It has been several years since Michael Jakson’s death, yet his estate continues to have trouble. Anyone in El Paso who has been following the story knows that the Jackson estate has been battling with the Internal Revenue Service over just how much the estate owes in estate taxes. An important part of estate administration is determining how much the estate is worth and then paying the relevant estate taxes. Jackson’s estate is arguing that it did that, but the IRS has accused it of undervaluing the estate and, thus, failing to pay the correct amount of estate taxes.
The IRS has just filed an answer to the estate’s petition, saying the estate should have paid $700 million more in estate taxes than it already has.
So where does this gap come from? Apparently the Jackson estate claimed that his estate was only worth $9 million after all debts had been settled and the estate tax exemption was subtracted from his gross estate, but the IRS believed his taxable estate to be well over $400 million. At a tax rate of 45 percent, that would create quite a substantial estate tax burden.
While not many people in El Paso are having to deal with $700 million in estate taxes, there is an important lesson here: estate administration does not end within a few months after death. For some estates the problem may be heirs questioning a will, for others it will be a matter of settling debts and paying estate taxes. Regardless, having a lawyer in charge of estate administration will likely help to simplify some of the problems awaiting an estate after its owner’s death.
Source:Forbes, “IRS to Michael Jackson’s Estate: Who’s Bad?” Kelly Phillips Erb, Aug. 26, 2013