When Young Stars Sue Their Parents: Whose Money Is It, Anyway?

Kids Money_Illo - THR - H 2018
Illustrations by: Hartley Lin

With no one watching how parents manage their child stars' earnings, kids' only recourse may be to work hard now and hire a lawyer later.

What do Macaulay Culkin, Jena Malone and Gary Coleman have in common? They all sued their parents for allegedly squandering their hard-earned money.

Across most of the U.S., when a minor earns a paycheck, that money legally belongs to the parents — but not in showbiz. Entertainment earnings are the exception thanks to the Coogan Law (aka the California Child Actor's Bill), legislation created in 1939 after actor Jackie Coogan took action against his parents for spending ?his money before he came of age (a few other states have similar laws). "It's one way the industry tries to protect kids for all the work they've done," says Dana Fletcher, a talent agent at Coast to Coast who has been repping young stars for 20 years.

The law requires parents to put 15 percent of gross earnings in an account that only the kid can access starting at age 18. The other 85 percent is intended to be used to pay taxes, fees and commissions the child owes as well as cover any job-related expenses (think headshots, acting classes, flights to auditions). Parents shouldn't be living off that money, explains one rep with several young clients: "I've had that conversation more than once where parents are like, 'Well, I'm getting screwed here!'" he says.

But no mechanism exists to monitor how parents manage a kid's finances. "There's nobody watching the Coogan Law stuff," explains one lawyer. It's simply ?a statutory obligation placed upon parents of child performers, with the state trusting that they'll comply. And if parents don't? "Then they run the risk of their child suing them when they're 18, saying, 'Where's all my money?'" says the rep. That's what O.C. star Mischa Barton did in 2015 when she claimed her mom bought a $7.8 million house with her earnings and what Gossip Girl's Leighton Meester did in 2012 when she alleged her mom spent hers on plastic surgery.

Most parents respect the 15 percent rule, say reps, with many putting away even more. "It all goes in the Coogan account and stays there until college," says Fresh Off the Boat's Ian Chen, 11. For kids on hit shows like Modern Family (all now over 18), who earned $500,000 an episode for the most recent season, parents often hire business managers to help manage funds. "And if they're making that kind of money, they can probably afford to lose a little bit to the parent," adds the source. For Disney Channel or Nickelodeon stars, at roughly $85,000 an episode, "It doesn't leave a whole lot to steal."

Whether the laws are fair — to either generation — remains up for debate. It's a huge financial burden on parents to have their kids act, notes one insider: "They have to travel all over the place. They can't really have a job. Think about it." Some reps have tried to offset the strain on families by having a parent paid as the child client's manager or tutor. "It smells a little bit," says the rep. "But at least it's better than saying, 'I'm taking it.'"

This story first appeared in the Aug. 8 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.