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Shrewd Planning: A Review of Michael Jackson’s Estate

By Paul Deloughery, attorney at law
(with the help of Beth Schneider)

Michael Jackson, the “King of Pop”, died on June 25, 2009 at the age of 50. Certainly a surprising and untimely death, his passing leaves us a chance to scrutinize the estate planning of an iconic celebrity. As you can imagine, he had much to consider in his estate planning, including many assets, large debts, children, parents, an ex-spouse, and innumerable people in his life certainly vying for a piece of the pie.

Gleaning from the care he took in planning his estate, it seems he Michael Jackson wanted to make the probate of his estate as simple and as forthright as is possible while maintaining as much privacy as possible for someone of such stature. In order to do this he had a will and a trust. His will (view PDF) includes items typical of a will. It revokes all prior wills to make clear to the court that the current document should be the binding document. It names his children by name, explicitly states his marriage to Deborah Rowe is dissolved and he intentionally omitted her from his will, it names the executors to his estate, and indicates who he would like to assign as guardians to his children. And of course, it addresses what can be considered quite literally as the million dollar (or more) question of “where does the money go?”

In Michael Jackson’s case of estate planning he took many concerns into consideration and created what is called a “pour-over will”. A “pour over will” is a will in which all of the assets remaining in the estate at the time of death are directed into a trust. In this case, Michael Jackson’s assets are directed into the “Michael Jackson Family Trust.” There are several reasons to create this type of arrangement, many of which were probably near and dear to Michael Jackson’s interest.

A pour over will enables the testator some privacy. The details of Wills are public whereas Trust’s are not. By creating a pour over will, Michael Jackson was able to direct all remaining assets not already controlled by the Trust into the Trust. Because the details of the Trust may be kept private it is not all clear what the Michael Jackson Family Trust contained. It has been reported that 40% of his assets will go to his children, another 40% will go to his mother, and 20% will go to charity. His assets will be distributed only after the estates executor’s marshal the assets and pay off any existing debts. This process will likely be long and tedious considering the amount of debt Michael Jackson held, reportedly close to $500 million. It has also been speculated that it included insurance policies to help him pay death taxes on his estate, another shrewd move by Mr. Jackson if that is indeed true (http://www.cbsnews.com/stories/2009/07/10/entertainment/main5151555.shtml). In any case, even a public figure like Michael Jackson has some sense of privacy knowing that, although the whole world has access to see his will, only a select few can view the details of his Trust.

Liquidity of assets prior to death may also be a major concern for those who utilize Trusts as a financial or estate planning tool. The pour over will allowed Mr. Jackson to keep assets to which he wanted access liquid, without fear of them being left out of his trust upon his passing. In Mr. Jackson’s case, items not included in the trust reportedly include a stake in the Sony catalog of Beatles copyrights, a lucrative item to say the least. By keeping them outside of his trust and using the pour over will, he could utilize any potential distributions while he was alive while being certain that they would go to the trust upon his death.

Michael Jackson’s will indicated his wish that his mother, Katherine Jackson, be assigned as guardian of his children if he were to pass while they were minors. If she were to predecease him, then he named Diana Ross, the legendary singer, as their guardian. On August 3rd, 2009 the California courts complied with this request and named Katherine Jackson as permanent guardian to Jackson’s three children. In California the courts have the final say even when a guardian is named in the will, but in Arizona the guardian named testate is approved once the named guardian files acceptance in writing. In effect, Arizonans have a bit more control over who they name as guardian to their minor children.

Katherine Jackson is also inquiring into whether or not she can contest the appointment of executors in order to have more of a say in the guidance of the estate. However, Mr. Jackson’s Trust contained a “no contest” clause which, if accepted by the courts, effectively terminates the rights of anyone who brings a dispute against the provisions of the trust. With the assistance of her attorneys, she is currently evaluating whether or not this sort of challenge will trigger the “no contest” clause of the Trust and forfeit her rights. If they determine that it will not forfeit their rights under the Trust, then we will likely see Katherine Jackson assert demands to have more of a say the post mortem handling of the estate. Otherwise, Katherine Jackson will not assert this claim or else she will lose her 40% inheritance from her son.

The remaining things to be hashed out over the next several months regarding Michael Jackson’s estate include several business deals that Mr. Jackson had in limbo at the time of his death and other deals that parties of interest would like to partake in due to his passing. Many of these deals have potential to be quite lucrative, especially considering the amount of exposure he has received in recent weeks due to his death. Several hearings are scheduled over the next several months to determine the rights of varying parties in each of these deals, the next one being on October 2nd, 2009. A schedule of these hearing is listed online at LA County Superior Court of California with case number BP117321. Regardless of what happens in the future proceedings in Michael Jackson’s estate, it is a clear lesson that good estate planning can go a long way in preventing tedious proceedings in probate, whether or not you are Michael Jackson.

Disclaimer: The information contained in this article is made available for general informational purposes only, and is not intended to constitute specific legal advice or to be a substitute for advice from qualified counsel. For that reason, you should not act or refrain from acting based on any information in this article without first obtaining advice from professional counsel qualified in the applicable subject matter and jurisdictions.