Whither the King’s kingdom? Elvis fans, estate planners watch carefully

The tragic passing of singer Lisa Marie Presley has Elvis fans — and estate planners — wondering what will become of the King’s kingdom.

Lisa Marie Presley, the sole child of Elvis Presley and his wife Priscilla, died last week at the age of 54 after suffering cardiac arrest in her home in the Los Angeles suburb of Calabasas. Her legendary father, often referred to as the “King of Rock and Roll,” died of a heart attack in 1977 at the age of 42.

Lisa Marie Presley enjoyed a successful music career of her own, charting numerous times. She was also married four times, including relatively brief marriages to pop star Michael Jackson in 1994 and actor Nicholas Cage in 2002. She is survived by daughter Riley Keough, 33, an actress, and 14-year-old twin daughters Harper and Finley Lockwood. Her only son, Benjamin Keough, also a musician, died by suicide in 2020 at age 27.

The size and scope of Presley’s three daughters’ inheritance has Elvis watchers deep in speculation.

Graceland, the Presley family’s ancestral home in Memphis, Tennessee, where Lisa Marie Presley was born and raised until the age of 9, is in a trust that will go to the benefit of her children. That much has been confirmed. The state of the rest of her portfolio, however, has yet to be revealed in full.

KING’S RANSOM

Presley founded a trust titled Elvis Presley Enterprises in 1993 to manage her father’s estate after receiving her inheritance at the age of 25. A little more than a decade later, she sold off 85% of those assets for approximately $100 million, retaining a 15% ownership.

That windfall apparently did not last as long as she may have hoped. In 2018, Presley was reportedly $16.7 million in debt, and suing her business manager over alleged financial mismanagement.

Most recently, the New York Post reported last week that Presley owed more than $1 million in taxes at the time of her death, a significant sum that estate planners say could affect her heirs and perhaps could have been avoided had the King himself thought ahead.

“Multigenerational planning can definitely protect wealth down the generations while providing for the comfort and needs of each generation,” said Priya Prakash Royal, managing attorney at Royal Law Firm. “For example, an asset protection trust that is set up to be dynastic can restrict distributions and how assets are used for several generations and also dictate how assets are used or transferred.”

POSTHUMOUS TAX TROUBLES

If the New York Post estimate that Lisa Marie Presley owes Uncle Sam $1 million in back taxes is correct, her estate beneficiaries and heirs may be liable for unpaid income and estate taxes, as the Internal Revenue Code provides broad liability and casts a wide net. 

“Both heirs and beneficiaries, as well as trustees, executors, and other fiduciaries, incur liabilities under various provisions of the Internal Revenue Code,” said Robert Barnett, partner in the trusts and estates and taxation practice at Capell Barnett Matalon & Schoenfeld. “Specifically applicable to unpaid income taxes is the concept of transferee liability, which will ensnare heirs, legatees and beneficiaries of an estate.”

As to Presley’s heirs’ options if they are indeed put on the hook for her tax liabilities, an estate fiduciary could apply for the release of a tax lien with respect to specific assets to be distributed. Still, Barnett says the IRS will closely scrutinize the liquidity of the estate before granting any such release.

It’s worth noting that if Presley’s estate is deemed insolvent — which right now does not seem to be the case considering her ownership of the Graceland property — the Federal Priority Statute puts the IRS tax debt ahead of all other claims, and the executor or fiduciary administering the estate can be held personally liable if they pay other creditors or claims before the IRS.

SMART PLANNING AVOIDS PROBLEMS

Minimizing assets in the estate through various strategies is the key to avoiding posthumous tax problems for heirs and beneficiaries.

“There’s a myriad of types of irrevocable trusts, including protecting life insurance and other non-probate and probate assets, lifetime gifting and transfers, charitable planning, and business entity structures implemented during the life that would ensure that assets are limited in the estate, and even if there are unpaid liabilities, including taxes, there are no assets that the IRS could levy,” Royal said. “The timing, transfers and structuring is important to avoid fraudulent transfer issues also.”

“The best way to protect beneficiaries of an estate is to utilize a trust with a knowledgeable trustee who can help navigate through these IRS minefields,” Barnett said. “Many parents provide long-term trusts in order to better protect their assets.”

Royal also brings up the potential tax problem posed by Presley’s inherited right to publicize her own name, image and likeness, as well as her famous father’s. Both valuable assets are sometimes overlooked by celebrities and their advisors.

“Hopefully, Presley had estate planning and asset protection to avoid this potential tax burden, but we have seen that is often not the case,” she said. “Prince and Aretha Franklin had no estate plan and Michael Jackson’s estate was reported at just a few thousand but after years of litigation between the IRS and the estate, they settled on a value of over $200 million for Jackson’s right of publicity. That would have generated a tax bill of over $70 million with interest and penalties on an estate where there were probably no tangible assets.”