PUBLISHED MAY 17, 2023
Elvis Presley’s daughter, Lisa Marie Presley, died too soon at the age of 54 in January. We often believe that the wealthiest of families will benefit from the very best possible legal, tax and estate planning advice. Part of the Presley legacy, so far, appears to be the failure to carefully create good, effective estate plans.
A good, effective estate plan transfers the assets and legacy to (1) the right people, (2) at the right time and (3) keeps the wrong people out.
The “right people” would be the person whom Elvis and Lisa Marie truly wanted to benefit. The reference to the “right people” also means ensuring that your desired beneficiaries or heirs actually receive the inheritance. This is important for us all, but particularly important for blended families.
The reference to the “right time” would be giving control over the assets to those loved ones at a time when the heirs or beneficiaries are financially mature enough to benefit from them for an entire lifetime and beyond, instead of simply spending the money on cars or temporary improvements to their lifestyle.
Finally, keeping the “wrong people out” means minimizing tax and administrative costs, protecting assets through the heir’s lifetime from lawsuits, divorce, creditors or other claims and from a second level of estate tax upon their death. A good estate plan provides protection from in-laws, outlaws, financial predators and the taxman.
Latest news: Settlement in Priscilla Presley’s challenge
Most recently, Priscilla Presley (Lisa Marie’s mother) challenged a 2016 amendment to Lisa Marie’s trust which would have removed Priscilla as a co-trustee from serving alongside Lisa Marie’s former business manager, Barry Siegel. This might have been Lisa Marie’s wish, because Lisa Marie and Priscilla reportedly had a strained relationship at that time. Nevertheless, the amendment did not include the basic formalities legally required. A confidential settlement was just reached — a sealed agreement is to be filed with the court by June 12.
However, Priscilla had successfully grown Elvis’ estate after his death. Despite being one of the most recognized and successful entertainers of his day, Elvis left an illiquid estate worth only $5 million in 1977. Adjusted for inflation, the estate would be worth $20 million today. The IRS later successfully asserted that the estate was worth far more and asserted $10 million in estate tax.
The estate could not even rely on royalty income, because Elvis’ business manager, Colonel Tom Parker, sold the music catalog to RCA for $5.4 million, of which only $1.35 million went to the estate or trust. Priscilla then assumed primary managerial control of the Elvis Presley estate.
By 1993, Priscilla was able to grow the estate to $100 million from wise use of Graceland profits, merchandising and royalties for music recorded after the RCA deal. That was when Lisa Marie turned 25 and became eligible to receive and control her inheritance under Elvis’ will. Lisa Marie established a revocable trust to hold that inheritance.
Business manager sells 85% of interests
Lisa Marie then appointed businessman Siegel as her co-trustee with primary managerial control over her trust assets. Within two years, Siegel sold 85% of her interests in Elvis Presley Enterprises (EPE). EPE was an entity created by the Elvis Presley Trust to conduct business, including Graceland and a worldwide licensing of Elvis Presley products.
While the deal was worth $100 million, it brought the estate only $40 million after taxes plus $25 million in stock in a future holding company of American Idol. That stock was eventually worthless due to a later bankruptcy by the parent company of American Idol, Core Media Group.
Careful planning could have avoided substantial income tax on the sale while providing the family a much better financial return that would be protected from lawsuits. Siegel was removed as a trustee in 2015. Lisa Marie’s trust was down to $14,000 and saddled with significant debt.
Lisa Marie sued Siegel for financial mismanagement and for hiding the true value and financial condition of her trust. Siegel asserted that Lisa Marie habitually overspent despite his warnings. Siegel further asserted that Lisa Marie did not want written records, so others would not see the level of her spending. Siegal countersued, and both cases were pending at the time of her death.
Lisa Marie’s estate difficulties really are an extension of Elvis’ estate plan. Elvis was known for his extreme generosity. Elvis said, “Sharing money is what gives it its value.” However, Elvis was also known for substance abuse and an exceedingly lavish lifestyle. Both Elvis’ generosity and lavish lifestyle may have contributed to Lisa Marie’s attitude about spending or investing money.
