Prince and the two certainties of life
Death and taxes can’t be beat, but taxes can be delayed and minimised
The writer is counsel to KSM Law, an associate professor at Valparaiso University Law School in Indiana and an adjunct professor at Osgoode Hall Law School of York University. He tweets @faisalkutty
Death and taxes are two inevitabilities that each one of us must face. Last month’s unexpected passing of music legend Prince Rogers Nelson is a stark reminder that rich or poor, powerful or weak, fit or unfit, talented or not, each one of us will taste death. It’s only a matter time.
The other lesson from his passing is that the tax man or woman will come calling even as your body turns cold and disintegrates. Estate and tax law experts predict long legal disputes. The battles will be all the more complicated because the rock star, like most people, did not leave a will. In fact, even before a full week had lapsed, Prince’s only surviving full sister, Tyka Nelson, filed paperwork in a Minnesota District Court (Probate Division) claiming that the 57-year-old singing sensation had no known will “and asking that an affiliate of Bremer Bank, which had been providing him with financial services, be temporarily appointed as a special administrator of the estate".
The consequences of leaving this world intestate (dying without a will) or turning your mind to estate planning may mean that your heirs will inherit more than they expected: decades of litigation.
Everyone knows someone whose family was torn apart or left with more issues than they could handle. Indeed, even almost seven years after his death, Michael Jackson’s estate is involved in a dispute with the Internal Revenue Service over the value of the “right of publicity” in an estate.
Mind you, although most people’s estates will not face such issues, there are plenty of other potential problems that non-celebrities never turn their minds to.
A few years back, my office was approached by a group directed to us by the local mosque. Two of their siblings had passed away in a car accident and the deceaseds’ children were making preparations to cremate their bodies. The departed were practicing Muslims and according to the siblings would have wanted to be buried in accordance with Islamic funeral rites. Given that there was no will and that the children insisted on cremation, the siblings would have had to resort to litigation or other form of dispute resolution to settle the matter. Both parties claimed they were only ensuring that the wishes of their loved ones were being carried out. Ultimately, they were cremated because given the reality of litigation (costs and duration), they were advised by community leaders that it was best to back off and allow for the cremation to take place. They had made their intentions clear and taken whatever steps they could. The leaders made the decision because also contrary to Islamic teachings, the body would sit in a morgue freezer for an extended period pending the resolution of the 'he said, she said' battle. A simple directive or expression of intention in a will may have saved all of the hassle, drama and costs.
Indeed, Prophet Mohammed (peace be upon him) is reported to have said: “It is the duty of a Muslim who has anything to bequest not to let two nights pass without writing a will about it" (Sahih al-Bukhari). In Pakistan, the West Pakistan Muslim Personal Law (Shariat Act 1962) and Muslim Family Law Ordinance 1961 protect the rights of legal heirs. Islamic laws dictate fixed shares for enumerated heirs but a will may be used to distribute up to a maximum of one-third of a person’s estate. Moreover, a will or estate planning can also assist in addressing a multitude of other issues that the estate and beneficiaries may otherwise face. Estate planning advice tailored to your particular situation and jurisdictional connections may enable you to distribute your assets prior to your decease using inter vivos gifts or trusts (given or set up prior to death). Provided that certain legal considerations are satisfied, such gifts may enable your estate and beneficiaries to minimise taxes, probate costs and transfers fees, depending on the jurisdiction.
A will may also enable a person to appoint trustees for any testamentary trusts (set up after death) that may be established, appoint guardians for any children (in the event of the decease of any default guardians provided by law, if any), name the executor or administrator of your choice to manage and oversee the estate (varies between jurisdictions).
Many jurisdictions will also allow parties to prepare a holograph will. Recommended only if a person doesn’t have significant assets or estate planning issues, a holograph will is a document written in the testator’s own handwriting and signed. Many of the rules applicable to formal wills are relaxed or not engaged at all.
Those with properties in different jurisdictions should also seek advice on how such properties can pass to the rightful heirs with minimum hassles, costs and taxes. Trust me when I say, technical conflict of laws, determinations of choice of law, forum conveniens, residency/domicile, comity and situs of property will not be fun and games for your heirs to grapple with.
