I am pleased to announce I have been interviewed by Financial Advisor Magazine on Celebrity Estates Tax Issues.
Failure to properly value a celebrity’s image and likeness and to plan for who will be the beneficiary of any related earnings after death, opens the door to the tax collector and the courtroom, experts say.
“Rich people have to worry about tax audits that survive their deaths, because liens will get filed, and lawsuits,” says Gary S. Wolfe, a Beverly Hills-based tax attorney.
Celebrities may avoid many of the image and likeness tax pitfalls by creating an irrevocable trust, transferring their intellectual property rights through a corporation established to receive the income from those rights, and then declaring a gift, according to Wolfe. If the gift is valued at less than $5.43 million, it is not subject to current federal estate or gift tax, and any appreciation in the value will be free of federal estate and gift taxes and shielded from creditors as part of an irrevocable trust. When structured properly, the image and likeness royalties can pay for the sale of other estate assets and deliver a significant income and estate and gift tax savings.
The primary concern is protecting assets from both taxes and litigation, says Wolfe, who noted that almost 100,000 lawsuits are filed every month in California alone.
“If you’re rich, you can get sued, and plaintiffs’ lawyers look for deep-pocketed defendants. They don’t care what the claims are, they just care who the source of recovery is,” he says. “If you’re dead, that lawsuit goes against your estate assets and no distributions can be made until that lawsuit or tax lien is resolved.”
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