What is someone worth?
It is the fundamental question for attorneys and other professionals advising high net worth clients on portfolio management and estate planning. The bulk of assets they typically consider are tangible – cash, stocks and bonds, real estate, art and other valuables.
However, celebrity and entertainment clients present a twist on this traditional mix. Their most valuable, long-term asset may be their images. The current and potential income from commercial use of personal images may outstrip the worth of more tangible assets.
A celebrity’s personal brand can be worth hundreds of millions of dollars. What has come to be called likeness valuation must be thoroughly considered in estate planning, lest beneficiaries face huge, unexpected tax bills.
Likeness valuation has become increasingly prominent as marketing avenues have grown and celebrities attach themselves to more products.
“Part of what you own is the value of the stress and effort that went into a personal brand,” said Paul DeLauro, senior vice president and manager of wealth planning at City National Bank. “That personal brand has value and the IRS will tax that value. This is very true within the entertainment/celebrity industry.”
Consider the recent case of entertainer Michael Jackson, who died in 2009. Heirs reportedly valued Jackson’s likeness at just $2,000, but the IRS said the estate would have to pay taxes on a likeness worth more than $430 million.
Although analytics are playing a larger role in many areas of wealth management, there is presently no standardized way of calculating likeness valuation. “The valuation answers itself,” said Schuyler Moore, a nationally renowned entertainment attorney and author of Taxation of the Entertainment Industry. “It’s whatever we can get from the marketplace.”
Moore is frequently asked to weigh in on infringement issues. He determines if an entertainment or marketing firm should compensate an individual for using their image. These situations are often not clear-cut, sometimes raising First Amendment and trademark issues and an individual’s right to control the use of their image. Some states and countries do not protect an individual’s likeness rights. For example, when Princess Diana died in a car accident in 1997, UK law did not prevent the use of her image.
“If it’s infringement, you have to negotiate a deal.” Moore said.
DeLauro says that a team of experts, including a financial planner, lawyer and accountant can best serve a high net worth, celebrity. They possess a strong understanding of issues, including likeness valuation.
“If you are a family of means, you need a team that can build a detailed, comprehensive plan that can handle your estate needs,” DeLauro said. “For a celebrity part of that is completing a likeness valuation.”
For more information on estate planning, call (800) 773-7100.
This story was featured in The Hollywood Reporter.
|City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. The effectiveness of the strategies presented in this document will depend on the unique characteristics of your situation and on a number of complex factors. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. The strategies presented in this document were not intended to be used, and cannot be used for the purpose of avoiding any tax penalties that may be imposed. The strategies were not written to support the promotion or marketing to another person of any transaction or matter addressed. Before implementation, you should consult with your other advisors on the tax, accounting and legal implications of the proposed strategies based on your particular circumstances.|