Michael Jackson estate battles IRS over image rights

On Behalf of | Mar 27, 2017 | estate tax, Firm News

Music fans in North Carolina and around the country may be interested in learning about some recent developments concerning his legacy. The legendary performer’s reputation had been badly damaged by child abuse allegations when he died, which prompted his estate to place a value of only $2,105 on his likeness and image rights. Jackson’s music has remained extremely popular despite the controversy, and Forbes now lists the iconic entertainer as one of the highest-earning deceased celebrities.

Postmortem image rights are a new and growing area of probate law, and the Internal Revenue Service expects estate taxes to be paid on this income. The agency says that Jackson’s image rights are worth $161 million, and they have filed a lawsuit against the deceased singer’s estate demanding 40 percent of this figure. While the outcome of that case remains uncertain, there are steps that other celebrities can take to prevent their estates from being subjected to similar litigation.

Robin Williams took a proactive approach when he drafted his estate plan, and one of his most prudent moves was passing his image rights to a charity. He also reduced the value of his image and likeness by placing a 25-year ban on their use. Celebrities who take this path reap the added benefit of providing their estates with a valuable estate tax deduction.

Attorneys that specialize in estate planning and administration may be able to suggest other ways of dealing with postmortem image rights. They could advise that clients use defective grantor trusts and family limited partnerships so that the value of these assets can be discounted for tax purposes. Lawyers may also recommend that a someone establish his or her primary residence in a state that does not recognize these rights. They could also seek to have image rights reappraised when the IRS and estate are unable to reach an agreement.