With the millions of dollars and substantial assets that some celebrities have, it would be reasonable to think they would engage in careful and methodical estate planning. However, all too often, after a superstar dies, we learn that simple mistakes were made that trigger year of litigation or cost their heirs millions of dollars.
Fortunately, learning estate planning lessons from the mistakes made by wealthy, famous individuals is a great way to prevent yourself from making similar missteps. Today, we will evaluate the common estate planning misstep Michael Jackson made that placed his estate in probate and made his private affairs public.
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If you have not created or recently updated your will, trust, or estate plan, I invite you to call Gemma Law Office to schedule a free consultation. As an experienced Massachusetts estate planning lawyer, I can discuss your objectives, explain your legal options, and create an estate plan that carries out your wishes, as well as helps avoid many of the common estate planning pitfalls experienced by wealthy celebrities.
Did Michael Jackson Have an Estate Plan?
Michael Jackson selected an impressive estate planning team consisting of renowned entertainment and corporate lawyer, John Branca, and savvy business executive, John McClain. Unfortunately, Jackson failed to properly retitle assets after creating his family’s trust, exposing many of his assets to probate.
What Is a Trust?
A trust is a fiduciary relationship in which one individual (known as a settlor) grants another party (known as a trustee) the authority to hold title to property or assets on behalf of beneficiaries. The trustee distributes the assets in accordance with the terms specified in a written trust agreement made by the settlor.
Trusts can be highly beneficial, as assets transferred to a trust are no longer part of an estate, meaning they bypass the probate process. Avoiding probate generally keeps the public (and media) from finding out how much an individual died owning or to whom their money will be left, as well as helps avoid family disputes, protects assets from creditors, and may help avoid estate taxes.
What Estate Planning Step Could Michael Jackson Have Taken?
Planning for the future of your loved ones through the creation of a trust is ideal. However, after creating a trust, there are procedural formalities that should also be considered. Specifically, whether to transfer of all or some of your assets to your trust or provide for those assets to transfer to your trust after your death. Often, settlors will transfer legal title to some or all of their assets. This can be done by retitling the asset to the name of the trust. Assets may also transfer to a trust after death by way of a transfer on death (TOD) or pay on death (POD) agreement. Likewise, assets can be transferred to a trust after death by way of a beneficiary designation on a bank account, a life insurance policy or even a retirement account. If an asset is not transferred to the trust, either during life or by arrangement after death, the asset will require court involvement through probate to complete the transfer into a trust.
Michael Jackson understood the importance of planning for the future of his children. He created the Michael Jackson Family Trust in 1995 to protect his estate for the benefit of his three children and mother, Katherine. However, Jackson failed to completely fund the trust. To fund the trust, he would have needed to take steps to change the title of his assets out of his individual name into the name of the trust. In Mr. Jackson’s case, he skipped this step; therefore, all of his assets, including the Neverland Ranch, had to proceed through probate.
Consequently, Mr. Jackson’s three children were unable to access his funds as instructed in his trust. Instead, a judge stipulated the amounts they were allowed to receive over the lengthy court process.
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Mr. Jackson, who took steps to protect his assets, but did not take the final steps to best fund his trust. Don’t place the security of your loved ones in harm’s way by failing to prepare a complete and well-designed estate plan. Instead, call our office to schedule a free consultation to learn how we can create a custom and pragmatic estate plan that accomplishes your objectives and provides for your loved ones.
As a Braintree will and trust lawyer with years of experience, I will work tirelessly to ensure your assets are protected from common estate planning mistakes.