inventory

Prince’s Estate Is a Royal Mess: 5 Ways You Can Do Better

When pop superstar Prince died of a fentanyl overdose in 2016, he left behind significant assets, many relatives … and no will. It was a recipe for disaster. In addition to tangible assets – money in the bank, real property – Prince left music rights and the value inherent in his name and likeness. Comerica, the estate’s administrator valued it all at $82.3 million; the IRS said it was worth twice that amount – a whopping $163.2 million – and asserted a tax claim for $39 million.

It took six years and tens of millions of dollars in legal fees, but the heirs and the IRS finally came to terms in January, agreeing on a final valuation of $156.4 million. In the interim, there were changes. Prince’s half-brother passed away in 2019, leaving a will that opened the door for new, unrelated parties to assert claims against the estate. Now the process of distributing the vast estate finally begins.

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We may not possess a fraction of Prince’s estate, but we can all treat our heirs like royalty. Simple steps now can prevent a nightmare like the one his family experienced. These are five key lessons from the Prince estate debacle.

1. Make a will

It sounds obvious, but an up-to-date will was clearly not on Prince’s priority list. Your will tells the court how you want to distribute your property, and it ensures that minor children will be placed in the care of someone you trust. Without a will, the court will make those decisions on your behalf.

To be valid and binding, a will must be signed by someone of sound mind; unrelated witnesses may also be required in your state.

Although a DIY will may sound enticing, don’t do it. A mistake can send an otherwise simple will to litigation, where any money saved is quickly eaten up by legal costs. Have a legal professional create your last will and testament.

2. Know what you have

Start your inventory with big-ticket items, such as real estate and savings accounts – trusts and life insurance policies will bypass probate if beneficiaries have been named – and work your way down. Your grandmother’s recipe book and your father’s tie clip may not have monetary value, but they mean something to somebody. Put them on a spreadsheet so they don’t fall through the cracks when you’re no longer here. It may also be helpful to add a column to the spreadsheet showing to whom you intend to pass the asset, so you can refer to it as you draft your will.

3. Know what it’s worth

The IRS and Comerica settled last spring on the real estate portion of Prince’s estate, but it took another year and a half to arrive at a valuation for intangible assets, such as rights to Prince’s music. The IRS ultimately dropped a $6.4 million “accuracy-related penalty” it had levied on Prince’s estate, and the Minnesota Department of Revenue also dropped an accuracy penalty. However, the fight over value resulted in a huge tax bill that will likely force Prince’s heirs to sell their interests in his catalog, rather than reaping its long-term benefits.

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Protect your heirs by enlisting the services of a reputable expert to value jewelry, artwork and other items of unique value, and be sure to keep all documentation in a safe place. Although valuations change over time, having a general idea of an asset’s value when making estate plans can spare your heirs severe tax consequences down the road.

Include a valuation column on your asset spreadsheet in which you insert the best information you have for each item and the basis for that valuation. If you’ve received a professional appraisal, indicate the source and the location of any supporting documentation; if it’s a best guess, state as much. Save your beneficiaries a fight over valuation by assigning a value or a process for determining values if one beneficiary wants to buy out others or receives a specific property.

4. Anticipate family dynamics

Even the best of families can morph into dysfunction when a loved one dies. How sad to think that your death could create a permanent divide between your relatives. Make things simple by creating a clear plan that leaves nothing to chance. Just because you’ve told a close relative that you want them to have your silverware, don’t assume that everyone knows this or will be happy about it.

In Prince’s case, the court was left to divide his extensive estate – including his Paisley Park studios-turned-museum, real estate and music rights – equally among six blood relatives. Had Prince simply spelled out his wishes prior to death, his heirs may not have been happy but they would have received their inheritance intact and in a reasonable time. Instead, they had to watch and wait as the estate doled out tens of millions of dollars to lawyers and consultants and valuable assets to pay those fees.

A letter that clearly explains to your heirs the reasons for your decisions can head off hurt feelings, acrimony and possible legal challenges. When the only decisions your relatives have to make are what to wear to the service and what kind of food to order afterwards, you’ve given them a precious gift.

5. Name an executor

Designate a trusted individual to carry out your will’s instructions and manage the affairs and wishes of your estate. Don’t make it a surprise. The more prepared and informed your executor is, the smoother the process will be. Your designee should understand what he or she will be required to do. If you sense any hesitation or concern, talk through those concerns. If it still doesn’t feel right to one or both of you, identify another person to serve in this important capacity, someone who will truly have your heirs’ best interests at heart.

The largest beneficiary of Prince’s estate was the IRS, followed by the administrators and attorneys. A close family member or friend may be willing to waive compensation and should work to keep fees down so that the bulk of your estate passes to your loved ones.

Prince probably thought — like most of us do — that he had plenty of time to get his affairs in order, or he may have concluded that whatever happened after he was gone was none of his concern. Creating an estate plan is an extremely personal decision, but it has huge consequences. It is perhaps the strongest expression of love that the law recognizes.

