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Fame and fortune don’t guarantee financial security. Whether it be tax issues, poor spending choices or bad investments, these folks learned some money lessons the hard way. Don’t make their mistakes.
The Internal Revenue Service slapped a $1.1 million lien on the recording artist in 2012 for failing to pay income taxes in 2010. Everyone — even music stars like the 65-year-old Richie, who has more than 25 gold and platinum records — has to pay taxes or face stiff penalties.
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The irreverent widow of Nirvana frontman Kurt Cobain has faced a string of money troubles over the years. In 2009, she was sued by American Express after refusing to pay her AmEx card accounts. The cost: more than $350,000, which included late charges and attorney’s fees, according to court papers. The 50-year-old Love also was slapped with fines and penalties in March 2014 for failing to pay her 2012 tax bill ($319,749).
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The famed TV talk show host says he lost millions when he sold a pair of life insurance policies worth a total of $15 million for $1.4 million in a deal called a life settlement. Here’s how it generally works: A policyholder sells his or her policy for cash to an investor who takes over the premium payments. The investor collects the death benefit when the insured dies. Now King, 80, may not be able to buy additional life insurance because of his age and history of heart problems and diabetes.
Hidden fees and broker commissions as high as 30 percent make life settlements a tricky proposition, experts say. If you’re considering selling your life insurance policy, shop around for the best offer or use a licensed broker. Ask about their commissions. Also, know what your tax consequences will be for the lump sum payment you’ll get in exchange for your policy.
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Kevin Bacon, 56, says he and his actress wife, 48, lost a substantial amount of money in Bernie Madoff’s massive Ponzi scheme. The Footloose star told Details magazine that the scandal had its “emotional downsides,” but added, “We’re both young, and we both had the ability to work and roll up our sleeves and start putting the pieces back together.”
Bacon says he was told that Madoff’s investments were safe. Regulators say it’s important to make sure your brokers and advisers are registered or licensed in your state — and that they’ve not had disciplinary problems. Contact your state securities regulator for that information; go to the Financial Industry Regulatory Authority’s BrokerCheck website; or call FINRA toll-free at 800-289-9999.
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The Oscar-winning GoodFellas director, 71, was hit with a $2.85 million IRS tax lien in 2011, according to the New York Post. In fact, Scorsese has faced a series of big liens since 2002, but those tax debts, which included fines and penalties, have been paid in full, the paper said, citing local finance department records. Though the famed director can afford it, shelling out money to cover fines and penalties is like tossing dollar bills from a moving car.
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The supermodel and ex-wife of Billy Joel called the $531,000 tax lien against her house in 2011 “the result of an error,” the New York Daily News reported. Brinkley, 60, is reportedly worth a whopping $80 million, the paper said, mostly in real estate holdings in the Hamptons.
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Jeff Yeager | Savings Expert
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