Fights Over Celebrities’ and High-Profile Individuals’ Post-Mortem Rights of Publicity Highlight the Need to Protect and Consider Intangible Assets in Estate and Tax Planning

Posted on January 14, 2019 by Amanda DiChello

Nine years after Michael Jackson's death, his estate and the Internal Revenue Service are fighting over the post-mortem value of the name and likeness of the late King of Pop. The dispute has been dragging on in tax court since 2013; a decision isn't expected until mid-2019.

Among the disputes over the estate's value is the huge discrepancy in how much each side estimates Jackson's name and likeness are worth. The estate values Jackson's name and likeness at just $2,105, in light of the child molestation accusations that tarnished his image before he died. The IRS counters that the value is closer to $160 million, citing Jackson's long and very successful music career, according to The Hollywood Reporter.

Unlike Jackson's musical output and other copyrighted work, his post-mortem publicity rights are not easy to quantify. Some celebrities include their publicity rights in their estate planning, but many more do not. Complicating matters further, the law regarding rights of publicity varies from state to state.

But if an individual doesn't contemplate appropriate planning and the value of his or her right of publicity, one can expect that the IRS will bring this issue front and center when it comes time to collect the taxes on the estate, which include taxes on the value of the publicity rights. This can often lead to liquidity issues for the estate, which may not have enough liquidity to cover the tax due on the total value of all assets, including the value of the publicity rights and other assets, the value of which may not have been contemplated in the estate planning.

At the end of 2017, the IRS settled a dispute with the estate of pop superstar Whitney Houston, who died in 2012. The parties disagreed about the amount of taxes the estate owed on the value of Houston's post-mortem intellectual property rights, particularly publicity rights. Here again, the estimates varied widely, with the IRS arguing the publicity rights were worth more than $11 million and the estate saying they were worth just $200,000. The IRS and the estate reached a settlement, but did not disclose how much Houston's publicity rights were ultimately valued.

Publicity rights can generate a significant amount of money through the licensing of a high-profile individual's name, image, and voice for use by a variety of licensees and by pursuing those who infringe on the publicity rights in court, according to Harvard University Law School's Journal of Sports and Entertainment Law (JSEL).

Estimating the value of publicity rights for tax purposes is tricky, since it's not a straightforward mathematical calculation. Those valuing the publicity rights must have specialized expertise.

As an intangible asset, publicity rights can often get lost in a large estate with numerous assets and may often be overlooked altogether in valuing an individual's entire worth. So, the value of publicity rights might not be estimated until the personal representative of an estate is required to do so on tax forms. Of course, by then, the high-profile individual has no say in how his or her name and likeness are handled -- and as a result, valued.

For example, the late Prince purportedly didn't make provisions for his rights of publicity after his death and also left no will. Prince's lack of estate planning has resulted in multiple disputes and lawsuits about how his assets should be handled, including his image. Prince's image was used after his death during the 2018 Super Bowl half-time show, a post-mortem appearance that was something the singer, who died in 2016, purportedly never wanted to happen. 

On the other hand and according to JSEL, comedian and actor, Robin Williams, allegedly barred his estate from exploiting his rights of publicity for 25 years after his death. While a lot of money could have been made in those 25 years by licensing Williams' name and image, JSEL explains that the move actually saved Williams' heirs from a steep estate tax burden.

High-profile individuals' estate planning or lack thereof, illustrates how failure to make educated decisions about intangible assets like rights of publicity can leave heirs answering to the IRS and making significant unanticipated tax payments.