Michael Jackson, the King of Pop, made his professional debut at the age of 6 as a member of the musical group his older brothers started called the Jackson 5. He spent nearly his entire life in the public eye, and by the time he died in June 2009 at the age of 50, he was one of the most famous and successful recording artists of the 20th century. His album Thriller sold an astonishing 66 million copies and is said to be the best-selling album of all time. As proof of his enduring legacy, Jackson's estate earned $825 million in 2016 alone and more than $2 billion since his death 10 years ago.
Given his success and the amount of money he earned as a musician and entertainer, it's not surprising that Jackson sought out and received excellent estate planning advice. In fact, he followed the advice we often give wealthy clients, which is to create a Revocable Living Trust with a "Pour-Over Will" that can be helpful in avoiding probate and usually keeps details of a person's estate private.
The way such estate documents work is that upon death the decedents' assets transfer into one or more trusts established for certain beneficiaries. In Jackson's case, that meant that his three children were to receive the proceeds of his estate. Unfortunately for his family, however, Jackson established a useful estate planning structure but failed to follow through by funding the trusts themselves.
At the time he created the trusts, he might not have decided or even known which assets should be placed in which trust because his most valuable assets were probably his name and likeness. Although he had other hugely valuable assets, including rights to the Beatles music catalog, Jackson's estate had very little liquid reserves. Indeed, Jackson died owing creditors more than $400 million. If he and his lawyer's objectives in establishing his estate plan was to avoid probate for his heirs, the failure to fund the trusts in the first place was a costly and avoidable mistake.
It turned out that because his trusts had no assets, the rest of his wealth needed to be sorted out before assets could be 'poured-over.' With an estate as large and complex as Jackson's, that has meant ten years of litigation in probate and tax court to negotiate assets, liabilities, and debts.
By contrast, Steve Jobs, the late founder of Apple established irrevocable trusts for his family. When he died in 2011 from pancreatic cancer, his estate and assets avoided probate, estate taxes, public scrutiny, and a prolonged wait for heirs to receive their distributions. Of course, a key difference is that Jobs knew he was dying and therefore did everything possible to ensure that his estate would remain private. Jackson's death was an unfortunate accident.
What can we learn from the case of Michael Jackson's estate? Should he have created irrevocable trusts instead of revocable trusts? Not necessarily. If he had followed through with completing the requisite plan, the challenges his estate faced would probably have been avoided. Having failed to complete the plan, in Michael Jackson's words, there's been some ten years of "monkey business goin' down." If he had lived longer, it seems likely that he would have eventually funded the trusts. And as far as we know, no claims to Jackson's estate were ever made by either Billie Jean or her son.
Before you go, please let me know if you'd like to receive a free copy of my first book, The Wolf at the Door, or my new book, Alzheimer's, Widowed Stepmothers & Estate Crimes. Just send your address in an email to me at hackard@hackardlaw.com, and I'll be glad to put one in the mail.