AP

A judge is holding a hearing in Los Angeles this morning which may determine if the 2002 will submitted to the court last week is THE will for Michael Jackson. If it is, the judge may rule whether to take authority over the estate from Jackson's mother, Katherine, and give it to the co-executors mentioned in the will, John Branca, a long-time Jackson attorney, and John McClain, a music executive. We have a producer in the courtroom and will update you with any decision.

"The executors or trustees have their work cut out for them," says Randy Godshall of Sheppard Mullin, a veteran estate planning attorney in Los Angeles who has dealt with several high net-worth clients. For one thing, the executors do not have a true idea of the value of the estate. In an attachment to the will, the executors estimated the estate's value as worth "at least $500 million", most of it illiquid. But sources tell me not to attach too much emphasis to that figure. It's more of a placeholder, until the real value is determined.

What about the taxes? Under federal law, estates worth more than $3.5 million must pay a 45 percent estate tax to the IRS, in cash, within nine months of the date of death. California repealed its own inheritance tax in 1982, thanks to Howard Jarvis. There is a mention in Jackson's will of an insurance trust for the estate, at least through 2003. An insurance trust is an account held outside the estate which you pay into to cover death taxes when you die. After the first $1 million into the insurance trust, you are taxed (while still living) at the gift tax rate, which just happens to be 45 percent, same as the death tax.

Did Michael Jackson, in fact, have an insurance trust to cover the estate taxes? If so, was the policy large enough to cover what may be a huge tax bill? Sources tell me that is still being investigated. If there isn't enough money to cover the taxes, Godshall says it's "a virtual certainty" that the executors may be forced to sell assets, including the lucrative Sony/ATV song catalog, to pay the IRS cash.

"The worst case scenario is that assets are subject to fire sale types of liquidity events, so that the hundreds of millions of dollars of potential value isn't realized," says Godshall, "which, of course, then leaves a lot less for the children." However, executors could file for an extension with the IRS, and even, perhaps, set up a payment plan over the next ten years to pay the taxes with new revenues coming into the estate. "The IRS would understand that you don't want to kill the golden goose by having to force (the catalog's) sale," Godshall says. "When Elvis died, his estate was also in dire straights, and the date of death value, I understand, wasn't all that substantial. But through good post-death management and commercial exploitation of his public image, it's a money making machine. I would anticipate we'll see the same thing with Mr. Jackson and his estate."

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