New York Estate Planning & Elder Law Blog
DAVID BOWIE BONDS
As the world learned, David Bowie passed away on January 10, 2016. Mr. Bowie was always on the leading edge of creativity, an advocate for meaningful social change and a musical genius to boot. He started his musical career at the same time as the Beatles, Rolling Stones and the Who and remained just as socially relevant, if not more so, compared to his contemporaries. As well as being a singer and songwriter, Mr. Bowie was also an accomplished actor and painter. More pertinent to the topic of estate planning, Mr. Bowie was a trailblazer in financial or investment products. In 1997, Mr. Bowie issued Bowie bonds, the first of any celebrity bonds. Since their initial offering, many credit agencies downgraded Bowie bonds status to just one level above junk bond status. True to form, Mr. Bowie was a first, with many other talented artists following suit.
BACKGROUND TO MR. BOWIE’S FORTUNE
In the early 1970s Mr. Bowie entrusted his management to outsiders who profited from his talent and earnings, while paying him only a small salary compared to his earnings – $35,000 per year. In the late 1970s he renegotiated this contract with an to a less onerous, but still exorbitant fifty percent of earnings price tag, reduced to 16% after a set period of time. In 1982, while he was still under the thumb of these high fee contracts, he found a trusted accountant to invest his rather large intellectual property portfolio. By 1997 he was estimated to be worth approximately $900 million, despite the high costs of his management contracts. He listed his domicile in Switzerland to avoid the higher taxes of Britain and Manhattan, even though he allegedly lived in Manhattan year round.
That is when he issued the first celebrity bonds or Bowie bonds as they were known and sought to free himself from high cost management contract that he was under. Bowie bonds assured the holder a percentage of income from Mr. Bowie’s then intellectual property portfolio. It is reported that he garnered an additional $30 million advance for a record (yes, they still sold records, even in those days) at about the same time. While Mr. Bowie did not necessarily need the additional cash at the time, he simply chose to mortgage his intellectual property for cash up front. It is estimated that he earned $55 million from his Bowie bonds sale and that he had to pay up to $80 million in return. If these figures are correct, Mr. Bowie was indeed a shrewd investor, as the stock market was red hot in those days and Mr. Bowie’s trusted accountant bragged that he could double an investment in seven to ten years. Bowie bonds matured in ten years time.
CURRENT ESTATE ESTIMATES
Mr. Bowie was known for being reclusive and extraordinarily private with his money and income. Many people who followed Mr. Bowie through the years noted that $800 million dollars of his wealth cannot be accounted for. It is hard to imagine that Mr. Bowie did not know where this money went or otherwise went unaccounted for. It is a more likely scenario that Mr. Bowie and his trusted accountant found some secure financial haven for him to invest and secure his money. The more people know his worth, the more people will prey on him or, more properly, his fortune. Depending on where his estate is settled, the full story may not come to light. If U.S. authorities have any part in settling the estate, it is likely that there will be heightened fees for keeping his monies overseas. Since Mr. Bowie was a British citizen, who domiciled in Switzerland, it is not likely that this will occur.
As such, it is hard to approximate Mr. Bowie’s true current worth at the time he passed. Many experts believe that his very large and lucrative intellectual property portfolio will dwarf Michael Jackson’s $2 billion posthumous earnings. Perhaps Mr. Bowie’s estate will act consistent with his life time habit of being a trailblazer and show a novel or new way of trust or estate planning. It is simply too soon to tell. While most of us did not invest in Bowie bonds, he was a trailblazer for celebrity bonds in general. For those of us who will never invest in celebrity bonds, he left us to feel like heroes, even for just one day.