1 00:00:05,939 --> 00:00:08,609 >> MARY BONEY DENNISON: Welcome, everybody. I'm Mary Boney Denison, the 2 00:00:08,609 --> 00:00:12,145 Commissioner for Trademarks from the U.S. Patent and Trademark Office. We 3 00:00:12,145 --> 00:00:17,150 have a fabulous panel here for you today. We are really excited to hear 4 00:00:19,253 --> 00:00:24,591 all our speakers on the postmortem right of publicity. I'm going to 5 00:00:24,591 --> 00:00:30,964 introduce them in alphabetical order. So we start with Kareem Abdul Jabbar, 6 00:00:30,964 --> 00:00:34,101 the greatest basketball player in history, as everyone knows. (Applause) 7 00:00:34,101 --> 00:00:37,971 When he retired from the NBA after player a record 20 seasons as well as 8 00:00:37,971 --> 00:00:39,973 setting the records for points scored, games played, minutes played, blocked 9 00:00:39,973 --> 00:00:41,975 shots and defensive rebounds, he was also a record six time NBA most 10 00:00:41,975 --> 00:00:44,745 valuable player, a record 19 time NBA All-Star, 15 time All NBA selection 11 00:00:44,745 --> 00:00:50,083 and 11 time NBA all defensive team member. Wow! Don't know how you can 12 00:00:50,083 --> 00:00:55,088 even remember all that. But since retiring from the NBA, he's been 13 00:01:17,511 --> 00:01:22,482 active as an education advocate, writer of social commentary, novels, 14 00:01:22,482 --> 00:01:27,554 history books. He's written 15 books including his most recent New York 15 00:01:27,554 --> 00:01:32,426 Times best seller Coach Wooden and Me, Our 50 Year Friendship On and Off the 16 00:01:32,426 --> 00:01:38,165 Court and Becoming Kareem, Growing Up On and Off the Court. Mr. Abdul Jabbar 17 00:01:38,165 --> 00:01:42,769 also produced a documentary adaptation of On the Shoulders of Giants, which 18 00:01:42,769 --> 00:01:49,242 won an NAACP award. And of particular interest to this audience of IP 19 00:01:49,242 --> 00:01:53,880 lawyers is his book entitled What Color Is My World, The Lost History of 20 00:01:53,880 --> 00:01:58,952 African American Inventors. And if that weren't enough, in October he has 21 00:01:58,952 --> 00:02:04,691 a novel coming out called Mycroft and Sherlock. So he has been quite busy. 22 00:02:04,691 --> 00:02:10,864 In 2016, President Obama awarded him the Presidential Medal of Freedom, the 23 00:02:10,864 --> 00:02:16,236 country's highest honor for civilians. He also is an award winning columnist 24 00:02:16,236 --> 00:02:20,807 for the Hollywood Reporter and the Guardian. Along with his writing, he 25 00:02:20,807 --> 00:02:24,778 is a highly sought after public speaker so thank you for joining us 26 00:02:24,778 --> 00:02:29,783 today. (Applause) We are also really lucky to have his business manager Deb 27 00:02:36,056 --> 00:02:41,328 Morales on the panel. Ms. Morales is a successful businesswoman who bounces 28 00:02:41,328 --> 00:02:46,466 her busy careers as a CEO, an award winning movie producer and business 29 00:02:46,466 --> 00:02:52,239 manager for Kareem Abdul Jabbar. As Founder and CEO of Iconomy Multimedia 30 00:02:52,239 --> 00:02:56,443 & Entertainment, Ms. Morales has been helping professional athletes go from 31 00:02:56,443 --> 00:03:02,282 success to significance by creating a plan to ensure financial stability 32 00:03:02,282 --> 00:03:07,254 while they pursue their post-playing dreams. She has also produced two 33 00:03:07,254 --> 00:03:11,625 highly acclaimed documentaries, On The Shoulders of Giants and Kareem, 34 00:03:11,625 --> 00:03:17,497 Minority of One. As Kareem's Business Manager, she has helped him realize 35 00:03:17,497 --> 00:03:21,968 his dream of becoming a successful writer of novels, history books, 36 00:03:21,968 --> 00:03:25,639 political commentary and screenplays. She is currently writing a book 37 00:03:25,639 --> 00:03:29,609 herself about the challenges of being a business manager called The 38 00:03:29,609 --> 00:03:34,614 Accidental Manager. Please join me in welcoming Deborah. (Applause) On the 39 00:03:39,653 --> 00:03:44,558 legal side, we are really lucky to have two distinguished experts in this 40 00:03:44,558 --> 00:03:49,729 area. We have Jennifer Rothman and Priya Royal. Jennifer Rothman is a 41 00:03:49,729 --> 00:03:54,868 Professor of Law at Loyola Law School in LA and she is an Elected Member of 42 00:03:54,868 --> 00:03:58,939 the American Law Institute and an affiliated Fellow at Yale Law School's 43 00:03:58,939 --> 00:04:02,776 Information Society Project. She is nationally recognized for her 44 00:04:02,776 --> 00:04:07,447 scholarship on intellectual property and constitutional law and her website 45 00:04:07,447 --> 00:04:12,119 Rothman's Roadmap To The Right of Publicity is the go-to place for right 46 00:04:12,119 --> 00:04:16,389 of publicity questions and news. Her latest book, The Right of Publicity, 47 00:04:16,389 --> 00:04:19,559 Privacy Reimagined for the Public World was published this year by 48 00:04:19,559 --> 00:04:23,997 Harvard University Press. She received her AB from Princeton University and 49 00:04:23,997 --> 00:04:29,436 an MFA from the University of Southern California School of Cinematic Arts. 50 00:04:29,436 --> 00:04:34,207 She also used to work in the film industry before attending law school 51 00:04:34,207 --> 00:04:38,945 at UCLA where she graduated first in her class. She clerked at the Ninth 52 00:04:38,945 --> 00:04:43,116 Circuit, was an entertainment and intellectual property litigator at 53 00:04:43,116 --> 00:04:47,521 Irell and Manella and then she went on to become a law professor. So please 54 00:04:47,521 --> 00:04:52,526 join me in welcoming Professor Rothman. (Applause) And last but 55 00:04:55,729 --> 00:05:01,568 certainly not least, Priya Royal is the Tax Law Editor in the Estate Gift 56 00:05:01,568 --> 00:05:07,674 and Trust Group at Bloomberg BNA. She was formerly an estate tax attorney at 57 00:05:07,674 --> 00:05:13,113 the Internal Revenue Service where she examined high and ultra-high net worth 58 00:05:13,113 --> 00:05:17,717 estates and also worked on training course materials for incoming estate 59 00:05:17,717 --> 00:05:22,722 tax attorneys. She has a JD and an LLM in taxation from Villanova University 60 00:05:25,492 --> 00:05:30,797 School of Law and she has been a panelist on a number of webinars and 61 00:05:30,797 --> 00:05:37,470 seminars over the years, most recently addressing the 2017 tax reform. She 62 00:05:37,470 --> 00:05:41,374 has also been in private practice in trust and estates and tax law 63 00:05:41,374 --> 00:05:45,879 representing a variety of clients from New York to DC for over a decade. In 64 00:05:45,879 --> 00:05:49,416 addition to tax law, she has also represented clients on trademark and 65 00:05:49,416 --> 00:05:53,119 copyright issues, especially as they relate to estate planning and 66 00:05:53,119 --> 00:05:58,358 valuation. She is admitted to practice in five states. It's amazing. So 67 00:05:58,358 --> 00:06:03,296 without further ado, let's welcome Priya. (Applause) I'm going to ask 68 00:06:08,368 --> 00:06:13,373 Professor Rothman to kick us off. Thank you, all. >> JENNIFER ROTHMAN: I 69 00:06:17,877 --> 00:06:21,615 think I might be the shortest person on this panel so excuse me for 70 00:06:21,615 --> 00:06:26,186 adjusting the mic. Thank you for that introduction and for inviting me to 71 00:06:26,186 --> 00:06:30,056 share my expertise with you this morning and to be part of this 72 00:06:30,056 --> 00:06:34,394 incredible event on trademark law, which is near and dear to my heart. 73 00:06:34,394 --> 00:06:38,365 It's actually the first subject that I taught when I first became a law 74 00:06:38,365 --> 00:06:43,270 professor. We have a short time together for an enormously complex 75 00:06:43,270 --> 00:06:47,207 issue or set of issues and we're only going to scratch the surface of them 76 00:06:47,207 --> 00:06:51,611 here today. My goal is to set the stage for the discussion that follows 77 00:06:51,611 --> 00:06:55,815 and for Ms. Royal's comments, more specifically about tax law and to 78 00:06:55,815 --> 00:07:01,655 provide some guidance for all of you as attorneys, as managers and as 79 00:07:01,655 --> 00:07:05,625 agents and most importantly for the very individuals whose identities may 80 00:07:05,625 --> 00:07:10,096 be at issue in these sorts of cases. So I'm going to focus on two primary 81 00:07:10,096 --> 00:07:15,068 topics today. The first is the overlapping set of legal entitlements 82 00:07:15,068 --> 00:07:18,571 that apply to the dead, which are not just the right of publicity and in 83 00:07:18,571 --> 00:07:21,875 fact there's a lot of confusion because they're often collapsed. The 84 00:07:21,875 --> 00:07:24,678 second topic I'm going to focus on is more about the right of publicity 85 00:07:24,678 --> 00:07:28,782 which people know the least about and talk about some of the challenges for 86 00:07:28,782 --> 00:07:33,787 having postmortem after death rights in the identity of a deceased person 87 00:07:35,855 --> 00:07:40,760 and they vary quite widely from state to state. So first as a preliminary 88 00:07:40,760 --> 00:07:44,331 matter, I want to consider the question posed by the session itself, 89 00:07:44,331 --> 00:07:49,469 who owns you when you are dead? We're not talking about dead bodies here. 90 00:07:49,469 --> 00:07:53,206 There's some very interesting cases about who owns dead bodies, wonderful 91 00:07:53,206 --> 00:07:55,875 lawsuits, not the topic of today. We're also not going to be talking 92 00:07:55,875 --> 00:08:01,514 about the tangible property of the dead, things like cars, houses, boats, 93 00:08:01,514 --> 00:08:07,420 and memorabilia. We're not talking about those. So we're going to focus 94 00:08:07,420 --> 00:08:12,826 on intangible property and what happens to it after a person, 95 00:08:12,826 --> 00:08:17,697 particularly a famous person or celebrity, dies. And so this is also 96 00:08:17,697 --> 00:08:21,201 sometimes called the intellectual property and this includes a variety 97 00:08:21,201 --> 00:08:24,003 of rights I'll be talking about. Sometimes the right of publicity is 98 00:08:24,003 --> 00:08:27,907 thought of as an intellectual property right, though I think that's a 99 00:08:27,907 --> 00:08:33,079 mischaracterization of that interest. So again our focus here is going to be 100 00:08:33,079 --> 00:08:36,750 on these intangible rights in a deceased person and specifically in 101 00:08:36,750 --> 00:08:42,155 their name, likeness, voice and other indicia of identity. This is not a 102 00:08:42,155 --> 00:08:46,626 single right at issue but a multiplicity of rights that intersect 103 00:08:46,626 --> 00:08:51,398 and teasing them apart is crucial in litigation, in estate planning, in 104 00:08:51,398 --> 00:08:58,238 dealing with the growing IRS efforts to tax high value celebrity estates 105 00:08:58,238 --> 00:09:02,375 and also in the context of pre-death or inter vivos, if you want to go all 106 00:09:02,375 --> 00:09:08,448 Latin on it; inter vivos transfers of rights. So these we need to sort of 107 00:09:08,448 --> 00:09:13,420 tease these apart and that's the first topic for today, these overlapping 108 00:09:13,420 --> 00:09:18,024 legal claims. I'll start with the basic proposition, which is who owns 109 00:09:18,024 --> 00:09:21,761 you after you die has a lot to do with who owns you while you're alive, so 110 00:09:21,761 --> 00:09:25,565 that should be the starting point for any evaluation. And then you have to 111 00:09:25,565 --> 00:09:31,171 tease apart what are the legal claims at stake in a particular estate? Those 112 00:09:31,171 --> 00:09:37,944 include copyrights, which as most in this room know, protects original 113 00:09:37,944 --> 00:09:43,316 works of expression in a fixed form. So if a person's image or voice is 114 00:09:43,316 --> 00:09:47,587 captured in a photograph, a movie, a sound recording, those are sometimes 115 00:09:47,587 --> 00:09:51,124 thought of right of publicity related as well but they're actually also 116 00:09:51,124 --> 00:09:54,961 covered by copyright law and so copyright law is something that 117 00:09:54,961 --> 00:10:00,533 survives death. It lasts for 70 years after the lifetime of the author. In 118 00:10:00,533 --> 00:10:06,105 the context of works for hire, which will also frequently be involved in a 119 00:10:06,105 --> 00:10:12,345 high end estate, it lasts 95 years after publication or 120 years from 120 00:10:12,345 --> 00:10:18,118 the time of creation; 95 years from publication, 120 years from creation. 