Details of Michael Jackson’s Family Trust were leaked to the media recently. My take? Michael Jackson would have benefited from working with an estate planning lawyer that would have taken the time to educate Michael about available techniques to better protect his children. This is just another example of poor estate planning from a celebrity.
Under the terms of the trust, Michael Jackson’s children are in line to receive $33 million each. Michael’s mother, Katherine Jackson, will receive her share of the estate immediately, and any portion remaining when she passes, will be split between Prince, Paris and Blanket. The children will receive allowances until they are 21 and then at age 30, they’ll receive access to one-third of their trust fund, another third at age 35 and the remainder at age 40.
My guess is that if you have a trust, you may have the same exact distribution terms. How do I know this? Because it’s the “standard” that a majority of lawyers use when they don’t take the time to educate their clients about available options and protections that are available.
So what would I have done differently?
For starters, Michael should have been advised to use a living trust to hold his assets and ensure that all assets were properly titled. This could have kept his family out of the probate court. In short, probate generally costs too much, takes too long, and is totally public. It will be interesting to see how long the probate attorneys manage to keep things tied up in court and how much of the estate is eaten away by legal fees and related probate expenses.
Second, I would have taken the time to educate Michael about how he could have protected both Katherine and the children from a myriad of life risks, including catastrophic illness, lawsuits and creditors, divorce, and more. Once Michael’s children receive their inheritances outright, the funds will be totally unprotected. What if they have creditor problems? It seems to be a pretty common occurrence for the rich and famous, and let’s face it, MJ didn’t exactly set a great example. If the children are sued or file for bankruptcy, the inheritance is going to be totally unprotected once it hits their bank accounts.
Instead, I would have suggested placing the funds in a lifetime asset protection trust. An asset protection trust can be set up in such a way that the children would still be able to receive allowances from the trust for their living expenses, but because the money is held in trust rather than owned by the children outright, it would be protected from lawsuits, creditors and other life risks.
What if one of the children receives their share outright and later gets divorced? There’s a good chance that part of the inheritance will be lost to the ex in the divorce proceeding? Is that really what Michael would have wanted? Most families I work with want to keep the inheritance within the bloodline.
If the trust had included asset protection, Michael could have had the peace of mind that his children would be well provided for, but also protected from life risks and that the assets could have continued to grow and accumulate for future generations.
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