Death and taxes can’t be beat, but taxes can be delayed and minimised, and in this way, the impact of your death on your loved ones can be made a little less devastating.
Published in The Express Tribune, June 1st, 2016.
The other lesson from his passing is that the tax man or woman will come calling even as your body turns cold and disintegrates. Estate and tax law experts predict long legal disputes. The battles will be all the more complicated because the rock star, like most people, did not leave a will. In fact, even before a full week had lapsed, Prince’s only surviving full sister, Tyka Nelson, filed paperwork in a Minnesota District Court (Probate Division) claiming that the 57-year-old singing sensation had no known will “and asking that an affiliate of Bremer Bank, which had been providing him with financial services, be temporarily appointed as a special administrator of the estate".
The consequences of leaving this world intestate (dying without a will) or turning your mind to estate planning may mean that your heirs will inherit more than they expected: decades of litigation.
Everyone knows someone whose family was torn apart or left with more issues than they could handle. Indeed, even almost seven years after his death, Michael Jackson’s estate is involved in a dispute with the Internal Revenue Service over the value of the “right of publicity” in an estate.
Mind you, although most people’s estates will not face such issues, there are plenty of other potential problems that non-celebrities never turn their minds to.
A few years back, my office was approached by a group directed to us by the local mosque. Two of their siblings had passed away in a car accident and the deceaseds’ children were making preparations to cremate their bodies. The departed were practicing Muslims and according to the siblings would have wanted to be buried in accordance with Islamic funeral rites. Given that there was no will and that the children insisted on cremation, the siblings would have had to resort to litigation or other form of dispute resolution to settle the matter. Both parties claimed they were only ensuring that the wishes of their loved ones were being carried out. Ultimately, they were cremated because given the reality of litigation (costs and duration), they were advised by community leaders that it was best to back off and allow for the cremation to take place. They had made their intentions clear and taken whatever steps they could. The leaders made the decision because also contrary to Islamic teachings, the body would sit in a morgue freezer for an extended period pending the resolution of the 'he said, she said' battle. A simple directive or expression of intention in a will may have saved all of the hassle, drama and costs.
Indeed, Prophet Mohammed (peace be upon him) is reported to have said: “It is the duty of a Muslim who has anything to bequest not to let two nights pass without writing a will about it" (Sahih al-Bukhari). In Pakistan, the West Pakistan Muslim Personal Law (Shariat Act 1962) and Muslim Family Law Ordinance 1961 protect the rights of legal heirs. Islamic laws dictate fixed shares for enumerated heirs but a will may be used to distribute up to a maximum of one-third of a person’s estate. Moreover, a will or estate planning can also assist in addressing a multitude of other issues that the estate and beneficiaries may otherwise face. Estate planning advice tailored to your particular situation and jurisdictional connections may enable you to distribute your assets prior to your decease using inter vivos gifts or trusts (given or set up prior to death). Provided that certain legal considerations are satisfied, such gifts may enable your estate and beneficiaries to minimise taxes, probate costs and transfers fees, depending on the jurisdiction.
A will may also enable a person to appoint trustees for any testamentary trusts (set up after death) that may be established, appoint guardians for any children (in the event of the decease of any default guardians provided by law, if any), name the executor or administrator of your choice to manage and oversee the estate (varies between jurisdictions).
Many jurisdictions will also allow parties to prepare a holograph will. Recommended only if a person doesn’t have significant assets or estate planning issues, a holograph will is a document written in the testator’s own handwriting and signed. Many of the rules applicable to formal wills are relaxed or not engaged at all.
Those with properties in different jurisdictions should also seek advice on how such properties can pass to the rightful heirs with minimum hassles, costs and taxes. Trust me when I say, technical conflict of laws, determinations of choice of law, forum conveniens, residency/domicile, comity and situs of property will not be fun and games for your heirs to grapple with.
Death and taxes can’t be beat, but taxes can be delayed and minimised, and in this way, the impact of your death on your loved ones can be made a little less devastating.
Published in The Express Tribune, June 1st, 2016.