121 00:10:18,118 --> 00:10:22,522 So often the person whose voice or image is captured in a copyrighted 122 00:10:22,522 --> 00:10:26,693 work is not the owner of the copyright and that raises some complex issues 123 00:10:26,693 --> 00:10:30,430 related to whether the copyright is going to overcome any right of 124 00:10:30,430 --> 00:10:33,800 publicity claim after death but it also is sometimes true that the 125 00:10:33,800 --> 00:10:37,504 particular individual owns the right to the copyright and can assert those 126 00:10:37,504 --> 00:10:42,342 rights or their estate can after death. The second type of right we're 127 00:10:42,342 --> 00:10:45,345 dealing with are those of trademarks and so when we're talking about 128 00:10:45,345 --> 00:10:50,650 someone who's famous, they may have a number of trademarks that protect 129 00:10:50,650 --> 00:10:53,920 their likeness and name if they're using it in conjunction with products 130 00:10:53,920 --> 00:10:57,857 or services including entertainment services or writing services. And 131 00:10:57,857 --> 00:11:01,995 these can survive death as long as the estate or businesses or licenses 132 00:11:01,995 --> 00:11:06,132 continue to sell products or services using those same marks with the 133 00:11:06,132 --> 00:11:10,203 person's likeness, a particular version of the likeness and the 134 00:11:10,203 --> 00:11:15,542 person's name or related names. And trademarks can last forever so that's 135 00:11:15,542 --> 00:11:19,779 another consideration after death. There's a third category of rights 136 00:11:19,779 --> 00:11:23,516 that are sometimes often forgotten in this context which is there's a whole 137 00:11:23,516 --> 00:11:28,855 umbrella of unfair competition laws including under the Federal Lanham Act 138 00:11:28,855 --> 00:11:33,593 and consumer protection laws varying from state to state in which an estate 139 00:11:33,593 --> 00:11:37,664 can file false endorsement or false advertising claims even after the 140 00:11:37,664 --> 00:11:41,067 death of a person because there might be a suggestion of sponsorship or 141 00:11:41,067 --> 00:11:46,172 endorsement by the estate. And finally, the claim that we're going to 142 00:11:46,172 --> 00:11:50,777 spend the rest of the time or most of the time talking about is the right of 143 00:11:50,777 --> 00:11:53,846 publicity. The right of publicity is often misunderstood as an intellectual 144 00:11:53,846 --> 00:11:57,717 property right akin to copyright law that's separated from the right of 145 00:11:57,717 --> 00:12:02,255 privacy in the 1950s. These are all myths about the right of publicity 146 00:12:02,255 --> 00:12:07,360 that I debunk in my latest book that was mentioned on the right of 147 00:12:07,360 --> 00:12:10,763 publicity. And I also delve into some more of the issues that I'm talking 148 00:12:10,763 --> 00:12:15,735 about today. So if you want to learn more, that would be a place but those 149 00:12:15,735 --> 00:12:19,172 are some myths that I bust there. But I want to make sure that we're all on 150 00:12:19,172 --> 00:12:23,109 a level playing field talking about the right of publicity without reading 151 00:12:23,109 --> 00:12:26,713 the book in advance. Just broadly speaking, the right of publicity is a 152 00:12:26,713 --> 00:12:31,284 state law. It varies widely from state to state. It provides a right to stop 153 00:12:31,284 --> 00:12:34,821 others from using your name, likeness and sometimes other indicia of one's 154 00:12:34,821 --> 00:12:39,025 identity without permission usually for the defendant's advantage. Not 155 00:12:39,025 --> 00:12:41,995 always for a commercial advantage. Some of you who have practiced in the 156 00:12:41,995 --> 00:12:44,931 area may think that it's limited to commercial speech. It is not in most 157 00:12:44,931 --> 00:12:49,602 states and it's not even always limited to for profit uses. So there 158 00:12:49,602 --> 00:12:53,506 are many variations from state to state. For our purposes today, not 159 00:12:53,506 --> 00:12:57,410 every state has an independent right of publicity separate from its right 160 00:12:57,410 --> 00:13:01,581 of privacy and not every state has a postmortem right of publicity. Not 161 00:13:01,581 --> 00:13:07,120 every state has a right that survives death so this varies also widely from 162 00:13:07,120 --> 00:13:11,357 state to state, which is one of the reasons out of frustration I started 163 00:13:11,357 --> 00:13:16,329 this website in which you can click on a state and find out what the laws are 164 00:13:16,329 --> 00:13:20,600 so I'll talk a little bit more about this in a few minutes, but one of the 165 00:13:20,600 --> 00:13:26,072 things you have to tease out is there even a postmortem right of publicity. 166 00:13:26,072 --> 00:13:29,208 So I said the first topic we're going to talk about is overlapping rights so 167 00:13:29,208 --> 00:13:33,146 I want to use the Michael Jackson estate litigation with the IRS to 168 00:13:33,146 --> 00:13:38,251 highlight these overlapping rights. So this is the Schedule F forms submitted 169 00:13:38,251 --> 00:13:43,389 by the Jackson estate. Ms. Royal is going to talk in more depth about some 170 00:13:43,389 --> 00:13:47,460 of the tax issues but I'm going to sort of use this to highlight this 171 00:13:47,460 --> 00:13:51,364 overlapping issue. So when they filed the form, they had a single item image 172 00:13:51,364 --> 00:13:56,235 and likeness. Image and likeness valued at $2,000 of Michael Jackson, 173 00:13:56,235 --> 00:14:00,273 which is absurd. That was like waving a red flag in front of the IRS, come 174 00:14:00,273 --> 00:14:05,712 and get us. The IRS said no, that's over 400 million at least in Michael 175 00:14:05,712 --> 00:14:11,117 Jackson's name and likeness. We can talk more about this later but what I 176 00:14:11,117 --> 00:14:16,122 want to highlight is that image and likeness was collapsed into a single 177 00:14:16,122 --> 00:14:20,359 line rather than being teased out. Image and likeness of Michael Jackson 178 00:14:20,359 --> 00:14:25,198 in copyrighted works, photographs, music videos, etc. trademark rights. 179 00:14:25,198 --> 00:14:28,401 And then there's the separate question of whether false endorsement, false 180 00:14:28,401 --> 00:14:32,538 advertising potential claims or potential right of publicity claims 181 00:14:32,538 --> 00:14:36,843 should even be part of the property of the estate. That is something that 182 00:14:36,843 --> 00:14:41,581 should be contested. The Jackson estate failed to contest the inclusion 183 00:14:41,581 --> 00:14:46,519 of the right of publicity or false endorsement or false advertising in 184 00:14:46,519 --> 00:14:50,523 the estate. So that is where this Jackson litigation is going to set a 185 00:14:50,523 --> 00:14:56,329 precedent. The IRS is using it to be more aggressive in taxing postmortem 186 00:14:56,329 --> 00:15:00,199 rights of publicity but I just want to remind everyone no one challenged the 187 00:15:00,199 --> 00:15:03,136 inclusion of the right of publicity in the estate. That's still something 188 00:15:03,136 --> 00:15:08,441 that can be challenged and litigated. And I also want to highlight that they 189 00:15:08,441 --> 00:15:12,078 collapsed all of those different property rights, which all should have 190 00:15:12,078 --> 00:15:16,315 been separated just in a single box of image and likeness which has caused a 191 00:15:16,315 --> 00:15:19,519 great, having talked to some of those involved in that litigation has caused 192 00:15:19,519 --> 00:15:23,956 a great deal of confusion by the judge as well as the experts in trying to 193 00:15:23,956 --> 00:15:28,261 value this property. So I'm just highlighting those things to show how 194 00:15:28,261 --> 00:15:34,167 they overlap and you need to disaggregate them. And as we think 195 00:15:34,167 --> 00:15:37,870 about this though, I want to focus in on the right of publicity because this 196 00:15:37,870 --> 00:15:40,907 is what people I think in the room probably know the least about but I 197 00:15:40,907 --> 00:15:45,011 wanted to start by reminding you not to forget about trademarks, copyrights 198 00:15:45,011 --> 00:15:50,583 and related estate claims. So one of the biggest challenges however is just 199 00:15:50,583 --> 00:15:54,587 figuring out postmortem rights of publicity and they don't exist in 200 00:15:54,587 --> 00:15:59,525 every state. I'm going to highlight six challenges posed by a postmortem 201 00:15:59,525 --> 00:16:03,329 right of publicity, an after death right in your name, likeness, voice or 202 00:16:03,329 --> 00:16:08,334 other indicia of identity. So first there's just the variability of state 203 00:16:08,334 --> 00:16:13,573 laws. As I said, not every state even has a postmortem right of publicity. 