Meet David Bowie, Estate Planning Guru

Draft_lens6229982module49470302photo_1249598396business-manA recent Forbes article on Bowie's death, entitled "A Peek Into The David Bowie Estate: His Legacy Extends Beyond Music," reports that Bowie, whose real name was David Robert Jones—and who didn't want to be confused with Davy Jones of the Monkees—recently passed away from liver cancer just two days after the release of his final album on his 69th birthday. He was one-of-a-kind, both as a musician and in his finances. In the 1970s and 80s, Bowie struggled financially, even to the verge of bankruptcy. Years later, he took control of his financial legacy through a move now considered to be revolutionary.

Bowie, with investment banker David Pullman's assistance, sold a stake in his catalogue of music, but rather than selling his songwriting, performance, and licensing rights to his hits, he created "Bowie Bonds." These allowed Bowie to sell a 10-year investment in his music, which operated like an annuity, providing a fixed-rate of return of 7.9%. The price was $55 million, and the payouts were secured by all of his royalties and copyrights from the music. Prudential Insurance bought the Bowie Bonds and was paid off in full during the 10-year time frame, even with all the changes in the music industry and internet-based music distribution—which dramatically reduced artists' royalties.

Bowie created this arrangement to protect his family. Bowie was interested in estate planning at a young age and wanted to make sure that his assets passed onto his family. He did the Bowie Bonds for tax savings and so that his estate would benefit from his music catalog. Bowie's wife will likely receive most of Bowie's estate, which is estimated to be worth $200 million—not counting the spike in sales that continues now that Bowie has died. His two children will each also receive substantial bequests.

Although details of Bowie's estate plan haven't been made public, many think that in light of his advanced planning and financial foresight, he likely used one or more revocable or irrevocable trusts. If he did, Bowie would have maximized the value of assets passing onto his heirs in the most tax-efficient way possible. Plus, his assets could pass privately, without the public records in probate court.

Unfortunately, Bowie is the exception in the world of rock ‘n' roll estate planning. Many musicians fail to properly plan. They frequently rely only on a will, which becomes a public document once it is filed with the probate court after death. Even worse, many artists have no estate planning whatsoever. For example, a short list of poor estate planning singers includes John Lennon, Tupac Shakur, Jim Morrison, and Kurt Cobain. Their heirs all went through messy estate battles that could have been prevented if they'd used the same foresight as Ziggy Stardust looks to have done.

Use David Bowie as your rock estate planning example, and plan for your loved ones at a young age. Don't wait until it is too late.

Reference: Forbes (January 14, 2016) "A Peek Into The David Bowie Estate: His Legacy Extends Beyond Music"

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