Not every estate can be Michael Jackson’s in terms of raw earning power, but that doesn’t mean advisors should let death separate them from their top clients’ interests.
Between Whitney Houston’s posthumous record sales and the annual release of Forbes’ top-earning dead celebrities list, a lot of advisors are reconsidering when the client relationship ends.
Houston, for example, sold an extra million records and song downloads the day the world realized she was dead and her estate is probably entitled to around 20% of that revenue.
And Michael Jackson is still earning $170 million a year, which makes him the second-biggest earner in the music industry two years after his funeral.
“Many celebrities continue to generate income long after their deaths, thanks to books, recordings or even the use of their likeness to sell products,” says Long Island estate administrator Steven Adler.
You might not have a star on your client list, but the principles apply if they have more conventional commercial interests.
Elizabeth Taylor, for example, is earning most of her posthumous income from the perfume she launched 20 years ago.
That’s the kind of business that many high-net-worth people are likely to build and leave behind.
“Most non-celebrities will not have potential income after death from songs or movies,” notes Adler.
However, “They very well might from a business or other investments they had contributed to during their lifetime.”
Income is income and trust is king
The fact is, no matter how your clients made their money, if there’s any chance that even a portion of it will outlive them, it will go on drawing income well after they’re dead.
At least, it has that potential, provided that it’s managed properly.
The stars have their agents and management companies to make sure their copyrights and royalties are taken care of. Your clients’ heirs have you to invest the liquid assets.
Provided, of course, that you’ve convinced them that you’re still the right person for the job.
Historical studies show that a disturbing 86% of advisors fail to keep the assets when a client dies -- often because there’s just no deep relationship there.
Naturally, moving the assets into a trust avoids estate tax issues and gives your client more say in how they’re used to enrich loved ones or favored causes.
The liquid assets are easy enough to assign to a directed trust, where a particular advisor is named to oversee how they’re invested.
Otherwise, there’s no guarantee that the current advisor will remain affiliated with the assets unless management rights are assigned in advance.
That’s an easy conversation to have with your clients while they’re still alive, and trust officers tell me that advisors who have that conversation usually get what they want.
Beyond that point, advisors need to know who the successor trustees will be and establish a working relationship now.
Of all the business professionals a wealthy family works with, the trustee is the least likely to be replaced when the next generation of clients takes over.
This is especially important when the money was originally made in Hollywood, the music industry or some other field where intellectual property rights continue.
For better or worse, celebrities generally appoint a relative or colleague to oversee the publishing rights and other “intangibles.”
This intellectual property is then handed back to the agent to manage, which usually works out all right.
However, estate planners who work with successful creative types stress that the more you can put in writing in the estate plan, the better.
If the current agents and business managers are doing a good job, make sure they can’t be removed just because the heirs think they can do the heavy lifting on their own.
And given the complexities of evaluating patents, trademarks and copyrights -- much less image licensing rights -- urge clients in these fields to appoint a corporate trustee with experience in these matters.
Tighten up the intangibles
Thanks to modern technology, these “intangibles” can generate a lot of money in ways that previous generations could not have imagined.
Marilyn Monroe, for example, didn’t own any intellectual property but her own image and her name.
But her estate raked in $27 million last year -- three times as much as deceased Beatle George Harrison, who still makes money every time someone buys his records or covers one of his songs.
The secret is licensing and adaptation rights. Perfume companies are paying big bucks to reedit Marilyn’s archival “footage” into all-new commercials, and the musical based on her life is moving toward Broadway.
As we’ve been saying for awhile, if modern editing techniques can theoretically let a digitized Steve Jobs “appear” at a future MacWorld, dead celebrities can go on acting, singing and pitching products.
Those revenue streams need to be at least considered in the estate plan, even if -- like Marilyn -- there’s no way to effectively profit from the “property” for decades to come.
And even if you don’t have any celebrity clients, they still have diaries, scrapbooks, even Facebook accounts that may never be worth money, but the executor should know how they should be disposed.
Remember, true superstars are rare even beyond the grave. Only 15 dead celebrities earned more than $6 million last year.
There are a lot more conventional mega-millionaires and billionaires whose liquid assets will generate a lot more money for decades to come, if not forever.
But treat them like stars and get the best deal for their children, and you may cash your own share of the paychecks for a long time to come.
Scott Martin, senior editor, the Trust Advisor. Steven Maimes contributed to the research.