204 00:16:13,573 --> 00:16:17,243 Some only provide rights to the living. Some have postmortem rights 205 00:16:17,243 --> 00:16:20,913 that only apply to soldiers. If you want to know why, you can ask me 206 00:16:20,913 --> 00:16:25,518 later, but some limit it to soldiers. Some limit it to personalities, people 207 00:16:25,518 --> 00:16:29,422 with commercially valuable identities who have been selling products or 208 00:16:29,422 --> 00:16:32,058 investing a lot of time and money in making themselves commercially 209 00:16:32,058 --> 00:16:36,662 valuable. Some let anyone have a postmortem claim. Some limit claims to 210 00:16:36,662 --> 00:16:40,166 those who died domiciled in a particular state. Some open their 211 00:16:40,166 --> 00:16:44,604 doors, like Washington State to all-comers. There's a wide range of 212 00:16:44,604 --> 00:16:49,075 duration in the postmortem rights. Some provide a ten year period, some 213 00:16:49,075 --> 00:16:54,547 25, some 30, some 40, some 70, some forever. Some require registration, 214 00:16:54,547 --> 00:16:58,951 some don't. Some have specific designated heirs to which it's 215 00:16:58,951 --> 00:17:02,655 limited, some don't. So as you can see, one of the basic challenges is 216 00:17:02,655 --> 00:17:05,658 just figuring out what law would apply to the particular person you're 217 00:17:05,658 --> 00:17:10,763 dealing with. This also raises significant valuation questions for 218 00:17:10,763 --> 00:17:15,868 taxation purposes and otherwise. The second challenge I want to highlight 219 00:17:15,868 --> 00:17:20,439 is the potential danger of forced commercialization. So as the IRS 220 00:17:20,439 --> 00:17:26,445 becomes more aggressive in enforcing a state tax inclusion of postmortem 221 00:17:26,445 --> 00:17:30,283 rights of publicity, there's a concern that people who don't, the sort of 222 00:17:30,283 --> 00:17:34,987 survivors of a famous person who don't want to commercialize their loved one 223 00:17:34,987 --> 00:17:40,026 will be forced to do so simply to pay off the estate tax burden. Now Michael 224 00:17:40,026 --> 00:17:43,629 Jackson's estate is heavily commercializing Michael Jackson's 225 00:17:43,629 --> 00:17:47,667 estate. They do so regardless of the estate tax situation but that's not 226 00:17:47,667 --> 00:17:52,772 true for every person. Some people don't want to be commercialized after 227 00:17:52,772 --> 00:17:56,309 death and their heirs don't want to commercialize them either but because 228 00:17:56,309 --> 00:18:00,446 of the way the tax works, they will be taxed as part of the estate tax if the 229 00:18:00,446 --> 00:18:03,649 right of publicity is included at the rates highest and best value at a 230 00:18:03,649 --> 00:18:07,787 commercialized value even if that's not what the person wants to do. This 231 00:18:07,787 --> 00:18:12,959 was very concerning to Robin Williams who developed a very elaborate trust 232 00:18:12,959 --> 00:18:19,632 plan to try to avoid that outcome for his family and so he vested his name 233 00:18:19,632 --> 00:18:23,235 and likeness rights and his right of publicity in a nonprofit through the 234 00:18:23,235 --> 00:18:28,374 trust and barred the non-profit from commercializing in any way his name, 235 00:18:28,374 --> 00:18:32,578 likeness, voice or identity for 25 years after death. Now I'll mention 236 00:18:32,578 --> 00:18:36,282 not only am I not giving you specific legal advice but this trust has not 237 00:18:36,282 --> 00:18:40,486 been challenged yet so it's not clear that it will be valid but it is sort 238 00:18:40,486 --> 00:18:43,990 of the primary example I know of someone trying to deal with this 239 00:18:43,990 --> 00:18:49,261 potential forced commercialization problem. And of course that forced 240 00:18:49,261 --> 00:18:52,665 commercialization problem could be solved other ways through legal reform 241 00:18:52,665 --> 00:18:56,969 or altering how the IRS is behaving currently. And of course getting rid 242 00:18:56,969 --> 00:19:02,408 of the estate tax, which could happen any day. All right so a third 243 00:19:02,408 --> 00:19:06,779 potential problem is not having an estate plan at all when you die in a 244 00:19:06,779 --> 00:19:11,017 state that has a postmortem right or maybe that doesn't have one. I call 245 00:19:11,017 --> 00:19:16,188 this the Prince problem. So Prince is a high value deceased celebrity who 246 00:19:16,188 --> 00:19:21,160 died without a will. He didn't think he was going to die. He didn't make a 247 00:19:21,160 --> 00:19:24,096 plan. So there are several challenges to this and I'll just highlight at the 248 00:19:24,096 --> 00:19:28,768 outset Minnesota doesn't have a postmortem right of publicity. And 249 00:19:28,768 --> 00:19:32,972 there was a rush in the aftermath of his death to try to get Minnesota to 250 00:19:32,972 --> 00:19:37,276 pass one and then when I and some others highlighted the estate tax 251 00:19:37,276 --> 00:19:40,646 problem and the danger of forced commercialization and valuation, all 252 00:19:40,646 --> 00:19:45,684 of a sudden all the support for that bill was removed and it was pulled 253 00:19:45,684 --> 00:19:49,388 from the Minnesota legislature because of tax concerns in particular. But 254 00:19:49,388 --> 00:19:53,759 even putting those to the side, there's the problem of whose going to 255 00:19:53,759 --> 00:19:58,798 inherit and who should get the value of this money of our dead person. Now 256 00:19:58,798 --> 00:20:02,668 just again reminding of the overlapping rights so this is not 257 00:20:02,668 --> 00:20:06,439 about copyrights or trademarks which will vest in whoever the heirs were 258 00:20:06,439 --> 00:20:09,909 but specifically about the rights of publicity and we want to provide this 259 00:20:09,909 --> 00:20:13,379 additional value and to whom. So in this case, there were a lot of 260 00:20:13,379 --> 00:20:17,416 estranged sort of relatives of Prince who now wind up owning him after 261 00:20:17,416 --> 00:20:20,820 death. It's not clear that's what Prince would have liked at all as 262 00:20:20,820 --> 00:20:25,224 compared to his fans who are a big supporter of in allowing them to 263 00:20:25,224 --> 00:20:28,661 perhaps have in memorium posters and other things to celebrate him. And 264 00:20:28,661 --> 00:20:32,364 there's also for a while a fight by someone who is incarcerated and 265 00:20:32,364 --> 00:20:36,669 claimed to be a child of his claiming that he should have rights, so we 266 00:20:36,669 --> 00:20:40,673 might want to think about that if we tease apart postmortem rights or maybe 267 00:20:40,673 --> 00:20:44,977 what they want that we want them to look like, who should get them and 268 00:20:44,977 --> 00:20:49,648 when and particularly if there's no will involved. And this ties up with a 269 00:20:49,648 --> 00:20:53,719 fourth potential concern which is the question of who profits from 270 00:20:53,719 --> 00:20:58,157 postmortem rights and potential abuse particularly of the elderly. I don't 271 00:20:58,157 --> 00:21:01,327 know if some of you read the recent New Yorker piece or saw John Oliver 272 00:21:01,327 --> 00:21:05,631 talking about guardianship with the elderly and some abuse in which older 273 00:21:05,631 --> 00:21:08,734 people are sort of stripped of their assets and lose control. This could 274 00:21:08,734 --> 00:21:12,705 happen to older celebrities as well who may not have family watching out 275 00:21:12,705 --> 00:21:17,376 for them or even the family themselves as we see in the instance of Stan Lee 276 00:21:17,376 --> 00:21:20,613 maybe taking advantage. And there could be a transfer of postmortem 277 00:21:20,613 --> 00:21:24,717 rights of publicity while the person is living and so this may shift wealth 278 00:21:24,717 --> 00:21:28,821 to a company for example that's wholly unrelated at the expense of others and 279 00:21:28,821 --> 00:21:33,225 they may do things that the person might not like. I give an example in 280 00:21:33,225 --> 00:21:37,930 the book but also there's one I circle here. Bettie Page who is one of the 281 00:21:37,930 --> 00:21:42,034 top ten dead celebrities and she was actually, you probably know a lot more 282 00:21:42,034 --> 00:21:46,138 about her now that she's dead because she's owned by CMG , a corporation 283 00:21:46,138 --> 00:21:50,943 that owns more dead people that anyone else and they have turned her into big 284 00:21:50,943 --> 00:21:55,748 business. We might ask is that -- do we want all that wealth shifted not to 285 00:21:55,748 --> 00:21:59,885 close heirs of a survivor but to just an unrelated corporation that's making 286 00:21:59,885 --> 00:22:04,190 hundreds of millions of dollars off dead people away from the public being 287 00:22:04,190 --> 00:22:08,594 able to comment on people. And I'll also mention that Bettie Page who 288 00:22:08,594 --> 00:22:12,965 became very religious later in life sort of rejected some of the more 289 00:22:12,965 --> 00:22:18,037 sexual imagery around her and yet this company that owns her is now selling a 290 00:22:18,037 --> 00:22:22,741 sex toy line, the Bettie Page sex toy line. It probably wouldn't have been 291 00:22:22,741 --> 00:22:27,913 something she would have chosen if asked. And this sort of shift about 292 00:22:27,913 --> 00:22:31,750 transferability leaves us to the last two things that I'll just highlight. 293 00:22:31,750 --> 00:22:37,256 One is about transferability for the living. So privacy rights don't 294 00:22:37,256 --> 00:22:39,258 transfer after death but if we make the right of publicity transferable at 295 00:22:39,258 --> 00:22:41,260 death in most states that brings along with it transferability during the 296 00:22:41,260 --> 00:22:43,262 lifetime which could lead to some abuse of the least powerful. So if we 297 00:22:43,262 --> 00:22:45,264 think of aspiring actors, singers, musicians, they may assign their 298 00:22:45,264 --> 00:22:46,632 rights forever in their name, likeness, voice to managers, to 299 00:22:46,632 --> 00:22:48,634 agents, to reality shows. Parents may assign forever the rights of their 300 00:22:48,634 --> 00:22:49,969 children and in the context for example of student athletes a 301 00:22:49,969 --> 00:22:51,971 condition for playing in the NCAA is to sign a very lengthy contract and 302 00:22:51,971 --> 00:22:53,973 also to get your scholarship money and the NCAA claims to therefore own the 303 00:22:53,973 --> 00:22:55,975 student's rights of publicity forever. The standard student athlete agreement 304 00:22:55,975 --> 00:22:57,977 according to the NCAA transferred to an all-rights in perpetuity to the 305 00:22:57,977 --> 00:23:02,915 commercial use of student athletes images including after they graduate. 