Death and Taxes: Big IRS Bill Looms for Michael Jackson’s Estate

It seems like every time you turn on CNN or check Google News there is another story about Michael Jackson. However, when I came across this article from the Associated Press with the tagline “the Tax Man is in the mirror for the estate of the late King of Pop” it caught my interest. The story claims that Jackson’s estate could end up owing more then $80 million to the IRS.

“To settle his tax bill, the executors of his estate may have to sell or borrow against lucrative but hard-to-value assets or ask the IRS for a multi-year extension. That could allow the estate to pay the tab over time with earnings from Jackson's share in rights to songs by the Beatles and his own music — prized properties whose value will likely make the estate's tax bill only bigger.”

"The government is not going to take a Beatles record as payment. They want to be paid in cash," said Roy Kozupsky, a veteran estate lawyer in New York who has worked on behalf of several wealthy clients.

“Given the convoluted nature of Jackson's finances, coming up with the cash won't be easy. Technically, the tax bill is due nine months after the date of death. In special cases, estates can spread out the payments for a period of up to 14 years. Once paid, the tax bill could dramatically shrink the inheritance passed on to the pop star's heirs — his 79-year-old mother and three children.”

To learn more about how estate taxes are calculated, check out this entry I posted in June titled “Everything you Need to Know About Taxes After Death.”

Mayor’s Office: Jackson Memorial Cost L.A. Taxpayers $1.4M

From CNN.com:

The memorial service for singer Michael Jackson cost the city of Los Angeles $1.4 million, the mayor’s office said Wednesday.

Spokeswoman Sarah Hamilton said the costs included putting extra police on the streets, trash pickup, sanitation, traffic control and more for the Tuesday event.

Three thousand police officers — almost one-third of the Los Angeles police force — were on hand to ensure the Jackson events proceeded smoothly, Los Angeles Assistant Police Chief Jim McDonnell said Tuesday.

The city, which is $530 million in debt, set up a Web page asking Jackson fans to donate money to help with the expenses.

On Tuesday morning, hundreds of donors contributed more than $17,000 through the Web site. But then, the high volume of traffic caused it to crash frequently and for long periods of time, the mayor’s office said.

The city, therefore, was unable to collect contributions for several hours on Tuesday. The site also crashed for 12 hours, beginning at 8 p.m. Tuesday — and again, periodically throughout Wednesday morning, the office said.

The Los Angeles City Attorney Carmen Trutanich does not want taxpayers to pay a penny for the service, his spokesman said Wednesday.

“The city attorney does not want something like this happening again, the city paying (the initial costs) for a private event,” said spokesman John Franklin. “That’s especially in a cash-strapped city, where people have been furloughed or even lost jobs.”

Michael Roth, spokesman for AEG — which own Staples Center and put on the event — could not be reached for comment

Will Or Trust? Understanding The Differences

Earlier today I came across this new Associated Press article on the differences between a will and a trust. Candice Choi, the article’s author, points out that after Michael Jackson death, questions about his will have sparked thousands of questions about wills and trusts in general. Choi provide several helpful answers to some of these common questions, and I highly recommend anyone confused about Wills check it out.

One of the big mysteries in the chaotic days following Michael Jackson's death was whether he left behind a will.

After initially stating the entertainer likely died without one, the superstar's family reversed course and produced a 7-year-old will this week.

The five-page document filed in court simply transferred Jackson's estate into a family trust, leaving a slew of questions unanswered about the King of Pop's finances.

The setup is common in California and numerous other states, where trusts are used in place of wills partly as a way to avoid court proceedings and keep financial matters private. There are other reasons to set up a trust rather than a will.

A will generally spells out a one-time distribution of assets, while a trust can stipulate that assets are distributed over time. So if you have young children, a trust could see that they get their inheritance in installments upon certain milestones, such as a birthday, graduating college or marriage.

Once the document you pick is drawn up, be sure to let family members or those named in the trust or will know where to find it. Anybody who has possession of your will — often your attorney — is obliged to file it in court upon your death.

It's common to leave copies of trusts with your attorney or designated trustees, said Akers, who is also chairman of the real property, trust and estate law division at the American Bar Association.