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Estate tax considerations for people with valuable images

On Behalf of | Mar 23, 2017 | Estate Taxes

Artists and celebrities in Georgia might want to consider the value of their images or likenesses when making an estate plan. The image of someone who earned a living as an entertainer or was famous might continue to be profitable after death, and estate taxes could apply to that after-death value.

Consider the example of Michael Jackson. The Internal Revenue Service took Jackson’s estate to court because it valued Jackson’s estate at $161 million. Representatives for the estate, however, insisted that his image was only worth $2,105 at the time of his death because of scandals about child abuse. The IRS chose to value his estate based upon the surge in revenue produced posthumously from the pop star’s image. The agency expects the estate to pay $64.5 million in taxes.

This case has inspired estate planners to consider methods for sheltering an image from estate taxes. The late Robin Williams adopted a couple of approaches to limit taxes. He donated the rights to his name and image to a charitable foundation, which achieved a 100 percent deduction. He also placed a 25-year time ban on exploitation of his image. This strategy removes it from the marketplace for a time, which could erode its value. Another strategy that people with valuable images might consider is to establish residency in a state that does not recognize postmortem rights to images as inheritable.

People who are concerned about how estate tax could affect heirs might discuss the challenge with an attorney. A review of the estate’s value by the attorney could determine what liability there might be. To limit tax exposure, an attorney could suggest strategies for discounting the value of certain assets or transferring them to beneficiaries in a trust.