“I don’t know where I’m going from here but I promise it won’t be boring."

- David Bowie, Madison Square Garden on his 50th birthday

The one-of-a-kind David Bowie definitely wasn't known as boring, and following his death, lawyers the world over have an opportunity to marvel at his uniqueness once again.

Throughout his musical career – which spanned from the early 1960s to his death from liver cancer on January 10, 2016 – David Bowie poured his heart and soul into creating iconic songs and putting on profound performances for his devoted fans.

Bowie has been praised worldwide for his ability to push boundaries, challenge convention and broaden the horizons of song and stagecraft. He did so not only through his lyrics and stage presence, but also by constantly reinventing his image and sound.

His talent for innovation and his ability to challenge societal norms extended beyond his music and into the world of – no, you probably didn’t guess it – estate planning.

The legend that went so far as to immerse himself in his fictitious alter-ego Ziggy Stardust was also gifted at being a “rebel rebel” when it came to his estate planning.

In the 1970s and 80s, Bowie reportedly had difficulty meeting his financial obligations. He needed to find a way to establish a secure cash flow. Bowie also understood and predicted that the way the world consumed and sold music was in for a dramatic change. He recognized the need to take control over the distribution of his artistic works and to create a plan for ensuring that he would maintain control over his creative assets and that they passed onto his family. 

The Bowie Bonds
 

After marrying his second wife, Iman, in the early 1990s, Bowie began meeting with financial advisors to create an investment vehicle that would provide him with a secure income stream in anticipation of the growing uncertainties and unpredictability of profit making in the music industry. Thus came the development of his ingenious investment and estate plan.

In 1997, along with his business manager, a renowned Wall Street investment banker named David Pullman, Bowie created an asset-backed security that rested on the value of the music he produced from 1969 to 1990, namely 25 albums and 287 songs. These securities, dubbed ‘Bowie Bonds,’ enabled Bowie to protect his artistic achievements and his rights to his songs and performances while simultaneously generating a regular income. In doing so, Bowie ensured that his creative legacy remained within his family, and would pass according to his estate plan.  

While usual asset-backed securities consist of receivables, such as credit card receivables or home equity loans (think of the mortgage loans that led to the financial crisis of 2008), Bowie Bonds were backed by Bowie’s own irreplaceable artistic works, including his lucrative hits ‘Changes’ and ‘Let’s Dance’. In other words, Bowie issued securities that were backed up by his future royalty earnings from his pre-1990 artistic portfolio.

Bowie sold the Bonds for $55 million to Prudential Insurance Co. of America in 1997. In exchange, he forfeited his rights to any royalty payments from any of the songs in the portfolio for a period of 10 years. The Bonds operated like an annuity and paid an interest rate of 7.9% over that 10-year period. At the 10-year mark, the Bonds would mature.

Just as Bowie had predicted, the music industry did change. Starting in the early 2000s, millions of young Americans took to Napster and other Internet-based media sharing programs to retrieve and listen to music. This caused a significant dip in album sales and a reduction in the income that artists could receive from royalties. As such, in 2004 Bowie Bonds’ investment-grade rating downgraded and the portfolio’s market worth was temporarily devalued.
 

The timing of the Bonds’ maturity in 2007 was exceptionally fortuitous, since it narrowly predated the financial crash of 2008.

While fans no longer needed to purchase Bowie’s albums or records in order to sing along to “Fame,” this did not prevent Bowie from cashing in the Bonds at the 10-year mark. The timing of the Bonds’ maturity in 2007 was exceptionally fortuitous, since it narrowly predated the financial crash of 2008.

Bowie used the Bonds as a form of estate planning, so that he could create a dependable source of income for himself, which would then later support his wife and his two children. It is likely, though unclear at this time, that Bowie would have structured his assets so that most, if not all, could pass outside of the estate.

Bowie Bonds were a vehicle for tax saving, estate planning, and also for ensuring that his music catalogue passed to his family.

Reportedly, Bowie’s financial empire is now worth approximately $100 million. While how much of that sum came from his Bonds is unclear, what we do know for certain is that in the realm of finance and estate planning, Bowie has become a hero, but not just for one day. Following his success, other major artists, such as James Brown and the Isley Brothers, have established similar 'celebrity bonds'. Perhaps more musicians will “turn and face the strange” world of finance to structure their estate plans for the future.

About the author

Amanda Bettencourt is an associate with WEL Partners. Amanda's practice is devoted to the areas of estates and trusts litigation and capacity litigation. Prior to joining WEL Partners, Amanda articled at the Office of the Public Guardian and Trustee, where she gained experience in estates, family law, and civil litigation.