The estate of Whitney Houston has reached a $2 million settlement over her tax debt, according to a Thursday, Jan. 4 report from The Blast. Initially, the estate was required to pay $11 million but documents obtained by the website reveal a lower amount was agreed upon Tuesday, Dec. 26.
After Houston died in 2012, the IRS estimated her estate undervalued her worth — including song royalties, TV and movie residuals and the publicity rights — by $22.6 million. Because of that, the estate originally owed nearly six times as much money than they currently agreed upon.
The singer’s estate argued that the IRS had overvalued Houston’s assets and asserted their tax returns were right.
While it seems like a sigh of relief that the estate has settled such debt, attorney Bernie Lawrence-Watkins of B. Lawrence Watkins & Associates in Atlanta, says years of trouble can be avoided with a will, which she says is “the only legal document (outside of a written agreement executed by the decedent [deceased person] prior to the time of death) that identifies the wishes of the decedent.”
“The best way for a celebrity to ensure that their debts are settled or will be settled is to execute a will that carries out their wishes,” she told Atlanta Black Star.
Of course, that has to mean there was a will, Lawrence-Watkins said, where the executor administers the “distribution of the assets to the beneficiaries identified in the will” as long as there were no other written agreements regarding assets, like life insurance.”
If no will exists, then the assets go to a probate court where a judge will assign an administrator to decide how the assets of the late celebrity are doled out.
Lawrence-Watkins noted that a deceased star’s debt is transferred to the estate and if that celeb owes any debt it will be settled by selling their assets.
Celebrities like Michael Jackson had assets like his posthumous recordings and the Mijac Music catalog, which according to Billboard contains rights to the “Beat It” singer’s masters and recordings, along with those belonging to Sly and the Family Stone, Aretha Franklin and others.
The estate managed to turn a $500 million debt into its equivalent in cash thanks to Jackson’s music and bigger earners like the Las Vegas show, “Michael Jackson: One.” Plus, 2012’s Michael Jackson: The Immortal Tour, a joint venture with Cirque du Soleil, saw the estate earn 13 percent of box office sales. The tour went on to earn $370 million globally.
So while music-linked items can generate the most income for some celebs, rather than, say, merchandise, Lawrence-Watkins says the biggest earners for a late celebrity’s estate varies.
“It depends on the type of assets the decedent had while they were alive,” she said. “If the decedent did not have investments, the biggest source of income is residual income the decedent had from contracts that were negotiated while they were alive.
“If the decedent owned intellectual property (i.e. copyrights and trademarks) at the time of their death, the decedent’s beneficiaries will receive the decedent’s [proportional] share of such assets as an inheritance, provided that there were enough assets in the estate to pay off the decedent’s debts.”