We’ve become all too used to folks in media twisting a story to suit a certain purpose. When Michael Jackson’s will was revealed, the media was reporting that he left everything to his Family Trust and then speculating as to what that meant.
Of course, no one doing the reporting is an estate planning attorney, so they didn’t mention the likelihood that there were likely ZERO assets owned in his individual name. The Family Trust referenced in his Will was likely created before he died and, if he did the right thing, his assets were funded into that trust. (The Family Trust was probably a living trust. Living trusts are like buckets. Funding is the process of taking your assets and putting them in the bucket.).
Instead of tearing apart the Will, dissecting the provisions of the guardianship nomination, I want to spend a few paragraphs discussing all of the right moves that Michael Jackson made in planning his estate. (I’m more of a “glass-half-full” kinda guy.)
First, he created a living trust and funded his assets into the trust. Back in the days where you could eat 6 days a week on a lawyer’s dime listening to a living trust seminar (the same rubber chicken meal, for sure), people were flocking to lawyers to have these magic books created.
What happened then, and what still happens often in estate planning, is that the lawyers left the job of funding the trust to clients, without any guidance (or at least, guidance that wasn’t billed hourly) from the lawyer. Personally, I think that’s a terrible way to practice and so we’re very diligent about making sure that our client’s trusts are funded.
If you visit a traditional estate planning attorney, clients are sent home with a nice, leather-bound book and a letter saying, “Now go move your assets into the trust.” This is hardly the best way to serve a client. Regardless, I’m hoping that Michael went with a great estate planning attorney that made sure that the assets were funded into the Family Trust.
We’ll soon learn whether the trust was fully funded because if Michael Jackson owned any assets in his individual name, they’ll have to go through probate to be put into the Family Trust – and we’ll see just how good his estate planning was.
Second, as a parent of young children, Michael likely separated the responsibility of caring for the kids from the caring of the money. (Again, we don’t know for sure because the Family Trust is a private document.) When I counsel clients with minor kids, I tell them that the only way to make sure that they money they leave for their children (through term life insurance or otherwise) is to keep the guardian’s hands off the spigot. That means having one person serve as guardian and a totally different person serve as trustee of the Trust created for the kids’ benefit.
As you can see, if you have the same person serving both roles, there is chance that the funds will be depleted before the kids are done being raised. Just as important, you will have lost control over the assets that you left for your children’s benefit. This issue is not so much about trust, but about control and taking every step that the assets you took time to plan to leave for your loved ones are there when they need them.
While we don’t know exactly who is named as a trustee, Michael likely kept those roles separate and therefore made it much more likely that the money will be used correctly for his children’s benefit and will last throughout their lifetime.
Third, his Family Trust afforded him the opportunity to keep his affairs private. We already know how fiercely private Michael Jackson was. If he died early, there would like be a frenzy of publicity digging into his life, his finances, etc. By creating a living trust, he’s been able to minimize the effect of his death as to access of his affairs. And you can see the fruits of this in the way that no one has been able to report what is in the Trust, who the trustees are, and who gets what, etc.
Now, it may be that one day the document is leaked, but the difference is that the Will was required to be filed as a public document, whereas the Trust is a completely private document. Unless you are a mega celebrity, the people that you trust with your assets (like your lawyer and your trustees) will be able to keep that secret and your affairs private. Even when predators come in to see if they can get some of those hard-earned financial assets that you left for your children.
Finally, Michael planned before it was too late. It’s unfortunate that it takes a tragedy for us to act – and it’s even worse that people will say “I need to so something” now and forget about it in a few weeks.
Unfortunately, tragedy knows no economy. The time is now for you to plan. As an estate planning attorney, father and husband, I’m thrilled to see that Michael Jackson did some good planning before he died.
Posted by Victor J. Medina