oswego, Oregon.