306 00:23:31,410 --> 00:23:34,780 And we can play out the implications of that but I don't have time now but 307 00:23:34,780 --> 00:23:37,983 I just want to flag that for you as people call for more expansive 308 00:23:37,983 --> 00:23:41,754 postmortem rights. We should be careful not to harm the living who may 309 00:23:41,754 --> 00:23:45,391 lose control over their own identities. And if you think this only 310 00:23:45,391 --> 00:23:48,327 applies to celebrities you might want to think about the terms of service on 311 00:23:48,327 --> 00:23:52,197 Facebook and what they could do to your own rights and your name and 312 00:23:52,197 --> 00:23:56,035 likeness. And finally I'll just leave us with some thoughts about some 313 00:23:56,035 --> 00:24:00,372 potential free speech issues and this really affects valuation too because 314 00:24:00,372 --> 00:24:04,510 all of these rights are limited by the First Amendment. And when we think 315 00:24:04,510 --> 00:24:07,212 about the breadth of some of these rights from a legislative point of 316 00:24:07,212 --> 00:24:11,016 view we also need to take these under consideration so I'll just highlight a 317 00:24:11,016 --> 00:24:16,655 few examples of this. Martin Luther King Junior's estate has been very 318 00:24:16,655 --> 00:24:21,026 litigious over his name and likeness rights. The bust in the center is 319 00:24:21,026 --> 00:24:25,698 something that the Martin Luther King Junior estate sued over its sale in 320 00:24:25,698 --> 00:24:30,636 multiple copies and prevailed in shutting that down so people could not 321 00:24:30,636 --> 00:24:34,306 buy these and have them in their homes to honor Martin Luther King Junior. On 322 00:24:34,306 --> 00:24:38,310 the left is the memorial here to Martin Luther King Junior and the 323 00:24:38,310 --> 00:24:41,013 federal government, I know there are a lot of federal employees in the room, 324 00:24:41,013 --> 00:24:43,782 I don't know if people know this, the federal government paid $800,000 to 325 00:24:43,782 --> 00:24:50,122 the estate to get permission to make that statue. I don't think they had to 326 00:24:50,122 --> 00:24:54,793 pay but that's the sort of thing honoring someone. Elvis' estate also 327 00:24:54,793 --> 00:24:59,832 sued over an honoring statue in Tennessee. On the right is a plaque 328 00:24:59,832 --> 00:25:04,670 that Rosa Parks’ estate sued over that was sold by Target to celebrate civil 329 00:25:04,670 --> 00:25:10,242 rights. That lawsuit was ultimately rejected for reasons that I don't have 330 00:25:10,242 --> 00:25:14,480 time to go into but these are sorts of things that we might lose out on if we 331 00:25:14,480 --> 00:25:18,016 have an over-expansive postmortem right but we also need to think about 332 00:25:18,016 --> 00:25:24,289 in terms of valuation as well as uses in movies and books. And so I'm almost 333 00:25:24,289 --> 00:25:27,559 done and we'll turn things over and I'll just to think about in the 334 00:25:27,559 --> 00:25:30,362 discussion why should we have postmortem rights? We might want to 335 00:25:30,362 --> 00:25:33,165 think in particular about the dignatory interest of the survivors. 336 00:25:33,165 --> 00:25:39,171 Obviously the deceased no longer have a need to be paid and they may have 337 00:25:39,171 --> 00:25:44,777 dignity in a broad sense but in the law we generally don't respect or make 338 00:25:44,777 --> 00:25:48,147 laws based on the dignity of people who are no longer living. But also 339 00:25:48,147 --> 00:25:51,350 there's lots of ways in which other laws, trademarks, copyrights, unfair 340 00:25:51,350 --> 00:25:56,822 competition might apply after death. So I know others are going to talk 341 00:25:56,822 --> 00:26:00,926 after me and Ms. Royal, I will turn it over to you to talk in more depth 342 00:26:00,926 --> 00:26:05,931 about tax and I will try to get your -- (Applause) >> PRIYA ROYAL: Good 343 00:26:20,512 --> 00:26:25,217 morning, everyone. So as you can guess I'm a tax attorney. I read the code 344 00:26:25,217 --> 00:26:31,990 for fun. It's also the bedtime story for my daughters, unfortunately. Just 345 00:26:31,990 --> 00:26:36,995 to get an idea of what sort of audience I'm speaking to, how many of 346 00:26:36,995 --> 00:26:42,968 you are IP practitioners? Ah-hah. All right. Any of you tax practitioners or 347 00:26:42,968 --> 00:26:47,573 have a tax background or a CPA by any chance sitting here? Ah, so we're 348 00:26:47,573 --> 00:26:52,578 going to have fun. Okay. So Jennifer did an excellent overview of the 349 00:26:54,746 --> 00:27:00,619 general issues that arise in estate planning, estate administration. I'm a 350 00:27:00,619 --> 00:27:05,357 former IRS estate tax attorney. I did planning. I continue to do planning 351 00:27:05,357 --> 00:27:11,396 which essentially means the things I draft to protect my clients interests 352 00:27:11,396 --> 00:27:14,666 I basically look at them and say ah, this is going to get picked up for 353 00:27:14,666 --> 00:27:20,239 audit and I can't do anything about it but I can win. So that's sort of what 354 00:27:20,239 --> 00:27:23,876 I'm throwing out some terms that you should consider when you speak to your 355 00:27:23,876 --> 00:27:28,914 clients, to your employer if you're in corporate counsel for considerations 356 00:27:28,914 --> 00:27:34,887 on things that an estate planning attorney should address. One of the 357 00:27:34,887 --> 00:27:39,124 reasons I'm excited that Mr. Jabbar is part of our panel here is that he sort 358 00:27:39,124 --> 00:27:44,162 of represents the conglomerate of issues and different types of IP 359 00:27:44,162 --> 00:27:49,067 rights that could be tax issues. It's sort of what would be the value of him 360 00:27:49,067 --> 00:27:54,206 in his authorship rights versus his basketball legend rights versus his 361 00:27:54,206 --> 00:27:58,844 speaker rights versus his journalism reporter sort of editorial rights? I'm 362 00:27:58,844 --> 00:28:03,682 mean the list could go on and from an IP standpoint what you would think is 363 00:28:03,682 --> 00:28:08,120 what you would tack on for a license agreement is not necessarily what is 364 00:28:08,120 --> 00:28:11,156 going to be the case on a tax again especially when you're dealing with 365 00:28:11,156 --> 00:28:16,461 postmortem rights. So the right of publicity essentially in a nutshell is 366 00:28:16,461 --> 00:28:22,668 the commercial value of a person's name, likeness or image. And where 367 00:28:22,668 --> 00:28:26,305 there's commercial value there's an asset attached to it. Where there's an 368 00:28:26,305 --> 00:28:32,344 asset there's an estate. Where there's an estate there's a tax. So anything 369 00:28:32,344 --> 00:28:37,482 that can be taxed will be taxed. I always joke and say you always start 370 00:28:37,482 --> 00:28:41,820 with Section 61 of the Internal Revenue Code which says all items are 371 00:28:41,820 --> 00:28:47,526 included in gross income unless excluded otherwise which means never 372 00:28:47,526 --> 00:28:51,263 ask the question will this be taxed. Always ask the question will this not 373 00:28:51,263 --> 00:28:56,268 be taxed and how do we make it that way. The way you can sort of minimize 374 00:28:59,037 --> 00:29:03,575 the tax and not make it tax at a certain time, or in a certain way, or 375 00:29:03,575 --> 00:29:08,013 in a certain amount is obviously to transfer the right, which is why we're 376 00:29:08,013 --> 00:29:11,016 sort of touching on the transfer of the right of publicity. The survival 377 00:29:11,016 --> 00:29:15,854 of the right of publicity. I know Professor Rothman touched on state law 378 00:29:15,854 --> 00:29:19,691 which is sort of an evolving landscape. Some states allow rights of 379 00:29:19,691 --> 00:29:23,629 publicity to survive, some don't. There's case law that basically in New 380 00:29:23,629 --> 00:29:28,667 York there were no postmortem rights of publicity which means it was free 381 00:29:28,667 --> 00:29:32,404 for all. The Marilyn Monroe estate is actually one good example of that, 382 00:29:32,404 --> 00:29:37,009 which I'll get to in a second. One of the things that most literature out 383 00:29:37,009 --> 00:29:40,479 there and most of the material that's not touched on is actually dual 384 00:29:40,479 --> 00:29:45,484 citizenship and estate tax on the right of publicity. Take for example, 385 00:29:48,520 --> 00:29:52,557 we're going to pretend to kill off celebrities now. Charlize Theron from 386 00:29:52,557 --> 00:29:58,897 South Africa. She has dual citizenship or dual residency. What laws apply? 387 00:29:58,897 --> 00:30:05,437 Right now, the WTO does not govern the right of publicity. They do not manage 388 00:30:05,437 --> 00:30:11,209 it. They do not limit it. They do not define it so how do you define it? 389 00:30:11,209 --> 00:30:14,012 What is the value? She may have international acclaim. She may have 390 00:30:14,012 --> 00:30:17,716 publicity rights. She may -- Aeon Flux for anybody who watched it that could 391 00:30:17,716 --> 00:30:22,721 be her image. That could be used in various things. So that is in terms of 392 00:30:25,190 --> 00:30:29,027 evolving landscape let's just say there is a lot of work and possibly a 393 00:30:29,027 --> 00:30:34,533 lot of employment opportunities at the IRS for estate tax attorneys if 394 00:30:34,533 --> 00:30:37,469 somebody wants to get into the minutia of this. And for estate planning 395 00:30:37,469 --> 00:30:40,405 attorneys this is a great area especially if you have an IP 396 00:30:40,405 --> 00:30:45,644 background or you have dealt with IP in specifically trademarks, copyrights 397 00:30:45,644 --> 00:30:50,949 and sometimes patent ideas, the broad concepts coming to define this right 398 00:30:50,949 --> 00:30:56,955 of publicity. So these are sort of like touch point examples of how the 399 00:30:56,955 --> 00:31:01,126 law is progressing the tax arena. Right of publicity as Professor 400 00:31:01,126 --> 00:31:03,929 Rothman could probably tell you has been around for a very, very long 401 00:31:03,929 --> 00:31:09,601 time; several decades. The tax issues in the line of publicity as of today 402 00:31:09,601 --> 00:31:14,406 we actually have no idea how they're going to get taxed. Well we have no 403 00:31:14,406 --> 00:31:19,244 idea to the extent I could disclose how they're going to get taxed. So the 404 00:31:22,380 --> 00:31:26,318 tax history is we sort of look at the estate of Marilyn Monroe as 405 00:31:26,318 --> 00:31:31,022 establishing right of publicity for tax purposes because it was an issue 406 00:31:31,022 --> 00:31:34,559 of domicile which sort of goes back to the dual citizenship idea of taking it 407 00:31:34,559 --> 00:31:38,463 beyond states to other countries because we live in a global digital 408 00:31:38,463 --> 00:31:43,468 age. And so in the estate of Marilyn Monroe, she passed away in 1962. 409 00:31:47,539 --> 00:31:53,145 Essentially her heirs 50 years later wanted to tack on a right of publicity 410 00:31:53,145 --> 00:31:57,616 to the things that were being used, her image, her likeness in 2012 411 00:31:57,616 --> 00:32:03,555 because they thought it a commercial value. And if you think about it from 412 00:32:03,555 --> 00:32:06,725 the IRS perspective, this is exactly what they're taxing. If you think it's 413 00:32:06,725 --> 00:32:10,462 unfair that they tax somebody's image and likeness somebody is making money 414 00:32:10,462 --> 00:32:14,699 on this so why shouldn't there be a tax. That's one perspective. On the 415 00:32:14,699 --> 00:32:19,337 other hand, you are who you are. How dare you tax me as a person, right. So 416 00:32:19,337 --> 00:32:26,311 in that case it was basically judicial estoppel was what kicked in. For tax 417 00:32:26,311 --> 00:32:31,316 purposes New York had more favorable tax law that said protection laws at 418 00:32:33,852 --> 00:32:37,622 the time she passed away in 2012, they wanted to switch that because they 419 00:32:37,622 --> 00:32:40,625 wanted the protection of the California laws. The courts said you 420 00:32:40,625 --> 00:32:44,462 don't get to eat your cake and have it too. I mean you just can't have it 421 00:32:44,462 --> 00:32:48,733 both ways. And then I call it the escalation point. Estate of Whitney 422 00:32:48,733 --> 00:32:51,736 Houston which would be a mystery to most people out there because the IRS 423 00:32:51,736 --> 00:32:56,741 settled with the estate of Whitney Houston. She on paper died 424 00:32:58,877 --> 00:33:03,582 impoverished. She owed I believe four million and her state was only three 425 00:33:03,582 --> 00:33:08,353 million. At the end of the day they agreed on a two million dollar value. 