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The 12 Best Neighborhoods in Madison for Renters in 2022

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The post The 12 Best Neighborhoods in Madison for Renters in 2022 appeared first on The Rent.com Blog : A Renter’s Guide for Tips & Advice.

13 Essential Tips When Moving In With Your Boyfriend

These will help you have a smooth transition.

The post 13 Essential Tips When Moving In With Your Boyfriend appeared first on The Rent.com Blog : A Renter’s Guide for Tips & Advice.

The 15 Best Neighborhoods in Omaha for Renters in 2022

While you can get an Omaha steak here, there’s so much more to see.

The post The 15 Best Neighborhoods in Omaha for Renters in 2022 appeared first on The Rent.com Blog : A Renter’s Guide for Tips & Advice.

How to Read the Balance Sheet of a Company for Investment

A balance sheet tells you a lot about the financial health of a company. Learn how to read and analyze a balance sheet before investing.

Home Office Deduction: Can You Claim This Tax Break If You Worked from Home Last Year?

Like millions of other Americans, you may have worked from home a lot last year because Covid forced your office to close. Sure, you saved money on commuting costs, work clothes and lunches, but there are other unreimbursed expenses that drained your wallet. For instance, you probably had to pay for printer paper and ink, note pads, and other office supplies. Plus, your electric and other utility bills were likely higher since you were at home all day. And maybe you had to upgrade your Wi-Fi, too. Wouldn’t it be nice if you could claim a tax deduction for your home office expenses on your 2021 tax return?

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Well, maybe you can. Some people can deduct their business-related expenses, and there’s something called the “home office deduction” that lets you write off expenses for the business use of your home. Whether or not you can claim these tax breaks depends on your employment status.

Employees Are Out of Luck

If you’re an employee working from home last year, I’m sorry to say that you can’t deduct any of your related expenses on the tax return you must file this year.

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Before 2018, you could claim an itemized deduction for unreimbursed business expenses, including expenses for the business use of part of your home if they exceeded 2% of your adjusted gross income. However, this deduction was eliminated by the 2017 tax reform law.

Self-Employed People Cash In (Maybe)

If you were self-employed last year, you may be in luck. Self-employed people can deduct office expenses on Schedule C (Form 1040) whether they work from home or not. This write-off covers office supplies, postage, computers, printers, and all the other ordinary and necessary stuff you need to run an office.

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Plus, the home office deduction may also be available if you were self-employed in 2021 — if you can satisfy all the requirements. This tax break covers expenses for the business use of your home, including mortgage interest, rent, insurance, utilities, repairs, and depreciation. It doesn’t matter what type of home you have, either — single family, townhouse, apartment, condo, mobile home, or even a boat. You can also claim the deduction if you worked in an outbuilding on your property, such as an unattached garage, studio, barn, or greenhouse.

The key to the home office deduction is to use part of your home “regularly and exclusively” as your principal place of business. If you only worked from home for part of the year, you can only claim the deduction for the period that you can satisfy the “regularly and exclusively” requirements.

“Regular use” means you use a specific area of your home (e.g., a room or other separately identifiable space) for business on a regular basis. Incidental or occasional use of the space for business doesn’t count.

“Exclusive use” means you use a specific area of your home only for your trade or business. The space doesn’t have to be marked off by a permanent partition. You can’t claim the home office deduction if you use the space for both business and personal purposes. However, the exclusive use requirement doesn’t apply if you use part of your home:

  • For the storage of inventory or product samples; or
  • As a daycare facility.

The space must also be used:

  • As your principal place of business for your trade or business;
  • To meet or deal with your patients, clients, or customers in the normal course of your trade or business; or
  • In connection with your trade or business if it’s a separate structure that’s not attached to your home.

(See IRS Publication 587 for more information about these and other requirements for the home office deduction.)

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If you qualify, there are two ways to calculate the home office deduction for your 2021 tax return. Under the “actual expense” method, you essentially multiply the expenses of operating your home by the percentage of your home devoted to business use. If you worked from home for part of the year, only include expenses incurred during that time. Under the “simplified” method, you deduct $5 for every square foot of space in your home used for a qualified business purpose. Again, you can only claim the deduction for the time you worked from home. For example, if you have a 300-square-foot home office (the maximum size allowed for this method), and you worked from home last year for three months (25% of the year), your deduction is $375 ((300 x $5) x 0.25).

The deduction is claimed on Line 30 of Schedule C (Form 1040). If you used your home for more than one business, file a separate Schedule C for each business. Don’t combine your deductions for each business on a single Schedule C.

If you use the actual expense method to calculate the tax break, also complete Form 8829 and file it with the rest of your 2021 tax return. If you used more than one home for business last year, you can file a Form 8829 for each home or use the simplified method for one home and Form 8829 others. Combine all amounts calculated using the simplified method and amounts calculated using Form 8829, and then enter the total on Line 30 of the Schedule C you’re filing for the business.

