Michael Jackson’s estate has been involved in a dispute with the Internal Revenue Service for some time. The Internal Revenue Service had used an appraiser for the deceased celebrity’s estate, and the judge on the case made note that the appraiser was not necessarily credible. The appraiser, according to court documents, had lied about previously working for the IRS.
The appraisal the man gave, as a result, was rejected by the court. That could mean that the IRS will collect thousands less in estate taxes than it thought, if not more.
Trouble started in 2009
Trouble with the estate began in 2009 after Jackson’s death. The IRS and the estate had a difference of opinion on the valuation of the estate as a whole. Since 2013, this case has been caught up in the tax court.
Despite resolving most issues, three remained for the judge to rule on. Two were bankruptcy remote trusts, NHT II, NHT III. The third issue was the asset of Jackson’s image and likeness itself.
At the time of Jackson’s death, those trusts were in substantial debt. During litigation, his likeness and image were valued at $3,078,000 by the estate. The IRS did not agree and valued it at $161,307,045. That’s a shocking difference, but the IRS did not do well in the case, because the judge determined it was closer to $4,153,912. Although the two trusts did contain significant assets, they were not enough to cover the debts owed.
The estate will still need to cover estate taxes, which were set at around 45% in 2009.
This case is interesting because it shows how complex settling an estate can be after someone passes away. Even celebrities can have complex finances, and trying to put a value on their image and estate can be difficult.
Don’t delay your own estate planning
No two estates are the same. If you haven’t started planning your estate, looking at situations like this should spur you to do so. Preparing in advance can help you avoid tax-related issues with the estate, so your family can settle it quietly in the future following your death.