Creative Estate Planning: Robin Williams
Currently, the federal tax code imposes an estate tax on any gross estate valued over $5.45 million, requiring estate planners to come up with creative and innovative legal ways to bypass this potentially crippling tax liability. Recently, much buzz has centered on charitable deductions. Specifically, amounts left to charitable organizations qualify for a charitable deduction, which allow every dollar donated to a qualifying charity to be deducted from the estate tax owed. Thus, $1 million can be deducted from the estate tax owed if there is a $1 million donation. While there is no limit on how much can be donated, one cannot donate more than the estate taxes owed in hopes of a tax refund or any other benefit.
Estate planners use this exemption to either lower the gross estate so that it falls under the threshold $5.4 million (which cancels out the estate tax altogether), or reduce estate taxes owed by $1 for every dollar donated up to the total amount owed. For example, Robin Williams left the rights to his name, image, and likeness to the Windfall Foundation, a charitable organization set up by Williams’ legal representatives. Additionally, he restricted the exploitation of these rights for the first 25 years following death, likely in hopes of rendering a $0 or low valuation of his publicity rights at the time of death, and thus avoiding a high estate tax on this value. It will be interesting to see if the IRS recognizes or challenges Williams’ restricted disposition of his publicity rights.
The right of publicity can and has been viewed as a form of marital property analogous to professional goodwill. To the extent that the right of publicity values in celebrity identity are the results of efforts during marriage, such values must be accounted for in a distribution of marital property after divorce or dissolution of a marriage. While this presents difficult valuation issues as the right of publicity is apportioned out as marital “property,” CMG has consulted and provided valuations in connection with Simpson to Dwyane Wade.
It remains to be seen how the IRS will treat inter vivos dispositions of a celebrity’s right of publicity as a community property asset. Generally, in community property states, the value of a celebrity spouse’s right of publicity can be argued to be an asset of the community, to be divided up upon dissolution. However, it has been argued that requiring a celebrity to pay support based upon a presumed earning level and to buy that same earning capacity from the community as an asset is improper as “double dipping.” The California Court of Appeals came close, but did not have to reach a decision as to whether the California postmortem right of publicity became community property as part of Bing Crosby’s estate. Though the court did speculate in dictum that the California statute seems to treat the publicity right as separate property, which would create an exception to the provision in Cal Probate Code §760 which notes that all property acquired during marriage is community property except as otherwise provided by statute. In an estate valuation context then, another creative way to lower the value of a celebrity decedent’s right of publicity value could lie in the inter vivos categorization/encumbrance of the right as community property belonging to the surviving spouse.