Love him or not you have to admit Michael Jackson ‘had the moves’. He is the undisputed King of Pop and his dance moves are the stuff of legend. For all his bazaar personal behavior, it turns out Jackson also had the right moves when it came to his estate plan. Here are the key elements and what you can learn from his example:
- Revocable Living Trust. A revocable living trust is a trust that you establish during your lifetime while retaining the right to make changes including terminating the trust. At your death, the trust becomes irrevocable, meaning all the provisions of the trust become non-changeable. The primary purposes of a revocable living trust are two-fold:
- Privacy. All assts held in a revocable living trust avoid probate and therefore remain private and out of the public eye. Had Jackson not done a revocable living trust, his assets would have gone through probate whereby a personal representative compiles a detailed list of all of his assets and post the list with the probate court…all of which is open to the public for viewing.
- Continuity of management. Another reason for setting up a revocable living trust it that it allows for smooth transition of financial management should the beneficiary become incompetent. For example, had Jackson lapsed into a coma, this would have triggered provisions allowing his appointed financial managers to take over. Without the revocable living trust, an expensive and time consuming legal battle could have ensued. An alternative strategy he could have used was to have General and Durable Power of Attorney whereby you nominate who will be in charge of your financial affairs should you become incompetent.
- Will. In addition to the revocable living trust, Jackson had a will. While your first reaction may be, “So what?” realize that the majority of Americans don’t have a will. In this case his will directs that any assets not held in his revocable living trust be transferred into the trust. Through this ‘pour-over’ will he made sure to tie up any loose ends.
- Competent trustees. For his trustees and personal representatives, he chose two business associates, one of whom is an attorney and the other an astute businessman. Your goal should be to choose people who are good at handling money.
- Guardians. Jackson was very explicit when choosing the guardian for his three children. His 79-year-old mother is their guardian, with long-time friend 65-year-old, Diana Ross as back-up guardian. I would have encouraged him to choose a guardian closer to his own age, perhaps a sibling, but he did make his wishes clear.
- Specificity. In his documents, Jackson wisely anticipated certain problems and included language to protect his estate from challenges. For example, he included a ‘no contest clause’ that would automatically ‘disinherit’ anyone who challenges the estate thereby removing any financial incentives for would-be treasure hunters. He was also careful to include the names of each of his three children and to specifically exclude his ex-wife, Debbie Rowe, making clear his intentions.
You don’t have to have a $500 million estate to take away valuable lessons offered by Michael Jackson. Consider, now, whether this is a good time to review your own estate plan. It turns out that the King of Pop was also the King of Estate Planning!