June is the month on our calendars regarded by many as an important time to honor, remember, and celebrate fathers and father figures around the country every year on Father’s Day. But few know that June is also home to World Music Day, celebrated every June 21st, which originated in France as a day when people would play their favorite music to be enjoyed by their neighborhoods and local communities.
What better time, then, to discuss a man who was both an iconic father and an iconic musician? I am referring, of course, to none other than the “King of Pop,” Michael Jackson, who, even years after his death, has been making headlines due to his estate facing legal issues with the IRS, leading to disagreements among his remaining family. So, naturally, in true Trust Counsel fashion, let’s dive into the details of MJ’s estate troubles and see what interesting estate planning lessons we can take from it.
So… What’s Happening with Michael Jackson’s Estate?
Michael Jackson’s estate is currently locked in a battle with the IRS over a dispute regarding the value of his assets. This is proving to be a very “Bad” situation for many of his family members, including his mother Katherine, and his three children, Paris, Prince, and Bigi. And don’t worry if you’re not caught up on the latest news—here are some quick facts on the context of the situation and its status as of right now:
IRS Dispute: The IRS claimed in 2021 that Jackson’s estate severely undervalued his assets and thus owed an additional $700 million in taxes and penalties (talk about some big figures!). Despite the estate winning a partial legal victory against the IRS in 2021, the final value of some assets, like Jackson’s music catalog, MIJAC, is still under negotiation.
Trusts on Hold: Due to the unresolved tax issues, the trusts for Jackson’s beneficiaries cannot be fully funded. Not only do they have to wait until the estate’s issues with the IRS are resolved, but the estate has also mentioned that, for federal estate tax purposes, 20% of the value of the assets must be donated to charity before Jackson’s beneficiaries can know what their monthly “allowances” will be and before any money can actually be distributed to them at all.
Family Disagreements: There are also internal disputes. Katherine Jackson has contested the executors’ control over the funds, arguing that they are being overly restrictive. Her biggest claim is that the executors allowed the sale of MJ’s music assets with Sony without her consent, even though she is an officer of his estate and has a 10% stake in all his assets. These legal issues, which Katherine has requested the use of trust fund money to pay for (a request the estate has denied), have caused issues with Jackson’s youngest son, Bigi, who sued his grandmother over her access to estate funds.
Avoid Making the Same Mistakes as Michael Jackson with These Lessons
These issues teach us several valuable lessons about how even the estates of high-profile individuals like Michael Jackson can face challenges when not properly managed, showing us all why detailed estate planning is so essential. So, let’s take note of what went wrong and what you should do differently:
Valuation of Assets: Ensuring accurate and transparent asset valuations is crucial to avoid disputes with tax authorities. Regular appraisals and clear documentation can help prevent costly legal battles.
Clear Communication: Clearly outline how assets should be managed and distributed in your trust to prevent misunderstandings and disputes among family members.
Regular Updates: Life events such as marriages, divorces, births, or significant financial changes should prompt immediate updates to your plan. This can help avoid any inconsistencies and keep your plan up to date.
Professional Guidance: Experienced estate planners and tax professionals can help you navigate complex financial landscapes and ensure compliance with all legal requirements.
Contingency Plans: Have contingency plans in place for potential disputes, including clear instructions for executors and trustees.
Tax Compliance: Maintain accurate records, file returns on time, and consider liability-reducing strategies, being sure to consult with professionals to minimize IRS claims and ensure compliance with your estate plan.
How Trust Counsel Can Help
At Trust Counsel, we specialize in helping families create robust estate plans that minimize the risk of disputes and ensure smooth transitions. Our team can guide you through every step, from asset valuation and tax planning to drafting wills and trusts that reflect your wishes and protect your loved ones.
By learning from high-profile cases like Michael Jackson’s, we can help you avoid similar pitfalls. After all, you don’t have to be the “King of Pop” to make sure your estate plan is complete and up to date. Don’t let surprises ruin your legacy. Trust Counsel is here to help you every step of the way, schedule an Initial assessment call with us now!
