Substantial or complicated estates can present a host of challenges during probate. Disputes can arise regarding valuation, ownership and distribution. And without an estate plan to provide direction and clarity, the process can be even more complicated.
The estate of music legend Prince is one example of the myriad issues that can arise during the distribution of a sizable estate, especially when a person dies without a will.
Valuations under fire
Valuing assets in an estate is not an exact science. Different parties can come up with different calculations when determining the value of an estate. And things only get more complicated when an asset is unique or especially valuable.
Records reveal that at the time of his death, Prince owned:
- Real estate properties
- Intellectual property rights
- Art and design work
- Car collections
- Gold bars
The size and nature of these assets have reportedly led to a discrepancy of $80 million in valuations, or about 50 percent of the total value. The IRS estimates his estate’s value at $163.2 million; the estate administrator estimates the value at $82.3 million.
The IRS alleges the administrator has undervalued the estate and is seeking additional taxes and penalties to reflect the inaccuracy.
However, the administrator backs its valuation, asserting that the IRS’ calculations are “riddled with errors.”
Resolving valuation issues
When there is a dramatic difference in valuations of an estate, parties can expect to go through the legal system to secure a resolution. As such, the road to administering and closing out an estate can be lengthier and more expensive.
Creating an estate plan can make things easier for the administrators and others by creating a comprehensive and accurate inventory of their assets. Hiring a qualified appraiser can also help to provide a framework for valuations.
However, valuation disputes can arise despite the best efforts of testators and administrators. Legal guidance and support can be crucial in avoiding the costly fallout of valuation mistakes in these situations.