A recent article from Reuters found that the estate of pop music legend Michael Jackson owes $702 million in federal taxes and penalties. The main issue is the wide difference between what the estate said Jackson’s legacy was worth versus what the IRS determined was its taxable value. Here’s a further look into this issue::
- Estate taxes occur when the value of what you own when you pass away exceeds the limit set by code (currently at $5,250,000 for those who pass away in 2013 and later).
- The value of the items in your estate is set by appraisal.
- In addition, where partial interests are owned, or where there is a lack of marketability, a discount can be taken.
- The discounts are subjective.
- That appraisals and discounts are subject to challenge by the IRS.
- This can result in an increase in the estate tax as occurred in the estate of Michael Jackson.
Good planning comes from consulting professionals.Having a good estate plan includes planning for how assets will be valued and if a tax is likely, how it will be paid. Having no estate plan could result in large portions of assets disposed of at discount prices to raise funds to pay for unexpected taxes.
If you have estate tax issues (or suspect you do) please contact us for your free ½ hour consultation so that we can discuss this with you.