Employees with a Side Gig?

If you were an employee at a “regular” job last year, but you also had your own side hustle, you can claim deductions for business expenses and the home office deduction for your own business — if you meet all the requirements. Being an employee doesn’t mean you can’t also claim the deductions you’re entitled to as a self-employed person.

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Act fast: It’s your last day to select benefits with these loyalty programs and credit cards – The Points Guy

It’s Jan. 31. Not only does that mean we’re already a month into the new year, but it’s also time to take inventory of any expiring benefits and rewards you

After a Fire Loss, Dealing with Your Insurance Company

The proper smoke and carbon monoxide (CO) alarms can mean the difference between having a home to live in – or even having a life to live at all, considering  80% of deaths from home fires that occur between 11 p.m. and 7 a.m.

Luckily, “Anna” and “Danny” were not one of those statistics, because they had a CO detector that went off early in the morning of Dec. 28, 2021.

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“It was a smoldering ceiling fire in our attic with little smoke, but which created carbon monoxide. Our Kidde CO detector woke us from a deep sleep, giving us time to call 911. Only a small bathroom and laundry area off of the kitchen were damaged,” Danny said.

“We would appreciate any guidance you can offer so we don’t do the wrong things with our insurance claim.”

Fire? Here’s What NOT to Do

I ran Danny’s important question by friends of this column, Los Angeles-based retired homeowners claims adjuster Rachel Greenberg and Karl Susman, an insurance broker and expert witness in insurance coverage issues.

Rachel: Don’t delay in calling 911 when you smell smoke or suspect there is a fire.

Consequences: This raises a suspicion of arson. Policyholders have a duty to mitigate (reduce) damages under the terms of the policy.

Karl: In addition to phoning 911, immediately report the claim to your insurance carrier.  Delay in both instances makes the entire claim suspect and may affect payment, even if  legitimate.

Rachel: Don’t fail to promptly begin making an inventory of what was destroyed or damaged. And don’t be a hero and start do-it-yourself repairs.

Consequences: Homeowners policies generally provide replacement coverage, but you’ve got to know what was lost. Unless you have date-stamped photos – showing the structure and contents of closets and drawers – the further away from the incident, your memory will suffer and you will not be paid for what you can’t prove was in your home.

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Karl: By starting to fix things yourself, you might not realize that the damage is far more extensive. If you do it on your own without approval of the claims rep, chances are that you may not be properly reimbursed.

These Things Are Giant Red Flags to Avoid

Rachel: Having a bad attitude towards the claims adjusters.

Consequences: They might drag their feet instead of moving things along quicker. This is a time to be patient and cooperative.  Their job is to help you. They aren’t your enemy!

Being a jerk, overly anxious and pushy will slow thing down.  If you insist that you need that money and you need it NOW, there is usually a problem.   Adjusters think, “Someone is in a lot of debt and sees the insurance claim as a quick way to get some cash to pay it off.”

Karl: How you react at the scene is important. Carriers receive copies of first responders’ reports. All of that information is passed on to the adjuster. They are trained to sniff out fraud, especially inflating what was lost. If a homeowner is pushy, this will make the adjuster suspicious – and a credit check will be done.

Don’t do it. Don’t pad the list of items destroyed. If caught, in some states, the insurance company can deny the entire claim.

Rachel: Abusing the “Temporary Living Expenses” section of your insurance policy by checking into the presidential suite at the Ritz-Carlton and having room service bring caviar each day for breakfast.

Consequences: “Can I stay wherever I want?” is a frequently asked question. You need to stay somewhere that is similar to where you were living before.  This does not mean a million-dollar mansion at Malibu, unless that’s where you were living before the loss.  

Approval from your adjuster – before renting an apartment or checking into a very expensive hotel – is required, or you could face a denial of payments under that section of your policy. Often insurance companies have pre-negotiated room rates with very nice properties, so it is always important to give your adjuster a chance to find lodgings for you.

Karl: You will not be rewarded for extravagant expenses. If you did not order the most expensive item on the menu every day before the fire, you are not going to be reimbursed for doing so after it.  “Is this how you and your family normally eat?” an adjuster will ask if presented with a mind-numbing bill for dining at fancy restaurants.

Thinking: “I have been paying my premiums for 20 years and you guys owe this to me!  Now is my chance to get my money’s worth,” is not the way insurance works.

It is so important to use common sense before a fire or other loss. With expensive items of jewelry, clothing, anything of unusual value, let your agent know about it, and obtain an appraisal and possibly a rider for it. 

Concluding our discussion, both Rachel and Karl stressed this final point:

“Don’t embellish, lie, rush, assume or guess.  Do not create an adversarial relationship with your adjuster. They are not your enemy!”

Dennis Beaver Practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to 661-323-7993, or e-mailed to [email protected]. And be sure to visit dennisbeaver.com.

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