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.