Michael Jackson was as much a corporation as a person. Like any major celebrity or company, he had ongoing litigation and business operations. “The National Law Journal” has an article detailing the myriad suits Jackson and his company, MJJ Productions, had at the time of his death. These suits will continue being litigated by his corporation or his estate. The corporate suits will proceed with nary a hiccup. The corporation’s existence is unaffected by Jackson’s death. Unlike a very small corporation that may be little more than a one man band, MJJ Productions probably has full time professional management. That management will continue to run the company. However, there may be issues as to who runs MJJ. Assuming Jackson owned most, if not all, of the shares of MJJ, the person who controls the estate and eventually his heirs will have control of MJJ as well as his other personal assets and business.
It is unknown whether Jackson had a will or a trust (or trusts). According to one attorney,most celebrities have living trusts. If he has a will or if he died intestate, there is likely to be a delay while a personal representative (a/k/a an executor) is appointed. If he had a living trust, then the successor trustee can more or less immediately take control of all the assets in the trust. However, if he had some assets in the trust and some not in the trust, then he may still need a personal representative to manage assets outside the trust.
However, Jackson’s estate may earn even more than Jackson. Even as I write this, radio stations and TV stations are playing Jackson songs and videos and the royalties are pouring in. Itunes is probably sellng Jackson’s music at a record rate and CDs and posters are flying off the shelves at WalMart. This income is likely to go further without Jackson to spend it faster than it comes in. It is likely to support an army of lawyers and accountants and still be able to pay debt and a legacy for his three (3) children. Elvis Presley’s estate earned $52,000,000.00 last year, which may be more than Jackson earned while living. Jackson’s estate may do better than Presley’s for the next year or two. On the other hand, a rush is on for refunds of the tickets sold for his upcoming concert tour. At least some of that is insured, but one wonders whether there will be suits for the lost profits and money spent in expectation of the tour.
We won’t know for some time just how things will shake out. One thing is for certain, whether Jackson’s estate proves to be flush or broke, his confused finances and personal life are likely to be a bonanza for a cadre of lawyers on both sides of the issues.
I had some clients come in recently in need of a guardianship for a family member. The family member was a retired professional. He had all the right tools in place to avoid a guardianship — durable power of attorney, health care surrogate, and revocable living trust. So why did he need a guardianship? Because he was suffering from dementia and refused to cooperate with his family in making rational decisions that were in his own best interests. Unfortunately, it seems to me that dementia often magnifies the worst personality aspects of some people. When you combine a cantankerous, domineering personality with paranoia and delusion, it makes for a difficult situation.
A durable power of attorney lets you manage the person’s property, but not the person. Sometimes I hear people say, “I’ve got power of attorney over my Aunt Ethel.” No they don’t. They have a power of attorney that allows them to deal with Aunt Ethel’s property. A revocable living trust also allows the management of property but not of a person. In the narrow area of health care and treatment decisions, a health care surrogate or medical power of attorney does give some control over the person assuming that third parties agree and cooperate. Therein lies the rub. Without an adjudication of incapacity, third parties my be reluctant to accept the authority of the attorney-in-fact or surrogate. This is especially true if the incapacitated person insists that he or she is not incapacitated. The presumption is that people are competent unless declared incompetent.
Sometimes the alleged incapacitated person has lucid moments or is able to “fake it” for significant periods of time. This makes third parties even more leery of accepting instructions solely from the attorney-in-fact or surrogate. Third parties who do not spend a lot of time with the incapacitated person are the most easily deceived. Thus, you can plan and have all the right tools and still not avoid a guardianship. The good news is that although you may not avoid a guardianship of the person, you may still avoid a guardianship of the property if you have a properly funded living trust in place.
A revocable living trust or intver vivos trust is a written document created by one or more persons called settlors or grantors. (For simplicity, we will use just the term “trust” instead of revocable living trust throughout the rest of this post.) The trust instrument names a trustee or trustees who have the power to control whatever property is placed in the trust subject to the settlor’s instructions. The trust property is used for the benefit of one or more beneficiaries. In fact, the trustee has a fiduciary obligation to follow the settlor’s instructions, to prudently manage the property of the trust, and to act in the best interests of the beneficiaries. With a living trust, the settlor is usually the trustee and is also a beneficiary during his or her lifetime. Thus, the settlor retains complete control over his or her property while living and competent.
One of the advantages of a revocable living trust is that a successor trustee takes over the trustee duties when the settlor dies or becomes incapacitated. This feature can help to avoid probate and reduce the likelihood of a guardianship.
In a nutshell, a living trust is an artificial legal entity created by a settor or grantor that provides instructions for the management of the settlor’s property during his or her life and the final management and distribution of the property after death. A trust has advantages if you become disabled because the successor trustee can manage the property for you and you can leave detailed enforceable instructions. A trust avoids a guardian of the property in the trust. A properly funded living trust avoids probate but not estate taxes. A properly set up living trust with certain provisions may avoid estate taxes. Living trusts also do nothing to avoid claims of creditors for the person who creates the trust. That person’s heirs may, however, enjoy some creditor protection if the property remains in trust and the trust has spendthrift features.
You may need a living trust if you are concerned about becoming disabled, if you wish to avoid probate, or if your estate is taxable.
This is probably the most frequently asked question for any estate-planning attorney.Anyone with any property at all, whether real or personal, or with children ought to have a will.Even a person who has nothing may be instantly worth a large sum of money at death, if they are killed through someone else’s negligence or are well insured.For a divorced person with minor children, a will eliminates arguments over who will manage any assets or money left to the children (e.g., an ex-spouse).If you do not have a will, then the state decides who gets your property.In addition, the court will decide who will be your Personal Representative and it may be necessary for that Personal Representative to obtain a bond at the expense of the estate. If you prepare a will, then you can direct that the bond be waived.
This is the first post in a series that will explain some of the basics of estate planning and basic estate planning documents. Many people put off estate planning because they associate it with their own death or they think it is too expensive, but estate planning isn’t just about the distribution of your assets after you are gone.It also isn’t just for the wealthy.In fact, it may be more important for the middle class because there won’t be enough money to correct a failure to plan after you are gone.It is cheaper to do it right the first time.Proper estate planning also takes into account how you will be taken care of if you become disabled.It also considers how to protect your assets for your own use and your hopes, dreams, and desires for your loved ones whether family, friends, or charities.Your estate plan will be built on a firm foundation by first considering your needs, then the needs of your family, ways to protect your estate, ways to grow your estate, and, finally, ways to minimize estate taxes, if applicable. Less than two percent (2%) of estates are subject to estate taxes.
Once upon a time, I might have said that you didn’t need an estate plan unless you had assets, property, or children. However, I have run into some situations that have convinced me that just about everybody needs an estate plan. It is possible for someone who never had any assets to have a large estate at death. How does this happen? A young father or mother could be killed in an accident with a well insured Coca-cola truck whose driver ran a stop light. Suddenly the not wealthy young father or mother has a substantial claim and a large estate. If the decedent was happily married to the other parent of the children, there may not be any problems. However, I have seen many situations like this where the couple was estranged. In the absence of a will, this often causes problems. On at least one occasion, I encountered a family where four of the five surviving “adult” children were mentally handicapped. The fifth was not much better. Their mother left a mobile home on some land and no will. This caused considerable problems. \
The Terry Schiavo tragedy is another example. If she and her husband had done any estate planning, chances are that they would have received Living Wills. There then would have been no doubt as to Ms. Schiavo’s wishes one way or the other. Many years of expensive litigation might have been avoided or shortened.. So now I think most people could benefit from estate planning.