Elvis’ manager helped contribute to estate losses
Parker, Elvis’ long-term trusted business manager, was born in the Netherlands in 1909 as Andreas Cornelis van Kuijk. He entered the United States illegally, changed his name and never obtained citizenship or a passport. While he served in the Army, he did so as a private, went absent without leave and was discharged from the Army after what was referred to as a psychotic breakdown. Parker, who died in 1997, also received 50% of Elvis’ profits until that agreement was terminated after Elvis’ death by the probate court. Elvis’ selection of Parker as a manager of the estate contributed to the loss in value for Elvis’ estate.
There are a few lessons in the Presley estate plan saga for us all to learn from. These include the following:
Lesson #1: Use a trust, not a will.
Except for the most modest estates, the controlling legal document for the management of your estate should be a trust. The use of a will as the controlling legal instrument subjects your estate to the delays and higher costs of formal court proceedings.
Those proceedings are entirely public information, which includes the names of the beneficiaries and the identity and value of the assets received. We all seek greater privacy in this age of identity theft and financial scams.
Lesson #2: Failure to minimize or avoid estate tax.
Elvis did not plan or consider the need to minimize estate tax. The estate tax effect is twofold. First, the tax reduces the value of the estate and the value of the legacy to your family or loved ones.
Second, the estate tax must be in cash in full (with very few exceptions for farmers or certain small-business owners) nine months from the date of death. This often requires a sale of estate or trust assets to pay the estate tax. Such a fine sale may prevent getting full value for an asset that you invested a lifetime to acquire and develop.
Tax planning should always be done after careful analysis of the client’s nontax goals and objectives. If there was uncertainty as to whether an estate tax would be due, a simple testamentary charitable lead annuity trust (TCLAT) is one alternate that could have prevented the estate tax that was assessed after Elvis’ death and provided substantial economic benefits to Lisa Marie.
Lesson #3: Failing to properly plan for Lisa Marie’s legacy.
Lisa Marie essentially obtained control over her inheritance at the age of 25. She was almost certainly unprepared for the complexity of the business and other interests that she inherited. She was likely not yet prepared to manage the finances needed to maintain an appropriate lifestyle to live within her means. She was not protected from lawsuits that might have arisen against her during her lifetime.
Lisa Marie’s children were not protected against estate tax on the Presley family legacy that they received. Careful planning would have better protected Lisa Marie and her children from future lawsuits, divorce, creditor claims and future estate tax. Elvis’ estate plan could have had provisions to protect from these risks.
Lisa Marie was 9 when her father died and had control of her inheritance at 25. Many clients want to be sure that their children grow to be productive members of society. Many of our clients do not want “trust fund babies” who live off and spend their inheritance and are not prepared to work or finance their lifestyles without the trust assets.
While I do not suggest that Lisa Marie was a trust-fund baby, her future was certainly unknown when Elvis died or when the will was drafted.
Many clients seek trust incentive provisions to reward milestones arising from a beneficiary’s good behavior. These may include incentives to hold full-time jobs, attend college or trade schools or recognize the efforts of a full-time custodial parent.
Lesson #4: Failure to properly plan to minimize tax on the $100M sale of the interest in Elvis Presley Enterprises.
Careful planning can almost always substantially reduce the tax triggered by the sale of appreciated property. No tax mitigation planning appears to have been taken for the $100 million sale of EPE. The maximum capital gains tax, federal and state combined, can exceed 40%. Careful planning is needed to minimize that tax.
The best planning alternatives are often available if planning begins more than two years before the actual sale.
Lesson #5: Carefully select the successor trustee or executor and provide at least two alternates.
Elvis appointed his father, Vernon Presley, as the executor. Elvis died in 1977. Vernon was elderly and not well at the time of Elvis’ death in 1977. Vernon might not have been the best choice.
The use of business managers in this position created an inherit conflict of interest due to the business managers’ ability to personally profit from the decisions made. Parker’s background was, and still is, somewhat of a mystery. An independent professional trustee might have been more appropriate due to the complexity of the estate, Lisa Marie’s age and the lack of other alternatives.
These are lessons for us all. We all work hard to build a legacy. This warrants careful consideration in planning an estate.
There is a concept referred to as "shirtsleeves to shirtsleeves in three generations," which describes the inability of children and grandchildren to properly manage or steward the wealth provided to them by their parents or grandparents. This concept threatens the continuation of family legacies.
However, careful planning and preparation is the solution.
https://www.kiplinger.com/retirement/estate-planning-lessons-in-elvis-presley-estate
