Tax Lessons to be Learned from Celebrity Estate Plans

A celebrity’s image and likeness can continue to produce considerable income after death. This type of intellectual property is considered part of your estate, and the IRS can tax its value. In the case of pop star Michael Jackson’s estate, that recently meant an IRS bill to the tune of $64.5 million, years after his death, which is about 40% of his likeness’ valuation of $161 million. We can all learn tax lessons from celebrity estate plans.

Michael Jackson’s estate planning fail could certainly have been avoided by using one of these estate-planning strategies that minimize the taxable value of a person’s image and likeness.

Robin Williams made a charitable bequest of his image and likeness to a foundation. It was set up in his name, allowing his estate to get a charitable deduction against the estate tax.

Williams also established a 25-year time ban to prevent any future exploitation of his image. A time restriction lowers the value of a celebrity’s name and likeness because the value is typically lower at the end of the ban than at the date of death.

Some states don’t recognize inheritable postmortem rights to likeness. This means the estate can’t profit from it. Consider your state’s laws when estate planning so you can benefit from any available tax breaks.