Michael Jackson, the “King of Pop,” had always been a controversial superstar. Over the years, he became the father of three children, Prince Michael Jackson II, Paris-Michael Katherine Jackson, and Michael Joseph Jackson, Jr.
While Jackson created a trust to care for his children and other family and friends, he never actually funded it. The result? Embarrassing and seemingly endless probate court battles between family members, the executors, and the IRS.
4 Essential Purposes of a Trust
A trust is a fiduciary arrangement which allows a third party (known as a trustee) to hold assets on behalf of beneficiaries. There are four primary benefits of trusts:
● Avoiding probate. Funded trusts are not subject to probate. However, unfunded or underfunded trusts, just like wills, generally must go through probate.
● Maintaining privacy. Probate is a matter of public record. However, since trusts aren’t subject to probate, privacy is maintained.
● Mitigating the chance of litigation. Since trusts are not subject to the probate process, they are not a matter of public record. Therefore, fewer people know estate plan details – mitigating the chance of litigation.
● Providing asset protection. Assets passed to loved ones in trust can be drafted to provide legal protection so assets cannot be easily seized by predators and creditors.
While these are arguably the most essential purposes, trusts can also affect what you pay in estate taxes as well.
Sadly, Jackson could not take advantage of any of these benefits. Although he created a “pour-over” will, which was intended to put his assets into a trust after his death, the “pour-over” will, like any other will, still had to be probated.
The probate, along with naming his attorney and a music executive as his executors (instead of family members), fueled a fire that could have been avoided with more mindful planning. Given the size of Jackson’s estate, it’s no surprise that everyone wanted a piece of the pie.
Don’t Burden Your Family!
Losing a loved one is difficult enough without having to endure legal battles afterward. In Jackson’s situation, a proper estate plan could have reduced litigation and legal fees, and helped provide privacy for his survivors. His situation, although it deals with hundreds of millions of dollars, applies to anyone who has assets worth protecting. In other words, it likely applies to everyone!
There are many types of trusts and estate planning tools available to ensure that you don’t burden your family after your death. We’ll show you how to best provide for and protect your loved ones by creating the type of estate plan which is tailored to fit your needs.