Oct 22, 2017

Playboy Founder A Shrewd Estate Planner

Playboy founder Hugh Hefner died in September at age 91.  As he wished, he was laid to rest at Los Angeles' Westwood Memorial Park in a mausoleum adjacent to Marilyn Monroe, who appeared on the very first cover of the magazine.

Hefner leaves behind two children from his first marriage: Christie, now in her 60s, and David; and from his second marriage, Marston and Cooper. Cooper, 27, is the current creative director of Playboy Enterprises.  Most of Hefner’s assets will go to his children, the University of California Film School, and several charities.

Hefner launched the magazine in 1953 with an investment of $8,000. The satin smoking-jacketed tycoon reigned over his empire for decades. In the 1970s, readership of Playboy peaked at seven million. But changing times and tastes, and the rise of the internet, caught up with the business in recent years. Current magazine readership is said to be just 500,000. Most of Playboy's revenue now derives from licensing deals to put its famous logo on everything from perfume to clothing. 

Whatever you think of Hefner's lifestyle and influence on American culture, he deserves credit for the nimbleness of his estate planning. Confronted with changing family circumstances and business realities, Hefner made several shrewd decisions designed to protect himself and his children, and to minimize the chances of battles occurring over his estate once he was gone. That is an approach we would all be wise to adopt, because everyone's circumstances and priorities change with time.

Hefner married his last and third wife, Crystal Harris, then 26, on New Years Eve in 2012 at the Playboy Mansion. They had met when she posed for the centerfold. According to reports, Hefner’s children, originally skeptical about Harris’ motives, felt grateful for the care she gave their father as his health declined. She coordinated game nights and movie nights to keep up his spirits, accompanied him to his doctor’s appointments, and when he was ultimately confined to bed, remained at his side. But she gets more than just her stepchildren's appreciation: Although not included in Hefner's will, the prenuptial she signed guaranteed her $5 million at his death. She also gets the house he purchased for her in 2013, in a trust that she controls. Located in the Hollywood Hills, the 5,900-square-foot residence has 4 bedrooms, 5 bathrooms and an infinity pool.  

Hefner owned only a 35% interest in Playboy Enterprises when he died, and all of Playboy Magazine. He had sold the company to a private equity firm some years ago. That deal provided Hefner with an annual salary of  $1 million and editorial control over the Playboy brand. Playboy Enterprises has one year from the date of his death to buy the shares from his estate; if it does not, the shares will be sold to the highest bidder. Their value is estimated at around $45 million, and the proceeds will go to Hefner's children.

It is not well known that at the end of his life, Hefner no longer owned the famous Playboy mansion he continued to reside in. Playboy Enterprises did. Hefner had given up ownership when he took the company private. Then, in 2016, Playboy Enterprises sold the 20,000-square-foot, 29-room compound to Hefner's adjacent neighbor, Daren Metropoulos for $110 million, on the condition that Hef could live there for the rest of his life. It is believed Metropoulos now intends to combine both properties and create a mega-mansion of some sort.

What happens to the Playboy brand now that Hef is out of the picture? We'll just have to wait and see.

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