Three Property Planning Classes From Prince – New York Property Planning Lawyer Weblog – Feb 18, 2021

The estate planning dispute that followed Prince death 2016 re-entered after the Internal Revenue Service determined that Prince’s estate was worth approximately $ 163 million, or double what Prince’s estate agents listed on his estate tax return. This difference resulted in approximately $ 39 million in penalties and interest being levied on Prince’s estate.

This discrepancy isn’t the first time a deceased celebrity’s estate has been undervalued. For example, after Michael Jackson’s death in 2009, officials claimed that a resemblance to Michael Jackson was worth $ 2,105. The artist’s net worth had plummeted in the years prior to his death due to child abuse claims. Michael Jackson’s estate has also been reported to be insolvent, estimated to be worth $ 236 million with debts of approximately $ 500 million. The Internal Revenue Service later disagreed, however, rating Michael Jackson’s likeness at approximately $ 435 million. Michael Jackson’s estate later denied this assessment and the case is pending.

What happens next with the valuation of Prince’s estate will be decided by the US tax court. This article discusses only two important lessons everyone should understand about real estate property valuation.

# 1 – It is difficult to predict the valuation of assets

Valuing assets is an abstract art and is not based on set principles. The value of an asset is defined as the price a potential buyer is willing to pay a potential seller, provided that both the seller and the buyer have adequate knowledge of the asset and are not subject to undue pressure.

Valuation of assets in a person’s estate is also often a difficult process because people are unfamiliar with the process. One of the best ways to ensure that you have fully disclosed assets in an estate is to get the assistance of a qualified, independent appraiser who can provide a valuation report on the nature of the property.

# 2 – Understand the value of well-written estate plans

The best-written inheritance plans can help minimize the time that assets go through inheritance proceedings. The best-written estate plans can also go a long way in minimizing an estate’s tax liability, or at least providing some predictability about how taxes will be applied to an estate.

# 3 – Beware of the penalties involved

In addition to the substantial taxes that may be incurred on an Internal Revenue Service audit, Internal Revenue Code Section 6663 creates penalties for taxpayers who undervalue assets in estate and gift tax returns. The size of these penalties is based on a percentage of the difference between the final value and the value originally reported on a tax return. There is no penalty if the value per tax return is more than 65% of the final value.

Speak to a knowledgeable estate planning attorney

Managing an estate is not an easy process even if your loved one’s estate is much smaller than Prince’s. One of the best things you can do to resolve the various estate planning problems that you may encounter is to contact a knowledgeable estate planning attorney. Plan a free case assessment Ettinger estate planning today.