How will Hugh Hefner's estate 'look after' his widow's finances?

Trust arrangements may allow the Playboy magazine founder's third wife to receive an income stream without technically inheriting from the estate

Sep 29, 2017 @ 3:00 pm

By Greg Iacurci

Hugh Hefner, the media and cultural icon who died Wednesday at age 91, left behind a sizable estate with an estimated value of more than $40 million, not including the $100 million sale of his home — the Playboy Mansion — last August.

Mr. Hefner, the founder of Playboy magazine, left this fortune to his four children, the University of Southern California film school, and charities, according to various news reports published after his death. The estate had supposedly been worth upwards of $200 million at the height of his empire in the 1970s (or, more than $1 billion in today's dollars).

His widow, 31-year-old Crystal Harris, isn't inheriting anything from the estate due to an "ironclad" prenuptial agreement signed ahead of their marriage in 2012, but will nonetheless be "looked after," according to news reports.

How could Mr. Hefner have accomplished this?


While it's impossible to tell at this point, estate-planning gurus say the most likely scenario is a stipulation in their prenuptial agreement that Ms. Harris, Mr. Hefner's third wife, would receive an income stream from various vehicles, perhaps a trust or annuity, upon their divorce or his death.

That would provide for her without technically bequeathing anything from the Hefner estate.

"That to me seems very likely," said Richard Behrendt, an estate planning attorney at Behrendt Law and a former estate-tax attorney for the Internal Revenue Service. "That, to me, fits within common sense and the real world — she trying to protect her interests, he trying to protect his and his kids' interests — and something they could both agree to."

(More: Prince's death sets off estate planning quagmire)

Mr. Hefner could have, for example, established a Qualified Terminable Interest Property trust, otherwise known as a Q-TIP trust.

This sort of trust would provide Ms. Harris, who was 26 years old when the duo married, with a lifetime income stream, similar to a pension or annuity, derived from the trust's net income. However, she wouldn't have control of the trust, so wouldn't be able to change its beneficiaries.

"However [Mr. Hefner] set it up at his death is set in stone," said Charlie Douglas, director of wealth planning at Cedar Rowe Partners, adding that he often sees this strategy used during second marriages.

These trusts are typically established with stringent conditions, so a beneficiary could tap the trust's principal only in certain circumstances dictated by Mr. Hefner. These conditions are often stipulated as "for health, support, maintenance and education," but could be narrower still, Mr. Douglas said.

Interestingly, the 60-year age gap between the couple poses a rare scenario for Q-TIP trusts. The trust would pass to Mr. Hefner's kids upon Ms. Harris' death if they were listed as the beneficiaries; however, given her age, she may outlive Mr. Hefner's children.

This scenario "hardly ever" happens, Mr. Douglas said.

Two of Mr. Hefner's children, Christie and David, are in their sixties, and the others, Cooper and Marston, are in their mid-twenties.


Another potential income avenue would be putting life insurance in an irrevocable trust. The life-insurance proceeds from Mr. Hefner's death would provide an income stream.

However, this scenario is less likely due to the high expense of buying life insurance at Mr. Hefner's age. He was in his mid-eighties when marrying Ms. Harris.

"If they were married 50 years, that might be more likely," Mr. Behrendt said.

A third, yet more unlikely, income option would be the purchase of an annuity by the Hefner estate. Mr. Hefner could have, for example, bought a commercial annuity providing $5,000 per month for his life, and that income would transfer to Ms. Harris upon his death. If annuitized, the principal is considered the insurance company's money.

"I can't imagine Hugh Hefner doing that," Mr. Behrendt said. "I wouldn't think it'd be something high-net-worth people would do. They kind of do the same thing, but through trust planning."

The Hefner estate could also use a combination of the three strategies (annuity, Q-TIP trust or irrevocable trust funded with life insurance.)


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Mar 13



InvestmentNews is honoring female financial advisers and industry executives who are distinguished leaders at their firms. These women have advanced the business of providing advice through their passion, creativity, inclusive approach and... Learn more

Featured video


What's the first thing advisers should do when they get home from a conference?

After attending a financial services conference, advisers can be overwhelmed by options, choices and tools. What's the first thing they should do when they get back to their office?

Latest news & opinion

Maryland jumps into fiduciary fray

Legislation would require brokers to act in best interests of clients.

8 apps advisers love for getting stuff done

Smartphone apps that advisers are using in 2018 to run their business more efficiently.

Galvin's DOL fiduciary rule enforcement triggers industry plea for court decision

Plaintiffs warned the Fifth Circuit that Massachusetts' move against Scottrade signaled that the partially implemented regulation can raise costs for financial firms.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

Is Fidelity competing with retirement plan advisers?

As the Boston-based mutual fund giant expands the products and services it brings to the retirement market, some financial advisers say the firm is encroaching on their turf.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print