426 00:33:08,353 --> 00:33:13,925 And the way this works is the estate gets audited. Everything in the estate 427 00:33:13,925 --> 00:33:18,897 is everything that the taxpayer had full dominion and control over at the 428 00:33:18,897 --> 00:33:23,902 time of death. Standard valuation is date of death. There are no statutes, 429 00:33:26,705 --> 00:33:32,677 regulations or internal revenue manual guidelines as far as I know which 430 00:33:32,677 --> 00:33:36,648 dictate that the time of death is to the precise second and not the second 431 00:33:36,648 --> 00:33:42,087 after. And the reason this is important is because if you take a 432 00:33:42,087 --> 00:33:47,826 celebrity or any sort of -- okay, Mr. Jabbar actually would be a good 433 00:33:47,826 --> 00:33:51,329 example. I'm sorry Mr. Jabbar but we're talking about estates so I don't 434 00:33:51,329 --> 00:33:57,369 mean to talk about the very future. You have sort of established yourself 435 00:33:57,369 --> 00:34:02,474 as this person who is for social justice as an author predominantly and 436 00:34:02,474 --> 00:34:07,412 moved away from your role and your emblem as a basketball legend. I mean 437 00:34:07,412 --> 00:34:13,351 that is sort of the first part of your career. After you pass away, the 438 00:34:13,351 --> 00:34:16,788 basketball legend aspect of it is going to get commercialized. That is a 439 00:34:16,788 --> 00:34:21,793 given. But does the value of your persona as a basketball legend now 440 00:34:25,196 --> 00:34:28,967 carry a greater value because one second after you passed away you are 441 00:34:28,967 --> 00:34:33,371 now worth more on that piece than as an author because it is very likely 442 00:34:33,371 --> 00:34:37,609 that the commercial value of your profile as an author is less than the 443 00:34:37,609 --> 00:34:43,581 commercial value of your basketball history. So this becomes an issue for 444 00:34:43,581 --> 00:34:49,387 valuation purposes because tax is taxed at 40% of the asset in the 445 00:34:49,387 --> 00:34:55,660 estate so what are you putting in that estate? So then the estate of Michael 446 00:34:55,660 --> 00:35:01,299 Jackson, the very famous case where the estate reported a $2500 value. The 447 00:35:01,299 --> 00:35:07,505 IRS said it's 500 million. It is, as an estate planning attorney, it is not 448 00:35:07,505 --> 00:35:14,279 a red flag, the estate of Michael Jackson is the red flag so there are 449 00:35:14,279 --> 00:35:19,284 several estates of extremely huge public figures that have been put at 450 00:35:21,519 --> 00:35:24,155 thousands of dollars, hundreds of thousands of dollars and they bill 451 00:35:24,155 --> 00:35:27,892 billionaires and the reason is estate planning. With Michael Jackson, he did 452 00:35:27,892 --> 00:35:31,229 not actually die with $2,000. He had excellent estate planning attorneys 453 00:35:31,229 --> 00:35:34,466 who literally pulled one billion dollars of his assets out of his 454 00:35:34,466 --> 00:35:39,471 control on paper. He died wealthy. The IRS was I'm sure not too happy about 455 00:35:43,842 --> 00:35:47,112 that and they wanted to find some way to get a piece of it so they found 456 00:35:47,112 --> 00:35:50,315 something else and said your right of publicity is worth 500 million 457 00:35:50,315 --> 00:35:56,588 dollars. But there was an issue about whether he would have any value in his 458 00:35:56,588 --> 00:36:02,060 persona because there were various contentions. He was sort of not in the 459 00:36:02,060 --> 00:36:07,098 greatest view publicly at the time he died. The IRS will take the 460 00:36:07,098 --> 00:36:13,605 perspective that allocates a discount to his value, not eliminate it because 461 00:36:13,605 --> 00:36:18,543 there is a risk of litigation that proves that his value was less than 462 00:36:18,543 --> 00:36:23,681 what they deem it to be or and it's going back to the time of death there 463 00:36:23,681 --> 00:36:28,386 is one case involving [indiscernible 00:36:20] restriction rights which 464 00:36:28,386 --> 00:36:34,826 literally went into the time of death. It is a corporate business asset case 465 00:36:34,826 --> 00:36:40,365 and that may get pulled by a brilliant estate tax attorney into a situation 466 00:36:40,365 --> 00:36:44,002 like this but it is a very hard argument because no statutes, no 467 00:36:44,002 --> 00:36:48,473 regulations, date of death is just valuation. So on the date of death, at 468 00:36:48,473 --> 00:36:52,577 the time he died, the IRS said he was worth 500 million dollars. We are 469 00:36:52,577 --> 00:36:54,712 looking to see what is going to come out of this case because this is sort 470 00:36:54,712 --> 00:36:58,416 of what you didn't see is Professor Rothman put out the Schedule F of 471 00:36:58,416 --> 00:37:04,589 866-A, which is a form that the IRS uses to make assessments. That is not 472 00:37:04,589 --> 00:37:08,560 the estate tax return. The estate tax return for the estate of Michael 473 00:37:08,560 --> 00:37:14,499 Jackson my guess would be was probably somewhere between seven to 20 boxes 474 00:37:14,499 --> 00:37:18,403 because they contain valuations with details in them. That is required. It 475 00:37:18,403 --> 00:37:22,440 is not a complete 706 without valuation. So those questions we're 476 00:37:22,440 --> 00:37:24,976 waiting to get answered and will probably be answered in the court 477 00:37:24,976 --> 00:37:28,379 dicta and if they were in there they were probably present at trial and 478 00:37:28,379 --> 00:37:31,916 they will show up in the court dicta. I mean it's there somewhere and 479 00:37:31,916 --> 00:37:36,654 they're basically putting valuation experts against valuation experts. 480 00:37:36,654 --> 00:37:41,493 What is the value and how much time does the IRS really want to spend on 481 00:37:41,493 --> 00:37:47,198 this? That's what it comes down to. The future estate of Prince, the man 482 00:37:47,198 --> 00:37:52,203 died without a will. Big mistake. Not selling services but big mistake. Not 483 00:37:54,639 --> 00:37:59,210 only were his regular assets not protected. His right of publicity, the 484 00:37:59,210 --> 00:38:04,883 value is unknown. The uphill battle in an estate tax audit which is 485 00:38:04,883 --> 00:38:08,319 guaranteed essentially I would say for all intents and purposes it'll 486 00:38:08,319 --> 00:38:15,293 probably pass several hundreds of thousands of dollars in legal fees. 487 00:38:15,293 --> 00:38:20,298 That is a cost of not doing a five figure estate plan because you're 488 00:38:22,433 --> 00:38:26,304 going to go through -- and the estate tax statutory period is three years. 489 00:38:26,304 --> 00:38:29,541 Or if you take a situation like the Michael Jackson estate where they 490 00:38:29,541 --> 00:38:33,311 reported the value of the right of publicity at 2,000 there is a clause 491 00:38:33,311 --> 00:38:38,883 in the statute at the REGS for gross undervaluation which essentially means 492 00:38:38,883 --> 00:38:43,288 that the asset wasn't reported or if it wasn't reported specifically enough 493 00:38:43,288 --> 00:38:50,161 as instructions require the estate remains open indefinitely. So this is 494 00:38:50,161 --> 00:38:56,334 why expert, seasoned estate tax attorneys who understand the 495 00:38:56,334 --> 00:38:59,637 implications, who understand celebrities, who understand public 496 00:38:59,637 --> 00:39:03,241 figures, who understand what IP means, what the right of publicity means is 497 00:39:03,241 --> 00:39:07,111 crucial and they have to be consulted. The first time you as an IP attorney 498 00:39:07,111 --> 00:39:11,950 draft a licensing agreement where you're giving a company name rights to 499 00:39:11,950 --> 00:39:17,522 one of your clients, you should be talking to a tax attorney because 500 00:39:17,522 --> 00:39:22,093 maybe that name right shouldn't be going as a direct person to the entity 501 00:39:22,093 --> 00:39:25,763 or that person. Maybe it should be sheltered through a trust. Maybe it 502 00:39:25,763 --> 00:39:29,868 should be sheltered through business entity because we can split rights. We 503 00:39:29,868 --> 00:39:35,173 can create remainder interests. We can create income interest so that the 504 00:39:35,173 --> 00:39:39,978 person who owns these rights can have control over them while they're alive 505 00:39:39,978 --> 00:39:44,682 but still not have value in them when they die. These are complicated, 506 00:39:44,682 --> 00:39:49,687 extremely, I would say intense very multi-layered sort of planning and the 507 00:39:54,993 --> 00:39:59,697 nebulous part is we don't know if these are going to be blessed by the 508 00:39:59,697 --> 00:40:04,702 IRS but we have an argument and at the end of the day when you create a trust 509 00:40:07,805 --> 00:40:11,943 and you put it in there and you create remainder interest, you have an 510 00:40:11,943 --> 00:40:15,213 argument where you can at least negotiate it. And negotiating means 511 00:40:15,213 --> 00:40:20,018 maybe you can get less than 50% of what the IRS claims the value is. If 512 00:40:20,018 --> 00:40:23,721 you have nothing, what is your argument? You never took anything out 513 00:40:23,721 --> 00:40:30,328 of the estate. So with the IRS most people don't know this, estate and 514 00:40:30,328 --> 00:40:35,300 gift tax audits there are about a little over 250 attorneys in the 515 00:40:35,300 --> 00:40:39,971 country who work for the IRS as estate tax attorneys. They have fun going out 516 00:40:39,971 --> 00:40:45,376 to the middle of the country to look at every single estate and gift tax 517 00:40:45,376 --> 00:40:51,883 return that has ever been filed. There is no return that does not task the 518 00:40:51,883 --> 00:40:57,221 purview of an attorney. You will only hear about it when it is selected for 519 00:40:57,221 --> 00:41:03,661 audit. So if you think that putting your client’s right of publicity at 520 00:41:03,661 --> 00:41:10,368 100 million dollars is going to escape audit, be advised. That is not the 521 00:41:10,368 --> 00:41:15,373 case because you have a potential for dispute on a valuation issue that is 522 00:41:17,709 --> 00:41:22,146 most likely going to go for a full audited exam. But you can cut that 523 00:41:22,146 --> 00:41:27,952 time when you have reliable valuation reports in the record, great experts 524 00:41:27,952 --> 00:41:32,390 who are collaborating with you, a team of tax