I recently came across an interesting New York Estate Planning Blog, which attempts to address the valuation of intangible property in relation to the payment of estate administration tax.
Although it is rather straightforward that estate trustees are required to value assets of a deceased person, and pay taxes on those assets, the issue posed by the blog is, whether intangible assets are included in the payment of estate administration taxes, and if so, how a valuation is reached.
In Ontario, intangible property is deemed to be owned by the deceased at the time of death, and is therefore included in the calculation of estate administration tax. This has been made clear by the Ministry of Finance.
Valuing intangible property appears to be less clear though. Apparently, in the USA, disputes have arisen between estate trustees and the Internal Revenue Service (IRS), over the valuation of intangible assets, and to the amount of estate administration tax paid.
This dispute seems to be highlighted by the valuation of publicity rights. For example, the estate trustees of Michael Jackson’s estate have valued his estate at $2,105.00, whereas the IRS has attributed a value of $1.125 billion – therefore alleging that an additional $702 million is owned in estate administration tax (based on taxes and penalties). According to the LA Times, most of the dispute is over the price attributable to the King of Pop’s image, and his interest in a Trust which includes the ownership of Beatles songs, including Yesterday, Get Back, and Sgt. Pepper’s Lonely Hearts Club Band.
While most Ontario residents will not be burdened with valuing publicity rights, it is nonetheless important to consider the inclusion of assets, including intangible assets, in calculating estate administration tax, and that a proper valuation is obtained. Otherwise, in reviewing the payment of estate administration tax paid, the CRA may not ‘Let it Be’.