The Michael Jackson estate plan could turn out alright. He had a Will that poured over into a Living Trust for the benefit of his family and children. If he had assets after all his liabilities his Living Trust should provide the tax planning necessary to reduce his Federal Estate Tax amount to a manageable number or even zero.
Well, Steve McNair estate appears to be in an entirely different boat. By all reports, Steve McNair, the former Tennessee Titan quarterback, died "intestate", in other words, without a Will or Living Trust. Wow! Just wow!
Steve McNair may have just been able to fund one of President Obama's Federal programs himself with the estate taxes that his estate and family may end up paying. On top of this is the fact that his wife (who he was apparently cheating on) is now the administrator of his estate and will be walking away with a portion of his assets that could have been held for the benefit of the children.
Focusing more on the Federal Tax aspect of Steve McNair's failure to plan, Florida Estate planning lawyer David Shulman, who beat me to the punch (as he usually does), has a great post that reviews the Federal Tax implications. You can read David's well written post here: Steve McNair died without a Will. The consequences could be disastrous.
To break it down to show just how much Steve McNair is "gifting" to the IRS because he had not done a proper estate plan, this year the Federal Estate Tax exemption is $3.5 Million. What that means is that anything left to anyone other than his wife this year over $3.5 Million will be taxed. The tax rate is 45%. I don't know the size of McNair's estate, but I do not according to ESPN, his last contract if it paid out the maximum was worth $32 Million. So, let's assume his estate is worth $32 Million.I am not licensed in Tennessee, so let's just assume the spousal share is 50% and the child's share is 50%.
McNair's estate could be writing the Federal Government-IRS a check for $5,625,000.
This is calculated by taking the amount not left to the spouse $16 Million, subtracting the exemption amount $3.5 Million, multiplying by the tax rate of 45%, and there you have it. McNair writing the Feds a big hefty check for money that could have went to his children or charity.
This sad story all around is a tale of why if you have loved ones, you need to think about estate planning. You never know when life is going to throw you a curve ball. If you want to ensure that your loved ones receive the support after you pass or are incapacitated, you need to sit down with an estate planning attorney. You don't need to be writing a huge check to the Federal Government and the IRS. That money could go to your children, loved ones, or your favorite non-profit.