attorneys, CPAs, IP attorneys 525 00:41:32,390 --> 00:41:38,029 who can go into every aspect of this basically off the top of their head 526 00:41:38,029 --> 00:41:41,766 and that will cut down the cost of examination from hundreds of thousands 527 00:41:41,766 --> 00:41:46,404 of dollars significantly. Any client out there is going to enjoy having to 528 00:41:46,404 --> 00:41:49,674 not have legal fees after they pass away so their beneficiaries get even 529 00:41:49,674 --> 00:41:54,445 less. Theoretically, it's a deduction of the estate tax return for the legal 530 00:41:54,445 --> 00:41:59,450 fees but remember at a 40% tax, you still lose 60%. NACVA is the National 531 00:42:04,655 --> 00:42:08,860 Association of Certified Valuation Analysts. They have developed specific 532 00:42:08,860 --> 00:42:13,398 business valuation methodologies. They're highly respected by the IRS. 533 00:42:13,398 --> 00:42:18,469 If a valuation analyst, business valuation IP analyst, anybody has an 534 00:42:18,469 --> 00:42:22,540 NACVA certification, they know the standards to follow. They know the 535 00:42:22,540 --> 00:42:27,278 order to put it in. They know the format. They know that they need to 536 00:42:27,278 --> 00:42:31,349 address all three approaches to valuation, which I will touch on, and 537 00:42:31,349 --> 00:42:35,920 if those things are missing it becomes an insufficient valuation report which 538 00:42:35,920 --> 00:42:40,358 is more easily challenged. So I recommend looking for some sort of 539 00:42:40,358 --> 00:42:45,763 certification and background for these valuation analysts and most attorneys 540 00:42:45,763 --> 00:42:50,234 -- I went through -- so while at the IRS we were put through the training 541 00:42:50,234 --> 00:42:57,108 for NACVA certification so I can actually do strategic valuation. The 542 00:42:57,108 --> 00:43:01,412 slides here you're going to get a copy of it so it looks like we are running 543 00:43:01,412 --> 00:43:05,917 out of time quickly so I just want to sort of touch on these points so that 544 00:43:05,917 --> 00:43:09,287 you can always follow-up with me with questions and I can go through them. 545 00:43:09,287 --> 00:43:12,790 Essentially about appeals process, there's a higher chance of negotiating 546 00:43:12,790 --> 00:43:16,127 at the appeals process and the tax code is your decision maker 547 00:43:16,127 --> 00:43:20,531 eventually. I mean it's -- and then the costs we just touched on. We can 548 00:43:20,531 --> 00:43:25,903 go back to what Professor Rothman said concerning this. Discounting is 549 00:43:25,903 --> 00:43:31,843 something I touched on again. Risk is discounting on the reverse side. If 550 00:43:31,843 --> 00:43:37,215 somebody is worth the value of their -- because they did good protecting of 551 00:43:37,215 --> 00:43:42,220 their public rights, the IRS has the ability to tack on a premium so it 552 00:43:42,220 --> 00:43:45,456 goes both ways. You can actually be more than what you thought your 553 00:43:45,456 --> 00:43:49,694 licensing rights were for your client. Income costs and market approaches, 554 00:43:49,694 --> 00:43:55,533 the three approaches, the most widely used. This evolving field is actually 555 00:43:55,533 --> 00:44:00,972 a combination of the income and the market approach, which basically 556 00:44:00,972 --> 00:44:06,110 factors in future streams of income and comparables although I don't know 557 00:44:06,110 --> 00:44:12,884 who you would use as a comparable for say Mr. Jabbar because he is sort of a 558 00:44:12,884 --> 00:44:16,487 unique case, which goes back to valuation of unique art and other 559 00:44:16,487 --> 00:44:19,991 nebulous items. The IRS has experts for everything you can imagine. There 560 00:44:19,991 --> 00:44:25,396 have been valuations of show dogs so there is nothing that they do not have 561 00:44:25,396 --> 00:44:30,635 the resources for. And this is again splitting the right of valuation. I 562 00:44:30,635 --> 00:44:35,673 spoke about trusts, moving it. There are a couple cases, the Trump Act 563 00:44:35,673 --> 00:44:39,143 conundrum is at what point does free speech end and what point does his 564 00:44:39,143 --> 00:44:43,781 rights as a celebrity which has value which includes the estate tack on. 565 00:44:43,781 --> 00:44:48,152 That's interesting. I'll probably have a couple articles on that upcoming so 566 00:44:48,152 --> 00:44:53,424 you can view more on that. It's obviously more -- restricted transfers 567 00:44:53,424 --> 00:44:57,328 again IP attorneys you're familiar with that. It is very similar to the 568 00:44:57,328 --> 00:45:00,998 business idea of licensing. I'm speeding through this because I just 569 00:45:00,998 --> 00:45:05,036 got a note that there is probably less than one minute at this point. 570 00:45:05,036 --> 00:45:08,339 Charitable options. There's a deduction of the estate tax return for 571 00:45:08,339 --> 00:45:13,444 the charity. The role of the estate planner flips. The estate planner 572 00:45:13,444 --> 00:45:16,314 wants to create the highest value for the right of publicity when you're 573 00:45:16,314 --> 00:45:19,417 putting it into a charity because that's the highest deduction. It also 574 00:45:19,417 --> 00:45:22,720 increases the basis of the properties when it transfers because when you 575 00:45:22,720 --> 00:45:25,556 transfer it in a [indiscernible 00:45:19] where remainder interest may 576 00:45:25,556 --> 00:45:31,262 go to noncharitable beneficiaries you have increased basis in some assets so 577 00:45:31,262 --> 00:45:36,934 capital gains are lower. And I said this is sort of I'm sure goes over the 578 00:45:36,934 --> 00:45:40,104 head of most people who have absolutely no interest in tax law 579 00:45:40,104 --> 00:45:44,742 because boring numbers in the Internal Revenue Code but these are things that 580 00:45:44,742 --> 00:45:50,781 you can mention to clients, to your employer, to your companies and it 581 00:45:50,781 --> 00:45:53,818 sort of gives them an idea there are other things beyond the scope of just 582 00:45:53,818 --> 00:45:58,522 licensing rights, what happens today, royalties and things of that nature. I 583 00:45:58,522 --> 00:46:04,495 can go through those. As I said, you can follow-up with questions. And here 584 00:46:04,495 --> 00:46:09,433 are some references for a general review and an article one of my 585 00:46:09,433 --> 00:46:16,240 colleagues published. But and if we have any time, would we have any 586 00:46:16,240 --> 00:46:19,243 questions or comments from anybody else in -- (Overlapping) >> FEMALE 587 00:46:19,243 --> 00:46:21,245 SPEAKER: I think the list of resources will be handed out at the end for 588 00:46:21,245 --> 00:46:23,247 people. I know that we started a little late but I think we can get 589 00:46:23,247 --> 00:46:25,249 sort of conversation -- [Indiscernible 00:46:27] >> PRIYA ROYAL: Questions or 590 00:46:25,249 --> 00:46:27,251 comments. Okay. Sure. Do you want to come up here? Do you want to go back 591 00:46:27,251 --> 00:46:29,253 and forth Jennifer? >> AUDIENCE: I can just use this. >> PRIYA ROYAL: Okay, 592 00:46:29,253 --> 00:46:31,255 great. >> KAREEM ABDUL JABBAR: Good morning, everyone. My question is how 593 00:46:31,255 --> 00:46:33,257 does someone with some level of fame know that they need to do estate 594 00:46:33,257 --> 00:46:35,259 planning around their right of publicity? I'm 71 years old and now 595 00:46:35,259 --> 00:46:41,432 trying to deal with this type of planning for my family and my 596 00:46:41,432 --> 00:46:48,272 survivors and I'm just learning about it. So how do we figure out who to go 597 00:46:48,272 --> 00:46:51,409 to and what questions to ask? >> PRIYA ROYAL: We are sort of in the session 598 00:46:51,409 --> 00:46:55,479 of what should your lawyer know to be a good lawyer. I think the ethics 599 00:46:55,479 --> 00:47:02,053 battle is going to address this whether it would be an ethics issue if 600 00:47:02,053 --> 00:47:05,523 you don't know, if you don't advise your client about things they should 601 00:47:05,523 --> 00:47:08,359 be considering that are not necessarily specifically within the 602 00:47:08,359 --> 00:47:12,930 scope of the engagement. And they are -- a good business manager should be 603 00:47:12,930 --> 00:47:17,601 aware that these issues exist so that they can vet the attorney because 604 00:47:17,601 --> 00:47:20,805 invariably for famous people the business manager essentially manages 605 00:47:20,805 --> 00:47:25,843 who is hired, who is not hired, and understanding these issues at least on 606 00:47:25,843 --> 00:47:32,483 a very broad level is critical to that. So I would say get good people 607 00:47:32,483 --> 00:47:39,156 so they know what they should know. And it never hurts to sort of keep 608 00:47:39,156 --> 00:47:43,094 abreast of what is happening in the news because like the estate of 609 00:47:43,094 --> 00:47:47,264 Michael Jackson is in the news and you sort of say what is this? Does this 610 00:47:47,264 --> 00:47:51,802 apply to me? Always ask is this my issue? >> JENNIFER ROTHMAN: I think 611 00:47:51,802 --> 00:47:54,739 people need to start, it's not about age. You mentioned your age but I 612 00:47:54,739 --> 00:47:59,744 think anyone who has a high commercial value, identity, needs to make a plan 613 00:48:01,779 --> 00:48:05,816 because no one knows when they're going to die so it doesn't really 614 00:48:05,816 --> 00:48:11,689 matter how old you are. It matters if you have a large enough value estate 615 00:48:11,689 --> 00:48:14,592 that you need to make a plan. >> PRIYA ROYAL: Let me add that everybody 616 00:48:14,592 --> 00:48:17,695 should have a basic estate plan. As soon as you have let's say reality 617 00:48:17,695 --> 00:48:21,699 show star walk into your room and say I want to be in this project or I'm 618 00:48:21,699 --> 00:48:25,936 going to get paid $500 for six episodes you need to tell them we need 619 00:48:25,936 --> 00:48:30,708 to start thinking about where we're going to put those $500 because it is 620 00:48:30,708 --> 00:48:35,813 likely that tomorrow that $500 may be 500 million dollars. So you have to 621 00:48:35,813 --> 00:48:39,083 start at the very basic level and you build on estate planning. You start 622 00:48:39,083 --> 00:48:42,853 low so your fees are low and then you keep building more and more trust 623 00:48:42,853 --> 00:48:46,624 instruments. It's a life-long process. >> DEBORAH MORALES: Now I'm Kareem's 624 00:48:46,624 --> 00:48:51,962 business manager and I've been doing this for about 15 years as his manager 625 00:48:51,962 --> 00:48:57,468 and I consider myself one of more the savvy managers out there. I'm very 626 00:48:57,468 --> 00:49:01,839 aware of issues but I didn't know about this until just a few months ago 627 00:49:01,839 --> 00:49:06,243 and we have lots of famous friends and we've been talking to all of them and 628 00:49:06,243 --> 00:49:10,648 they don't know about it. It seems that they think this Michael Jackson 629 00:49:10,648 --> 