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Without an estate plan, tax penalties can be quite steep

Creating a will or an estate plan is something that every person will want to do if there are people, assets or wishes that he or she wants to protect. Unfortunately, many people avoid this planning or keep putting it off because it can be uncomfortable and complicated, and they fail to appreciate the consequences that may result from not having a plan.

But if you do not have any estate planning documents in place, you could be doing yourself and your family a great disservice. For instance, the tax liabilities could ultimately cost a huge portion of your assets. This is the lesson readers can take away from the situation currently facing the family of legendary musician Prince.

Reports like this one from ABC News indicate that Prince, who recently passed away from an accidental opioid overdose, had no will at the time of his tragic death. Because of this, administrators of his estate have reported that more than half of his estate could be handed over in tax liabilities.

Losing half of an estate of any size would be devastating, but in Prince's situation, as much as $150 million could be owed in taxes. This amount would be due next year. To further complicate matters, reports suggest that Prince did not leave behind that amount in liquid assets. If this turns out to be the case, Prince's property could be sold off until enough money is earned to cover the tax payments.

While you may not have an estate worth $300 million like Prince, you will probably still want to protect the assets and properties you do have. You can do this by examining many different estate planning options from setting up trusts to completing transfers. Taking these and other steps to minimize tax liabilities with your estate plan can be an effective way of ensuring you are able to pass on as much of your assets as you wish.

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