From Bloomberg BNA -- The late Aretha Franklin, the “Queen of Soul,” once again brings a nebulous legal issue into the limelight – valuing the right of publicity.
As the previous Bloomberg Tax blog titled “’Queen of Soul' Left an Estimated $80 Million Estate but Didn't Have a Proper Estate Plan” indicated, Ms. Franklin died without a will. Without a complex estate plan addressing the valuation of the use of her name, image, and likeness (right of publicity), a significant portion of her estate may be subject to tax on the postmortem right of publicity.
Right of publicity valuations are complicated because they rely on predicting future streams of income and there is no established (and tested) valuation methodology for this asset.
The definition of the asset for valuation purposes uses concepts from both trademark and copyright law. Additionally, some states recognize a port-mortem right of publicity and others do not. For example, if Ms. Franklin had died domiciled in New York, the value of her postmortem right of publicity would be nothing because New York does not recognize a postmortem right of publicity.
However, Michigan, where she was domiciled when she died, would likely recognize a postmortem right of publicity although it does not have a statutory right of publicity.
Valuation of a right of publicity is even further complicated by the fact that the law in this area is evolving rapidly. Right of publicity issues in estates came to the forefront recently with the over $400 million discrepancy between the value reported by Michael Jackson’s estate and the value assigned by the IRS. It is anticipated that the Estate of Michael Jackson case will provide some guidance on how the Tax Court will treat the right of publicity in the future.
More and more states are addressing this issue but there is no consistency across the jurisdictions. The issue is, however, garnering interest among intellectual property law practitioners. Even the USPTO recognizes that right of publicity and estate planning as being inseparably intertwined.
The valuation of the right of publicity in Ms. Franklin’s estate will also likely involve going beyond the usual future streams of income from her image rights as a musician computation. Additionally, her title, as the “Queen of Soul,” carries value and likely also involve trademark issues. Her image rights can attach to areas far beyond her profile as a musical icon.
As the first woman inducted into the Rock and Roll Hall of Fame, and as a prominent civil rights activist, she is a legend and a formidable historical figure.
Valuation of her postmortem right of publicity will likely need consideration of the value of the asset from the use of her image across various industries and in multiple contexts.
Comparables are usually used to determine fair market value of an asset and for the Estate of Michael Jackson, the IRS relied on the income generated by his estate postmortem to make the additional assessments.
However, if Ms. Franklin’s heirs decide not to exploit her postmortem right of publicity, it is difficult to conceive the “comparables” that would accurately represent the fair market value of the right of publicity, which may very well be deemed a unique asset.
By Priya Prakash Royal
