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I want to share with you some fascinating information I found in an article at thewealthadvisor.com written by Scott Martin. The article is about the Hollywood legend, Kirk Douglas, who passed away on February 5, 2020, at the ripe old age of 103. Kirk was one of the last remaining stars from Hollywood’s Golden Age, with a film career that began in the mid-1940s after his service in the U.S. Navy during World War Two.
Back in the 1940s and ‘50s, top stars like Kirk Douglas might be paid—by whatever studio they were under contract to—somewhere around $500,000 a year. At that top pay rate, Kirk could have racked up around $20 million in career earnings, thanks to the fact that his career in films and television lasted more than 50 years. $20 million is nothing to sneeze at, but it’s being “underpaid” as far as today’s mega-stars are concerned. Top movie stars now command more than twice that amount of money for just one movie, and the leading TV stars make two or three times that much for each season.
However, Kirk Douglas, at the time of his death, had a net worth well above and beyond the money he made as an actor. Just a rough estimate of Kirk’s net worth at the time of his death is close to $60 million, thanks to his sharp handling of his Hollywood income. Kirk didn’t just settle for what he could make as an actor; instead, he took that money and used it—invested it—to make some “REAL money.”
Actor, Producer, And Real Estate Magnate
Two major factors contributed to Kirk’s ability to amass a fortune way beyond his on-screen earnings:
1: He wasn’t satisfied with just starring in movies. He also owned many of his films, such as “Spartacus.” Kirk was one of the first Hollywood stars to also become a producer. He didn’t take any salary for playing the role of Spartacus, opting instead for 60% of the film’s profits—profits that turned out to total just under $20 million. The Douglas film production company, Bryna Productions, (named after Kirk’s mother) is still in operation, now solely owned by his widow, Anne.
2: He also invested the money he made from films in valuable real estate. Apparently, Kirk heeded the old adage—“They’re not making any more of it”—about the wisdom of investing in land. The family’s money was eventually put into a family trust that grew to include several holding companies and joint ventures. Just one of those ventures gave Douglas 50% ownership of the land that the Shores luxury apartments in Marina Del Rey were built on, a property that cost a bit over $150 million to develop in the 1960s and whose value today is…well, I don’t think I have a calculator with that many zeros on it. But we can safely assume that it’s worth an awful lot.
Along the way, he also managed to write 10 books and about a decade before his death was recognized as the world’s oldest celebrity blogger.
Kirk’s wife, Anne, is actually the person credited with setting up a trust to handle the family’s money. Setting up a family trust to manage your business, investments, and finances does offer several advantages, mostly related to tax savings. For example, if you operate a qualifying small business, both you and your family members may be eligible for a lifetime capital gains exemption on the company shares. But going beyond that, a family trust can help you maximize that exemption for each family member. It can also enable you to realize more tax savings by splitting income among family members. Another potential tax savings comes from the fact that the trust can allow you to reduce or delay potential tax liability resulting from the death of a trust beneficiary. A trust can also help you protect your assets from creditors and handle putting money aside for things like your children’s education.
Family trusts can be a hugely effective and money-saving financial vehicle. However, as is the case with most major tax reduction tools, they can get quite complicated. A tip of the hat to Anne Douglas for her management of the Douglas family trust. If you think you might want to look into establishing a family trust, my best advice to you is to get good professional help on handling both legal and tax issues.
As the family’s fortune grew under Anne’s direction, Kirk himself was motivated to become a generous philanthropist. The family charitable foundation (that also operates under the umbrella of the family trust) has donated tens of millions of dollars over the years to charities such as schools and hospitals. The Douglas family charitable efforts, which include donations in excess of $40 million for the treatment of patients suffering from Alzheimer’s Disease, helped to earn Kirk the Presidential Medal of Freedom in 1981.
The Future Of The Family Fortune
When Anne passes on, the family’s money will be transferred to heirs via the family trust, which means avoiding estate taxes. The Douglas’s operated their financial empire efficiently, too. The film production company, trust, and charitable foundation are all headquartered in a single office.
The end result is that the Douglas family fortune will take care of Kirk’s heirs for generations to come, along with continuing to generously fund numerous charitable efforts. In addition to valuable movie rights and real estate, their fortune also includes millions in stock shares and cash. About the only thing Kirk and Anne might have done better would have been to set up the trust in a more business-friendly, tax-friendly state than California.
It Pays To Stay Married
Oh, and it pays to stay committed to your wedding vows. If Kirk and Anne had gotten the usual Hollywood divorce after just a few years of marriage, split what they had at the time 50-50, and gone their separate ways, the massive Douglas family fortune…well, most likely wouldn’t be a massive family fortune— not one worth 60 million dollars anyway.
Kirk and his wife smartly followed two tried-and-true formulas for amassing wealth: Number one, be in business for yourself; and number two, invest the excess in good quality investments.
Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. There are no investment strategies that guarantee a profit or protect against loss. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however, their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by the radio show.