00:49:17,555 case is an anomaly. So while I'm not a lawyer, what is my responsibility to 630 00:49:17,555 --> 00:49:23,294 inform my client of these types of issues? >> PRIYA ROYAL: From my 631 00:49:23,294 --> 00:49:26,297 perspective as a business manager, you are competing with other business 632 00:49:26,297 --> 00:49:30,768 managers and your duty is to enable your client to be completely aware and 633 00:49:30,768 --> 00:49:36,540 protected entirely so it is a responsibility. You should be aware of 634 00:49:36,540 --> 00:49:41,045 what legal issues may arise and essentially you need the information 635 00:49:41,045 --> 00:49:46,050 to vet a tax attorney and an IP attorney. You need to know so how much 636 00:49:48,285 --> 00:49:51,188 is my client's right of publicity worth and they sort of give you this 637 00:49:51,188 --> 00:49:55,993 glazed look, we have a problem. >> JENNIFER ROTHMAN: I think there are 638 00:49:55,993 --> 00:50:02,199 different issues. One is a legal issue which is do business managers have a 639 00:50:02,199 --> 00:50:06,670 legal liability to know about the right of publicity? I'm going to put 640 00:50:06,670 --> 00:50:13,177 that to the side. But there's another issue which is should a business 641 00:50:13,177 --> 00:50:16,413 manager know about the right of publicity and the issues related to 642 00:50:16,413 --> 00:50:19,917 it? Absolutely. I mean I think that's important but it's not just about the 643 00:50:19,917 --> 00:50:23,587 managers. The people who most need to know about this are the actual 644 00:50:23,587 --> 00:50:29,593 individuals and not just the wealthy and famous but everyone because I 645 00:50:29,593 --> 00:50:33,664 don't know if people know this but some of the strategies that Ms. 646 00:50:33,664 --> 00:50:38,335 Morales suggested and that people with high value estates are enacting are 647 00:50:38,335 --> 00:50:44,174 potentially jeopardizing those who have less valuable estates as well as 648 00:50:44,174 --> 00:50:48,846 the living. So for example, in New York there was a recent push to pass a 649 00:50:48,846 --> 00:50:52,583 postmortem right of publicity and there's a very small subsection of 650 00:50:52,583 --> 00:50:55,953 individuals across the country for whom a postmortem right of publicity 651 00:50:55,953 --> 00:50:59,857 matters, that the IRS will care about, that will transfer. But by setting it 652 00:50:59,857 --> 00:51:03,961 up in a certain way, what it's going to do is that the sort of less 653 00:51:03,961 --> 00:51:10,901 powerful athletes and individuals will be harmed by some of the transfers and 654 00:51:10,901 --> 00:51:15,039 there won't be protection. So I just want to make sure that people see the 655 00:51:15,039 --> 00:51:20,311 sort of bigger picture but I think business managers absolutely know as 656 00:51:20,311 --> 00:51:25,582 well as the individuals involved about the right of publicity and associated 657 00:51:25,582 --> 00:51:29,186 rights. >> KAREEM ABDUL JABBAR: Are the right of publicity laws protected 658 00:51:29,186 --> 00:51:34,191 differently by each state and how does that affect people that might have 659 00:51:38,128 --> 00:51:43,000 roots in various states or homes? How is that determined? >> JENNIFER 660 00:51:43,000 --> 00:51:45,202 ROTHMAN: I'll take the first part and then maybe you can take the second 661 00:51:45,202 --> 00:51:50,207 part of that. So the states vary widely so only about half of the 662 00:51:53,911 --> 00:51:59,817 states provide any postmortem right of publicity so the other half don't have 663 00:51:59,817 --> 00:52:03,921 it or we don't know whether they have it or not. And of those as I mentioned 664 00:52:03,921 --> 00:52:05,990 initially -- >> DEBORAH MORALES: Sorry, when you say that some of them 665 00:52:05,990 --> 00:52:10,928 supply it and some of them don't, does that mean that if there's no right of 666 00:52:10,928 --> 00:52:15,132 publicity in the state then there's no estate tax or is that still -- ? >> 667 00:52:15,132 --> 00:52:18,602 JENNIFER ROTHMAN: Ah, see that's the second part of the question and so 668 00:52:18,602 --> 00:52:23,007 this is not a simple answer because the IRS doesn't know and as you 669 00:52:23,007 --> 00:52:25,709 probably realized from this conversation they want to try to get 670 00:52:25,709 --> 00:52:32,449 the most tax. They're going to value it at a very high rate so they're 671 00:52:32,449 --> 00:52:36,620 going to say well we don't know that there's a postmortem right in your 672 00:52:36,620 --> 00:52:40,224 state but since we don't know, let's presume there is and let's presume 673 00:52:40,224 --> 00:52:44,828 that it looks like this other state's right of publicity and then we'll 674 00:52:44,828 --> 00:52:48,732 value it as if it's fully commercialized and there's never a 675 00:52:48,732 --> 00:52:52,636 First Amendment defense and never a copyright preemption defense and you 676 00:52:52,636 --> 00:52:56,740 get all the money all the time and that's what we're going to tax you on. 677 00:52:56,740 --> 00:53:02,579 So that's the IRS version. As a matter of state law, that's not right and so 678 00:53:02,579 --> 00:53:07,017 it's hard to know exactly how but that is an area of litigation that will 679 00:53:07,017 --> 00:53:10,454 eventually be sorted out. People are going to challenge hey look, I died in 680 00:53:10,454 --> 00:53:14,625 a state that doesn't -- or the estate will say I died in a state, there's no 681 00:53:14,625 --> 00:53:17,828 postmortem right of publicity. I died in New York. I died in Minnesota. 682 00:53:17,828 --> 00:53:21,265 There's no postmortem right of publicity so you shouldn't value it. 683 00:53:21,265 --> 00:53:23,967 >> DEBORH MORALES: Dr. Rothman, if you die in New York and you're Marilyn 684 00:53:23,967 --> 00:53:28,205 Monroe and your estate is being monetized by a company like CMG and 685 00:53:28,205 --> 00:53:32,176 the family is not getting the money because they died in a state where 686 00:53:32,176 --> 00:53:35,045 their right of publicity is not protected? >> JENNIFER ROTHMAN: So 687 00:53:35,045 --> 00:53:40,117 it's more complicated than that. So Marilyn -- let me just answer that 688 00:53:40,117 --> 00:53:43,654 part and then I'll tag Dan. So Marilyn Monroe is complicated because Marilyn 689 00:53:43,654 --> 00:53:47,024 Monroe tried to avoid paying California taxes, her estate, and by 690 00:53:47,024 --> 00:53:52,229 doing so they said oh no, she was a resident of New York when she died so 691 00:53:52,229 --> 00:53:56,533 we don't have to pay those taxes in California which are higher than those 692 00:53:56,533 --> 00:54:00,170 in New York. Then later when her estate wanted postmortem rights they 693 00:54:00,170 --> 00:54:04,041 said oh no she died in California because we have those postmortem 694 00:54:04,041 --> 00:54:09,613 rights and of course you can't change where she died. She's dead. You picked 695 00:54:09,613 --> 00:54:14,618 one. You're stuck with it. So that's a slightly different issue and so I want 696 00:54:41,178 --> 00:54:46,183 to reiterate two points that I made. One, the right of publicity, whether 697 00:55:24,054 --> 00:55:29,059 Marilyn Monroe's estate has a right of publicity after death or not, doesn't 698 00:55:40,871 --> 00:55:44,608 change that her estate still can enforce false endorsement and false 699 00:55:44,608 --> 00:55:46,777 advertising claims if anyone is claiming to have official Marilyn 700 00:55:46,777 --> 00:55:48,779 Monroe merchandise. It doesn't change any ownership or enforcement of 701 00:55:48,779 --> 00:55:50,781 trademarks and copyrights that the estate holds so there's still a lot of 702 00:55:50,781 --> 00:55:52,783 money related to Marilyn Monroe's name in likeness separate from whether New 703 00:55:52,783 --> 00:55:54,785 York has a postmortem right of publicity. And then I'll just add to 704 00:55:54,785 --> 00:56:00,691 that the additional piece that some states open their doors to all-comers 705 00:56:00,691 --> 00:56:05,696 so Washington state for example and Hawaii if you sell Marilyn Monroe 706 01:02:11,361 --> 01:02:15,865 merchandise there under current law from the Ninth Circuit, it hasn't gone 707 01:02:15,865 --> 01:02:20,870 all the way up to the Supreme Court, the Marilyn Monroe estate can enforce 708 01:02:33,583 --> 01:02:35,585 those rights in those states because you don't have to have died domicile 709 01:02:35,585 --> 01:02:37,587 in those states to enforce your rights as to products sold in those states. 710 01:02:37,587 --> 01:02:39,589 >> PRIYA ROYAL: Yeah, thank you. So just a caveat to something Professor 711 01:02:39,589 --> 01:02:41,591 Rothman said, the tax person, for tax purposes you can pick where you die so 712 01:02:41,591 --> 01:02:43,593 that's sort of what she was touching on with domicile. >> JENNIFER ROTHMAN: 713 01:02:43,593 --> 01:02:45,595 But you can't change it. >> PRIYA ROYAL: You can't change it. You can 714 01:02:45,595 --> 01:02:47,597 pick where you die and you can sort of, I mean, the definition is a little 715 01:02:47,597 --> 01:02:49,599 bit fluid so you can sort of say your domiciled in one place and not the 716 01:02:49,599 --> 01:02:51,601 other if it has advantages and you have enough contacts and things of 717 01:02:51,601 --> 01:02:53,603 that but we won't go into that right now. The other thing is you can also 718 01:02:53,603 --> 01:02:55,605 pick varying rights of publicity get valued and where they so to speak die 719 01:02:55,605 --> 01:02:57,607 to have an afterlife because that's where planning comes in. But you pick 720 01:02:57,607 --> 01:02:59,609 and choose and you put it into entities. Let's say Nevada has no tax 721 01:02:59,609 --> 01:03:01,544 on corporate. Maybe some parts of those right of publicity I'm sure Mr. 722 01:03:01,544 --> 01:03:03,546 Jabbar is quite fond of his name but if he wants to use, if he never 723 01:03:03,546 --> 01:03:05,548 applied to use Lou Eseldor (Ph) for example maybe he could put that in a 724 01:03:05,548 --> 01:03:07,550 Nevada trust somewhere and never use it but then he could monetize on it 725 01:03:07,550 --> 01:03:09,552 because other people want to use it. Or he would give up control or he 726 01:03:09,552 --> 01:03:11,554 could retain control having end of interest and then he would give up 727 01:03:11,554 --> 01:03:13,556 control when he dies and that's a different type of trust. So I've 728 01:03:13,556 --> 01:03:15,558 essentially probably confounded the audience but I'm sorry. >> JENNIFER 729 01:03:15,558 --> 01:03:17,560 ROTHMAN: I just want to add -- I just want to reiterate something because I 730 01:03:17,560 --> 01:03:19,562 think if I read the tea leaves right what's going to happen over the next 731 01:03:19,562 --> 01:03:21,564 25 years is that high value individuals like Mr. Abdul Jabbar and 732 01:03:21,564 --> 01:03:23,566 others are going to create companies and vest their rights of publicity in 733 01:03:23,566 --> 01:03:25,568 them as a tax strategy to avoid things. But the problem is that