Say “Margaritaville”—and you just know. You know it’s always 5 o’clock somewhere. You know that come Monday, it’ll be alright. You know it’s Jimmy Buffet’s signature. But besides the cargo shorts, the flower shirts and the island attitude, there was a side to Jimmy Buffet most people didn’t know about—a shrewd and wise business side that included estate planning to protect his legacy.
History
Jimmy Buffett died September 1, 2023 at the age of 76 due to Merkel cell carcinoma which he had been diagnosed with four years earlier. Besides being a singer-songwriter, he was also a film producer, novelist, businessman and philanthropist.
Buffett was born in 1946 in Pascagoula, Mississippi and spent most of his childhood in the south. He decided to be a musician in 1961 after seeing a folk music ensemble. As a freshman at Auburn University, he learned to play the guitar. He dropped out after his first year because “he couldn’t balance his interest in music and girls with his college classes.”
From that point, Jimmy Buffett focused on his music career playing clubs and venues from New Orleans to Nashville and in 1972 he signed a recording contract with ABC/Dunhill Records. His career got traction after singer Jim Croce died in a plane crash in 1973 and Dunhill promoted Buffett as a replacement.
Buffett’s Planning
At the time of his death, Jimmy Buffett’s net worth was more than $1 billion, including a $180 million stake in his company, Margaritaville Holdings LLC, which brings in $1 billion to $2 billion in revenue every year, and was paying Buffett annual income of approximately $200 million.
Unlike other celebrities, Buffett learned the importance of protecting his money while he was alive and after his death. According to the New York Times, most of his money and property, including intellectual property and music are held in trust. His wife Jane is the personal representative.
Because a trust is private, we’ll never know exactly what assets will be passed on to Buffet’s heirs, which include his wife, three children, two grandchildren, and two siblings. It’s believed that his estate includes:
- Music royalties of $20 million annually
- A collection of houses and cars
- 150 Margaritaville restaurants, casinos, cruises, and related business holdings
- A yacht and several planes
- Stock market investments, including shares in Berkshire Hathaway
- Watches and memorabilia
Other Estate Planning Strategies Buffett May Have Used
Charitable giving was a big part of Jimmy Buffett’s life. He co-founded the Save the Manatee Club in 1981 with former Florida governor Bob Graham. The charity supports rescue, rehabilitation, research, and education efforts in the Caribbean, South America, and West Africa. During his lifetime, Buffett gave away and helped raise millions of dollars for charities. For every concert ticket he sold, one dollar went to a charitable cause he believed in.
Charitable Remainder Trusts
Given his charitable nature, Jimmy Buffett may have had a charitable remainder trust (CRT) to incorporate charitable giving into his estate. This type of trust could provide a consistent income stream to his beneficiaries while leaving the remainder to the charity of his choice.
Family Limited Partnership or Family Limited Liability Company
Buffett likely considered his restaurants to be much more than commercial enterprises—and business continuity may have been preserved by creating a family limited partnership (FLP) or family limited liability company (LLC). Using either of these entities could have allowed him to use different strategies to retain control over his business shares while gradually transferring ownership to his wife and children. He could have also potentially taken advantage of the annual gift tax exclusion by making tax-free gifts of the limited partnership and reduce potential future estate taxes.
Grantor Retained Annuity Trusts
A grantor retained annuity trust (GRAT) may have been another trust structure that Buffett considered to pass on his business interests while retaining certain financial benefits during his lifetime. A GRAT is an irrevocable trust that would have allowed him to transfer his business interests or other assets with the potential for significant appreciation in value to the trust while still retaining an income stream for himself via annuity payments for a specified term. At the expiration of the term, his beneficiaries would receive any assets from the trust, with any excess appreciation above the 7520 rate (a rate of return specified by the IRS) transferred free of estate and gift taxes.
Family Trusts
After years of ongoing use and enjoyment of the property he owned, Buffett could have also taken steps to ensure the smooth transfer of assets, such as his airplanes, to future generations for their own use and enjoyment by establishing a family trust. A family trust would have allowed him to designate how the planes should be used, maintained, and cared for after his death.
Long-Term Care Planning and Advance Directives
Buffett had plenty of funds to pay for his long-term care needs privately, but he may have set aside specific financial resources intended to pay for care in advance. Based on comments made by his family in his final days, he may have also prepared advance directives so everyone understood his wishes for care and treatment at the end of his life. Consequently, he appears to have made a peaceful exit from a terminal illness on his own terms.
Create an Estate Plan
In a well-designed estate plan, the things someone owns, such as Buffett’s planes, money, and other significant property, avoid probate, thereby maintaining the family’s privacy. Additionally, beneficiaries can immediately receive their inheritance without waiting to wrap up lengthy or costly court proceedings.
No matter the size of your estate, it’s important to have a plan, whether that includes a trust or just a will or both. The key is leaving instructions to make sure your estate benefits the people and charities that are important to you. If you don’t have an estate plan, the government has one for you, and you probably won’t like it.
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at [email protected].
