Always in Fashion
Ernie Neve, CPA
March 6, 2019
She's a long-haired European exotic beauty. She lives a life of glamour and luxury that most of us can only dream of. She has 300,000 followers on Instagram. She's earned $3 million in royalties and endorsements. She's launched fashion lines, and been the subject of two books. Oh, and she has absolutely no idea how much she pays in taxes, and she wouldn't care if she did.
Who is this gorgeous creature? Is she latest supermodel sensation, posing for the Sports Illustrated swimsuit cover on a deserted Croatian beach? Is she Kim Kardashian's newest best friend? Perhaps she's about to star in the next James Bond movie? No, no, and no. Her name is Choupette, and until fashion icon Karl Lagerfeld died last week at age 85, she was his . . . cat. She's also Lagerfeld's heiress, which may make her the richest cat in the history of her species.
Lagerfeld cut an instantly recognizable figure with his trademark white hair, black sunglasses, fingerless gloves, and starched collars. He's credited with breathing life back into France's House of Chanel by revamping their ready-to-wear line after the death of founder Coco Chanel. His efforts earned him a fortune estimated at $200 million. But he died childless, with no partner and no obvious heir. Enter Choupette . . . who gets enough money to pay for all the Little Friskies she can eat for the rest of her life!
Leaving money to pets is more common than you think. It's not a great tax-planning move because bequests to pets — unlike those to spouses or charities — are subject to estate tax, which starts at 40% on amounts over $11.4 million. But plenty of people love their animals more than their families. Michael Jackson left $2 million for his pet chimp Bubbles. And hotel heiress Leona Helmsley, who served 19 months in prison for tax evasion, left $12 million for her dog Trouble. (That's more than some of her grandchildren got!)
Obviously, the money doesn't go to the animals. (Can you imagine standing in line behind a cat trying to use an ATM, or writing a check to pay for groceries?) It goes to a trust, with an actual person controlling the money for the benefit of the animal. In 2016, Minnesota became the last state in the country to authorize pet trusts. Many of those statutes even dispense with the usual "rule against perpetuities" limiting them to 21-year terms, making them appropriate for longer-lived animals like horses or parrots.
Sadly, there's one complication standing in the way of Choupette getting her paws on her inheritance. She lives in France, where pets are property, and can't legally inherit anything themselves. (Has PETA been notified?) They can't even benefit from a trust. So Lagerfeld would have to leave Choupette's money to a nonprofit organization or a trusted friend to take care of her.
And that, in turn, brings up one final question: who inherits Choupette's fortune when she dies? France has the highest inheritance tax in Europe, with rates running up to 60%. And while cats may always land on their feet, they can't hire estate-planning attorneys. (While we're on thattopic, does having nine lives mean Choupette gets to pay the tax nine times?)
We realize you haven't earned millions in royalties from licensing your image. But if you had, you'd probably want to keep as much of them as you can. So call us, and discover just how stylish tax planning can be!