Estate Tax Avoidance Is Not Always a Girl’s Best Friend

8:54 pm Asset Protection, Estate Planning, Probate, Wills

marilyn monroe 150x150 Estate Tax Avoidance Is Not Always a Girl’s Best FriendThe public’s fascination with Marilyn Monroe continued last month when the 50th anniversary of her death on August 5 was marked with many tributes.  Three weeks later, the Ninth Circuit Court of Appeals handed down its decision in a case regarding whether Monroe’s publicity rights passed to her estate.

The case – Milton H. Greene Archives, Inc. v. Marilyn Monroe LLC – is an estate planning lesson in long-term benefits vs. short-term gain.  Monroe’s executor, now-deceased New York attorney Aaron Frosch, probated her will in New York and represented her domicile in other probate proceedings over the years as New York, mainly to avoid California estate taxes.

The Monroe will’s residual clause distributed the bulk of her estate to her acting coach Lee Strasberg.  He died in 1982, leaving his share of Monroe’s estate to his wife, Anna Strasberg.  After Monroe estate executor Frosch died in 1989, a Surrogate’s Court appointed Anna Strasberg executor of the Monroe estate.  In 2001, the Surrogate’s Court settled the estate and authorized it to transfer all remaining assets to Marilyn Monroe LLC, a newly formed Delaware LLC managed by Anna Strasberg.

In 2005, Marilyn Monroe LLC sued Milton H. Greene Archives in Indiana for violation of Monroe LLC’s rights by using Monroe’s image and likeness for unauthorized commercial purposes.  Greene countersued, arguing that Monroe LLC does not own Monroe’s right of publicity.

In 2007, the district court granted summary judgment in favor of Milton Greene, concluding that, at the time of Monroe’s death in 1962, the states of New York, California and Indiana did not recognize “a descendible, posthumous right of publicity.” Acknowledging that “California created a descendible, posthumous right of publicity in 1984, with the passage of its postmortem right of publicity statute,” the district court held that as of 1962, applying either New York or California law, no right of publicity could have passed through Monroe’s will, reasoning that Monroe “had no testamentary capacity to devise, through the residual clause of her will, statutory rights of publicity that were not created until decades after her death.”

This decision led to the passage in California of SB 771, when amended the Civil Code to provide that the California statutory right of publicity is deemed to have existed at the time of death of any deceased personality who died before January 1, 1985; is a property right, freely transferable and descendible; and, in the absence of an express testamentary transfer, could pass through the residual clause in the will of the deceased personality.

Based on the new California law, Monroe LLC sought reconsideration of the district court’s ruling in favor of Milton Greene in 2007, now saying that Monroe was domiciled in California and that California laws should prevail.  The district court again granted summary judgment to Milton Greene, reasoning that principles of judicial estoppel precluded Monroe LLC from advocating that Monroe was domiciled in California when she died.

As the appeals court noted in its decision to affirm the district court’s ruling:

This is a textbook case for applying judicial estoppel. Monroe’s representatives took one position on Monroe’s domicile at death for forty years, and then changed their position when it was to their great financial advantage; an advantage they secured years after Monroe’s death by convincing the California legislature to create rights that did not exist when Monroe died. Marilyn Monroe is often quoted as saying, “If you’re going to be two-faced, at least make one of them pretty.” There is nothing pretty in Monroe LLC’s about-face on the issue of domicile.

By claiming New York as her domicile to avoid California estate taxes, Monroe’s estate lost out on significantly greater earnings via publicity rights.  The lesson?  Having your estate plan revolve solely around the avoidance of estate taxes is not always the prudent path.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

 

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