Death and taxes; the two constants in life. There has been significant discussion in the past few years over the one tax that is itself most closely tied to death: the estate tax. At the federal level, the President and Congress have debated the exact rate of the the tax and at one point it should kick in.
But once those details are set, it is still not entirely easy to determine what one’s total estate tax bill is. That is because most individuals have assets whose value is hard to gauge. It would be straightforward if all of one’s wealth was in a bank account with a set balance or stocks with a clear value.
That’s not how it works in the real world, however. Instead, many have assets that must be “valued” before added to a tax bill. Who does the valuing and what decisions they reach may ultimately have significant effects on how much of an estate goes to Uncle Sam. As you might imagine there is frequently considerable disagreement regarding this matters.
The MJ Example
For example, Bloomberg News is reporting that Michael Jackson’s estate is challenging the estate tax bill which the IRS calculated. The estate claims that some assets were overvalued, leading to a requested payment in excess of what should have been owed.
The process has included some back-and-forth. First, the estate hired its own appraisers to value everything in the estate. Then, based on those appraisals, the estate paid the estate taxes that were due. Later, the IRS issued a “notice of deficiency.” This is the government’s way of claiming that the estate didn’t pay enough and owes more. In response, attorneys for the estate have fired back, filing their own suit challenging the notice of deficiency.
The court filing lists many different assets that the estate claims were overvalued by the IRS. This includes real estate, automobiles, Jackson’s share of a business, items in two trusts, and smaller personal property. In addition, there are disagreements about how much the singer’s “image and likeness” are worth as well as the value in a “contingency non-appearance and cancellation” policy which was part of a scheduled concert series.
In short, there is a lot of room for conflict here, and with so much money ultimately at stake, this estate tax dispute will likely rage on for some time. It is yet another reminder of the critical need for experienced estate planning help both before and, sometimes, after a passing.