Gentlemen Prefer Tax-Free


Fifty years after her mysterious death, Marilyn Monroe's image remains as profitable as ever. In 1999, the dress she wore to sing "Happy Birthday, Mr. President" to John F. Kennedy sold at auction for $1.26 million. Forbes magazine lists her as #3 on their "Top-Earning Dead Celebrities" list, and in 2009, a Japanese man paid $4.6 million for the crypt directly above hers at Westwood Village Memorial Park Cemetery in Los Angeles.

Now Marilyn is in the news again, this time for the financial consequences of her tax planning. Marilyn died at her home in California. However, she executed her Last Will and Testament in New York – where she owned an apartment – and named her New York attorney, Aaron Frosch, as her executor. Frosch consistently treated Marilyn as a New York resident in order to avoid California estate taxes. It worked – her estate paid just $777.63 in inheritance taxes there.

Now fast forward to 2005. That year, the entity responsible for managing Marilyn’s estate, Monroe, LLC, sued the heirs of several photographers who had taken pictures of Marilyn while she was still alive and were licensing those images for commercial use. Marilyn's estate argued that this violated her "right of publicity," which included their rights to control the commercial use of Marilyn's name, her image, her likeness, and other aspects of her identity. The heirs, in turn, countersued, arguing that Monroe, LLC didn't own the star's right to publicity.

A district court in California declared that at the time of her death, the state didn't recognize any such right of publicity, and ruled in favor of the photographers' heirs. Even after the estate appealed, citing a new law that gave posthumous rights of publicity, the decision was held up. Yes, the California law would let Marilyn's estate inherit her right to publicity, but only if she had been a California resident at her death, which she wasn’t. Unfortunately for the estate, New York doesn't recognize a right to publicity.

The case has continued to drag on until just recently. Last month, the U.S. Circuit Court for the Ninth District issued what should hopefully be the last word, just over 50 years after her death, by affirming the lower court’s decision. The court concluded that because she had consistently been represented as a New York resident at the time of her death to avoid paying California estate tax, the posthumous right of publicity could not be granted.  

While Marilyn Monroe’s attorney did not do anything wrong in avoiding California estate tax with his decision to treat her as a New York resident, and certainly couldn't have foreseen the development of any right to publicity, this case shows how important it is to keep taxes and estate planning in perspective, and to make sure you see the bigger picture when making managing your finances. Decisions should never be based solely on avoiding certain taxes, or they may come back to haunt you later!