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Estate planning may help to prevent post-death disputes

It was probably inevitable that Michael Jackson's estate would become embroiled in extended battles with the IRS over the value of his assets in California and elsewhere. One major sticking point is the value of Michael's name and likeness. Because these have the continuing potential to earn income, the IRS has contested the $2 million value listed by the executors. This issue may not have been amenable to estate planning protections, but other issues being fought out might have been better planned by his estate planners or perhaps better handled by his executors.

For estate tax purposes, most people will not experience tax issues. Federal taxes on an estate kick in at $5.6 million (over $11 million for married couples), and this is going higher under the new tax laws. In this controversy, the IRS claims that the artist's name and likeness should be valued at $434 million and it has assessed more than $700 million in taxes and penalties against the estate.

There has been a post-death flow of extraordinary amounts of income to his estate, complicating further the ongoing fight with the IRS. Michael's executors have apparently made a number of shrewd business deals, including various entertainment productions that have amassed a fortune in themselves. In addition, the estate took in $750 million on Michael's stake in Sony/ATV Music Publishing.

The IRS claims that these deals were foreseeable and should have been accounted for at date of death valuations. A trial on these issues was held one year ago. In Dec. 2017 the Tax Court held that the IRS could not claim certain penalties due to the failure to follow certain procedural mandates, but the remainder of the decision is not yet published. Most if not all California residents will escape such complex potential estate problems, but estate planning can help every person to lessen the burden on his or her heirs after death.

Source:, "What The IRS Means For Celebrity Estate Planning", March 4, 2018

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