When Michael Jackson died unexpectedly on June 25, 2009, it became clear he had made one of the most common estate planning mistakes of all time. Although, he started on the right estate planning path, he then completely dropped the ball. You see, Michael created a living trust to avoid probate, reduce the potential for litigation, and keep his estate private. This was a smart move. Clearly he was getting good legal advice early on. Trusts are a great way to protect your property from the probate court process. Wills are public documents and must be filed with the probate court. Probate can take a year or more and invite challenges. Many celebrities want to keep their estate details private, reduce the likelihood of challenges, and keep their estate out of probate court.
Failure to Follow Through
For Michael Jackson, after creating his trust, things took a turn for the worse because he failed to follow through and fund his trust. Funding is the process of transferring or re-titling property into the name of your trust. There are several ways to fund a trust. You can transfer property directly into your trust or you can list your trust as a beneficiary of life insurance or investment accounts. The type of property and your goals will determine the best way to fund your trust. However, some types of property should not go into a living trust. Always consult with your attorney before adding property to your trust or changing a beneficiary designation. When properly transferred, property in the trust is safe from probate. Any probate property left out of the trust is not protected. Probate can be a lengthy and costly process. It also makes your estate more vulnerable to challenges and creditor claims. Distributing property to your children through a trust can also provide creditor protection for your children's inheritance.
Getting back to Michael Jackson's situation. After setting up his trust, Michael Jackson should have immediately begun funding it. Because most people continue to buy and sell property over a lifetime, funding is an ongoing process. When funding doesn't happen, the trust cannot achieve its purpose. An unfunded trust like the one Michael Jackson set up is a waste of time and money. As of 2018, Michael Jackson's estate is still open, still in court, and still facing legal challenges.
If you have an existing trust and haven't funded it, it's time to get started. Call 704.887.5242 to schedule a consultation.