Michael Jackson & Farrah Fawcett: Estate Plan Wake Up Call

In the wake of the sad and tragic deaths of Michael Jackson and Farrah Fawcett, we are all reminded how fragile our lives can be and how quickly things can change. The death of these two iconic figures should be a call to many to put their estate plan in order. It should be noted that the reality is that most people die without wills in our country. Some really smart and famous people, Abraham Lincoln, Howard Hughes, and Pablo Picasso, die without taking the time to draft a will.

Many of us procrastinate, minimize our personal need or the legal importance of drafting wills, trusts, living wills, and durable powers of attorney. The complexities of combining and coordinating diverse assets such as individual assets, jointly held assets, retirement plans, life insurance, annuities and business interests seem just too daunting for some. For others, they do not realize the importance of looking at all of their assets from an overall perspective; namely, when all is said and done who ends up with what.  Is the division of assets fair and equitable to all concerned after the payment of taxes, debts and estate administration costs?

For many, Michael Jackson’s untimely death has raised these and many other estate planning issues. At this point, no one knows whether he had a will and/or trust for his kids, or whether his estate plan was up to date. But by looking at his situation (and speculating a bit), some important estate planning considerations for the rest of us can be explored:

Guardianship: It is unclear what provisions Mr. Jackson had in his will (assuming there is a valid will) for his children. The early word from the media is that this will be a messy battle in the courts over the issue of guardianship of his children, even if his will indicated his preference for guardian.  Even if  challenged, the designation of guardian in a will would still be a very significant factor in any court challenge and laying out your wishes is always a prudent thing to do in any event.  The object lesson is clear: Parents with young children clearly should see the need for a will that indicates their choice of guardian for their children.

Trusts: No one knows whether Mr. Jackson had set up trusts for his children. Although it appears that his estate is now insolvent, this situation will probably change with post-mortem sales of his music someday providing assets and wealth for his children (think after-death income of the Elvis Presley estate).  Hopefully, he set up trusts that will protect and manage his assets.  To increase the possibilities of becoming competent adults, perhaps he drafted provisions in his trust in a way that develops their sense of personal initiative and responsibility yet still provides for their basic needs.  Experienced estate planning attorneys explore this type of forward looking planning when it comes to dealing with children and their anticipated needs if parents die prematurely.

Specific Bequests: The media has speculated that a very large asset of his estate (his Beatles song rights) was gifted to Paul McCartney. This generosity may be commendable, but from an estate planning perspective this bequest may raise problems. First, if his estate is in fact insolvent, this bequeathed asset would not be available to his estate to be sold and the proceeds used to pay down estate debts and/or benefit his children. Secondly, generally, bequests like these are often times given in a way that they bear no estate taxes. This could distort how the assets are divided between beneficiaries. The point here is that this bequest may have made sense when the will was originally drafted when Mr. Jackson was wealthy, but this bequest could be quite problematic in the current situation. The lesson here is that an estate plan needs to be looked at periodically as the family needs and financial situations change over time.

Special Needs Trusts: Farrah Fawcett died leaving a son who is in jail with addiction problems. The issues for people with children with special needs is often minimized, overlooked or not fully considered. As her only child, did she leave all of her wealth to her son? Did her will provide that he was to get his inheritance at her death or did she provide for a trust for his benefit? If she established a trust, what kind of provisions and conditions did she make in providing benefits to him? These tough questions arise not only for children with addiction issues, but for children with cognitive impairments, physical disabilities and emotional issues.  In addition, special needs trusts may be required where children are receiving public assistance from state and local governments.

The Bottom Line: Protect your family and protect your hard earned wealth. Spend the time to plan your affairs with an experienced estate planning attorney.  Remember, if you die without a will and trust, your state intestacy laws will control who will get your assets and how they get your assets. When young children are involved, courts generally place the children’s inheritances in trust in accordance with what a judge deems appropriate.  In addition, the judge will determine who will be the trustee of any trust they impose on your children and they will determine who should be the guardian of your children. These and other important considerations should be determined by you and not by a court of law, so do it and do it now so you do not leave problems like the ones Michael Jackson and Farrah Fawcett may have left behind.

© Steven J. Fromm, 2009

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15 responses to “Michael Jackson & Farrah Fawcett: Estate Plan Wake Up Call

  1. Pingback: Phillip Seymour Hoffman: Lessons For Us and Especially Women On The Estate Plan Left Behind | Philadelphia Estate and Tax Attorney Blog

  2. Pingback: Celebrity Deaths: An Estate Plan Wake-up Call « FLORIDAWILLMAKER.COM

  3. amazing stuff thanx :)

    Like

  4. These tragic events are teaching us to make a plan before we die to ensure that our family is safe. We need to think about this now when we have a chance to implement our wishes.

    Thank you for sharing

    Like

  5. Steven,

    Excellent stuff. Its so sad to see the needless pain and additional costs that people have to endure because they don’t do a little planning on the front end.

    Olaide Banks

    Like

  6. James Rothaar

    Excellent advice and usage of article marketing.

    Thank you for sharing this info.

    Like

  7. What a great piece of advice for clients, Steven. The importance of planning is not just resrved for the rich. You established how every family needs planning to protect their most cherished assets… their children.

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    • Kris this is so true. As I touched on in response to the above comment, the other part of naming guardians is setting up a trust for young children (and in some cases for other family members). Parents need to explore the drafting possibilities as to the appropriate terms that need to be in a trust depending on the beneficiaries, their particular needs or disabilities and the amount of money involved. Trusts need to be carefully set up so that that they do not create a disincentive for children to become independent and competant adults. This would be clearly an issue in Mr. Jackson’s case where the trust may ultimately end up with a large amount of assets. Hopefully, the trust document was built with this type of eventuality contemplated.

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  8. Good analysis and excellent advice, Steven. Since your posting, it has been reported that Jackson’s will is a pour-over will, leaving everything to the Michael Jackson Family Trust. Good for him! He appears to have taking action during his life to provide protection for his children by setting up a living trust.

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    • It looks like he did get some good estate planning advice. Readers should be aware that a pourover will, one that pours all assets of person’s probate estate to a trust, is used quite often. It provides privacy as to the terms of the trust, namely, who will get paid and when. It also can keep private the amount of any assets that are placed in the trust before death. Assets titled in the deceased person’s name pass through probate in Pennsylvania and are a matter of public record. One of the many advantages of trusts is that placing assets in trusts and having the assets professionally managed can protect the beneficiaries from squandering assets. Trusts may also protect these assets against creditor claims, bad financial judgment, bankruptcies, divorces, etc. of beneficiaries. Most importantly, great care should be taken in drafting the terms of trusts to meet the families financial, charitable and/or special needs.

      Like

  9. Excellent piece and great use of familiar circumstances in the pubic eye to engage readers and really show the urgency for people to take action and protect what is rightfully theirs.

    Like

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