Whitney Houston's estate just cut a deal with the Internal Revenue Service. The IRS originally assessed an $11 million tax bill against the estate, but settled for a mere $2.2 million. This settlement allowed both parties to avoid a costly trial.

The award-winning singer passed away in 2012 at the age of 48. Her daughter Bobbi Kristina Brown, the sole beneficiary of her estate, passed away in 2015 at the age of 22. Disputes ensued over the remaining assets between family members, including singer Bobby Brown.

Here's how the IRS dispute started. After Houston's death, the IRS determined that the estate under-reported the value of her entertainment royalties, residual income and other assets.

But Houston's estate didn't exactly agree with the IRS assessment. They argued that the assets were fairly assessed on the original estate tax return. Obviously, with millions of dollars at stake, both sides had a lot to risk if the case went to trial.

Why business owners should care.

Situations like this should always be a concern for taxpayers, especially entrepreneurs. This is not because they should fear that the IRS is going to come after their money once they pass away. It is a reminder to make sure that they do some estate planning before it is too late.

But the problem often is that business owners don't understand what an "estate" is (we'll get to that shortly). In fact, many successful entrepreneurs have significant estates because of the value of their business interests.

We have all seen instances of businesses that have never generated a profit, but have sizable valuations. The owners might "feel" poor because their businesses are not generating the cash flow they desire. But in reality, there may be a substantial estate tax problem lurking.

This is why estate planning often gets overlooked. We are all busy (or complacent) and just don't take the time to address the issue with our lawyers and accountants. Then it's too late.

What is the estate tax?

The estate tax currently applies to the "gross estate" of the deceased. This generally includes all the decedent's assets, including real estate, business holdings and other tangible and intangible property. The gross value of these items must be calculated normally through a lengthy and costly appraisal process.

But estates then get to deduct certain expenses and liabilities of the descendant. These would include loans and debts along with other nominal expenses like funeral costs, legal and accounting fees and possibly any estate taxes paid to states. The taxable estate is then calculated as the gross estate less any of these allowable deductions.

The IRS then allows a credit to be applied that exempts a significant portion of the estate. Under tax reform, the effective exemption was doubled to approximately $11 million for individuals. Any value of the estate over this amount is taxed at the top rate of 40 percent.

Had Houston passed away under current tax law, her estate would have been in much better shape. But since she died in 2012, the IRS believed it had some money coming. It was just a matter of how much.

It's difficult to understand exactly the extent of Houston's tax planning. But I suspect that she could have done a bit more to ease the pain of the estate tax. But it is too difficult to know for sure.

However, one thing we do know for sure, her tax troubles tell a story that I see often. Make sure that you commit to an estate plan, so you can mitigate any financial pain for your heirs. Ask the right questions before it is too late.