the 734 01:03:25,568 --> 01:03:27,570 door will then close and so the next Kareem Abdul Jabbar will sign an NCAA 735 01:03:27,570 --> 01:03:29,572 contract which transfers the right of publicity to the NCAA or to a manager 736 01:03:29,572 --> 01:03:31,574 or agent will sign over all of the rights of publicity or to some third 737 01:03:31,574 --> 01:03:33,576 party corporation and won't be able to get it back. So the only people who 738 01:03:33,576 --> 01:03:35,578 can benefit in some respects for the transfer right now are people who are 739 01:03:35,578 --> 01:03:37,580 already so powerful that they can't have their rights stripped from them. 740 01:03:37,580 --> 01:03:38,948 And so I just want to, when we're thinking about these planning 741 01:03:38,948 --> 01:03:40,950 strategies, there's dealing with your individual client but I also think 742 01:03:40,950 --> 01:03:42,952 this is an area since we're in DC to highlight some of the potential law 743 01:03:42,952 --> 01:03:44,954 reform that needs to take place so that maybe we're helping heirs of 744 01:03:44,954 --> 01:03:46,956 celebrities so they're not forced to commodify their identities or have the 745 01:03:46,956 --> 01:03:48,291 survivors deal with crass commercialization of their loved one 746 01:03:48,291 --> 01:03:50,293 but we're not taking advantage of every other person. >> KAREEM ABDUL 747 01:03:50,293 --> 01:03:52,295 JABBAR: How exactly do we go about finding out how much your right of 748 01:03:52,295 --> 01:03:54,297 publicity is worth if you're trying to make these plans? How do you find that 749 01:03:54,297 --> 01:03:56,299 out? >> JENNIFER ROTHMAN: I'll start but then Ms. Royal I think will have 750 01:03:56,299 --> 01:03:58,301 more to say about how the IRS would value it. I know that for example in 751 01:03:58,301 --> 01:04:00,236 the Jackson estate that one of the experts that were brought in for the 752 01:04:00,236 --> 01:04:02,238 Jackson estate which is actually perplexing to me is a company that 753 01:04:02,238 --> 01:04:04,240 specializes in selling celebrity personalities and licensing them. So 754 01:04:04,240 --> 01:04:06,242 they had a vested interest in a high valuation as you can imagine so that 755 01:04:06,242 --> 01:04:08,244 is not the person you want valuing a right of publicity if you want it to 756 01:04:08,244 --> 01:04:10,246 come in low, a company that makes money by coming in high. So I just, 757 01:04:10,246 --> 01:04:12,248 strategy-wise, if you're in that situation you might want to look 758 01:04:12,248 --> 01:04:14,250 elsewhere but because of who the IRS goes to and others, there are only a 759 01:04:14,250 --> 01:04:16,252 very small number of people who could say they're right of publicity value 760 01:04:16,252 --> 01:04:18,254 experts and they largely are these people who have a vested interest in 761 01:04:18,254 --> 01:04:20,256 it being high. So that is a whole problem with the valuation process 762 01:04:20,256 --> 01:04:22,258 itself and the valuation is complicated by and there was an expert 763 01:04:22,258 --> 01:04:24,260 filing by a colleague of mine, Eugene Volokh, in the Jackson estate saying 764 01:04:24,260 --> 01:04:26,262 well how do we even value this because of the First Amendment and copyright 765 01:04:26,262 --> 01:04:28,264 preemption things? So it's very fuzzy and amorphous plus the variation in 766 01:04:28,264 --> 01:04:30,266 state law. And with that said I think there are strategies to -- 767 01:04:30,266 --> 01:04:32,268 (Overlapping) >> DEBORAH MORALES: Priya, how does the IRS calculate the 768 01:04:32,268 --> 01:04:34,270 value of an estate and once they do calculate it, what can be done to 769 01:04:34,270 --> 01:04:36,272 properly challenge an over-evaluation? >> PRIYA ROYAL: I'm going to mention 770 01:04:36,272 --> 01:04:38,274 that and answer that question right after I address some issues that 771 01:04:38,274 --> 01:04:40,276 Professor Rothman spoke of in terms of IP and planning. But in estate 772 01:04:40,276 --> 01:04:42,278 planning and from an IRS valuation standpoint, you actually want a 773 01:04:42,278 --> 01:04:44,280 valuation expert who does these high valuations because when you call a 774 01:04:44,280 --> 01:04:46,282 valuation company that does right of publicity the first thing you tell 775 01:04:46,282 --> 01:04:48,284 them is not that I need a valuation but that I need a valuation for estate 776 01:04:48,284 --> 01:04:50,286 tax purposes. They will use different comparables. They will use tax 777 01:04:50,286 --> 01:04:52,288 beneficial parameters where there is some gray area. And the IRS will give 778 01:04:52,288 --> 01:04:52,522 more credibility to those valuations because they know what they're talking 779 01:04:52,522 --> 01:04:52,522 about from their perspective because that is what the IRS has. The IRS has 780 01:04:52,522 --> 01:04:52,522 people and they can outsource to private companies the very person who 781 01:04:52,522 --> 01:04:52,522 values your client's right of publicity in their estate is going to 782 01:04:52,522 --> 01:04:52,522 be the same person that the IRS will hire tomorrow on another estate. So 783 01:04:52,522 --> 01:04:52,522 wouldn't you want to put apples to apples and then say my apple is better 784 01:04:52,522 --> 01:04:52,522 than yours? That's the idea. So when you asked about IRS I think I just 785 01:04:52,522 --> 01:04:52,522 answered your question so that's where the methodology is. >> KAREEM ABDUL 786 01:04:52,522 --> 01:04:52,522 JABBAR: With the constant movement of federal estate exemptions, how does a 787 01:04:52,522 --> 01:04:52,522 celebrity properly plan and make the adjustments that they have to make 788 01:04:52,522 --> 01:04:52,522 with all this movement? >> PRIYA ROYAL: So right now the estate tax 789 01:04:52,522 --> 01:04:52,522 exemption amount is set at 11 million, adjust for inflation like 11.18, 790 01:04:52,522 --> 01:04:52,522 something like that, and it's good until 2026 unless the Brady Bill 791 01:04:52,522 --> 01:04:52,522 passes which means that we have it perpetually or infinitely until 792 01:04:52,522 --> 01:04:52,522 Congress changes hands. But so the idea is that when we have tax reform 793 01:04:52,522 --> 01:04:52,522 like this you need an attorney who is abreast on the law changes and who 794 01:04:52,522 --> 01:04:52,522 knows how to plan quickly because here we have a great opportunity to pass 795 01:04:52,522 --> 01:04:52,522 double the amount of assets in valuation out of the estate. You would 796 01:04:52,522 --> 01:04:52,522 want your valuation expert to value conservatively. Maybe sort of say at 797 01:04:52,522 --> 01:04:52,522 the worst case scenario this is probably going to be the value so 798 01:04:52,522 --> 01:04:52,522 let's see how much we can pull out of the estate in this amount. So this is 799 01:04:52,522 --> 01:04:52,522 where you have to work and you have to be -- most people who have 800 01:04:52,522 --> 01:04:52,522 conservative rights of publicity they should be getting updates from their 801 01:04:52,522 --> 01:04:52,522 attorneys. They should be getting new law updates and they should basically 802 01:04:52,522 --> 01:04:52,522 be saying okay now what for me? And you should be getting a list with a 803 01:04:52,522 --> 01:04:52,522 customized plan that says okay now we need to change these things. >> 804 01:04:52,522 --> 01:04:52,522 DEBORAH MORALES: If the current deduction is 10 or 11 million dollars 805 01:04:52,522 --> 01:04:52,522 for a single person and then that changes in 2026 then does this have to 806 01:04:52,522 --> 01:04:52,522 be readjusted again? >> PRIYA ROYAL: Not necessarily. If you're putting it 807 01:04:52,522 --> 01:04:52,522 in these vehicles where on paper the person has given up control on paper 808 01:04:52,522 --> 01:04:52,522 or you're putting the grant to retain annuity trust for example or an 809 01:04:52,522 --> 01:04:52,522 intentionally defective income trust where basically Mr. Jabbar would get 810 01:04:52,522 --> 01:04:52,522 income that is generated from this commercialization but he doesn't 811 01:04:52,522 --> 01:04:52,522 actually own the name, have control over his name and likeness for estate 812 01:04:52,522 --> 01:04:52,522 tax purposes, so essentially when he dies it passes out of his estate. It's 813 01:04:52,522 --> 01:04:52,522 not in his estate anymore so you maximize -- when the exemptions are 814 01:04:52,522 --> 01:04:52,522 high, you pull more assets out so that's sort of -- (Overlapping) >> 815 01:04:52,522 --> 01:04:52,522 DEBORAH MORALES: My last question for you is so how do you know whose 816 01:04:52,522 --> 01:04:52,522 valuation is correct; the IRS’s or the valuation company that you hired? Even 817 01:04:52,522 --> 01:04:52,522 if it's in apples to apples, how do you plan for an expensive legal 818 01:04:52,522 --> 01:04:52,522 battle? >> PRIYA ROYAL: The best way to do that, I usually recommend with 819 01:04:52,522 --> 01:04:52,522 planning -- I'm from being tax editor of one of the premier leading tax 820 01:04:52,522 --> 01:04:52,522 publications because we address these issues in our portfolios. If you have 821 01:04:52,522 --> 01:04:52,522 an entirely illiquid estate which is what you're looking at, right? Rights 822 01:04:52,522 --> 01:04:52,522 of publicity are illiquid. There's nothing tangible there so intangibles 823 01:04:52,522 --> 01:04:52,522 and they're illiquid. You don't want to have to sell Mr. Jabbar's house for 824 01:04:52,522 --> 01:04:52,522 example to pay taxes. So the classic example that is applied to other 825 01:04:52,522 --> 01:04:52,522 wealthy, not necessarily celebrities even, taxpayers is that you would have 826 01:04:52,522 --> 01:04:52,522 a very high amount of life insurance. By the way, the full value of life 827 01:04:52,522 --> 01:04:52,522 insurance is also included in the estate so there's a special trust to 828 01:04:52,522 --> 01:04:52,522 pull the life insurance out of the estate and then use the funds from the 829 01:04:52,522 --> 01:04:52,522 payout of the life insurance to pay the taxes for the estate so you do 830 01:04:52,522 --> 01:04:52,522 that planning. So I think that sort of gives you a general -- that's just one 831 01:04:52,522 --> 01:04:52,522 of many ideas but that's one of the more commonly used ones. >> KAREEM 832 01:04:52,522 --> 01:04:52,522 ABDUL JABBAR: Do you give aspirin to people who are trying to figure this 833 01:04:52,522 --> 01:04:52,522 out? (Laughter) >> PRIYA ROYAL: Now you know why I apologized. Thank you. 834 01:04:52,522 --> 01:04:52,522 >> MARY BONEY DENNISON: We are running out of time. If you have any last 835 01:04:52,522 --> 01:04:52,522 questions, we can ask them. Otherwise I think we need to wrap up because 836 01:04:52,522 --> 01:04:52,522 we've got a tight schedule today. >> DEBORAH MORALES: We've got a lot to 837 01:04:52,522 --> 01:04:52,522 learn. >> MARY BONEY DENNISON: Okay well thank you. Please give everybody 838 01:04:52,522 --> 01:04:46,583 a big round of applause. Thank you. (Applause)