Following the sad and tragic deaths of Michael Jackson and Farrah Fawcett, we are all reminded of how fragile our lives can be and how quickly things can change. The death of these two iconic figures should be a call for many to get their estate plan in order. It should be noted that the reality is that most people die without a will in our country. Some really smart and famous people—Abraham Lincoln, Howard Hughes, and Pablo Picasso—die without taking the time to write a will.
Many of us procrastinate, downplay our personal necessity 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 owned assets, retirement plans, life insurance, annuities, and business interests, seem too overwhelming to some. For others, they don’t realize the importance of looking at all their assets from a big picture perspective; that is, when all is said and done, who ends up with what. Is the division of property fair and equitable to all concerned after payment of taxes, debts, and estate administration costs?
For many, the untimely death of Michael Jackson has raised these and many other estate planning issues. At this time, no one knows if he had a will and/or a trust for his children, or if his estate plan was up to date. But by looking at his situation (and speculating a bit), you can explore some important estate planning considerations for the rest of us:
Guardianship: It is unclear what provisions Mr. Jackson had in his will (assuming there is a valid will) for his children. The first word from the media is that this will be a messy court battle over the issue of guardianship of his children, even if his will indicates his preference for guardianship. Even if contested, the appointment of a guardian in a will would still be a very important factor in any court challenge, and in any case, it is always prudent to state your wishes. The object lesson is clear: parents with young children should clearly see the need for a will indicating their choice of guardian for their children.
Trusts: No one knows if Mr. Jackson had established trusts for his children. Although it appears his estate is now insolvent, this situation will likely change with postmortem sales of his music one day providing assets and wealth for his children (think of the postmortem income from Elvis’s estate). Presley). Hopefully, he has established trusts that will protect and manage his assets. To increase the chances of becoming competent adults, he may have written provisions in his trust in a way that develops his sense of personal initiative and responsibility and still meets his 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 the parents die prematurely.
Specific bequests: It has been speculated in the media that a large part of his estate (his rights to Beatles songs) was donated to Paul McCartney. This generosity may be commendable, but from an estate planning perspective, this legacy can pose problems. First, if your estate is in fact insolvent, this legacy asset would not be available to your estate to be sold and the proceeds used to pay off the estate’s debts and/or benefit your children. Second, in general, bequests like these are often given in ways that do not incur estate taxes. This could distort the way the assets are divided among the beneficiaries. The point here is that this bequest may have made sense when the will was originally drawn up when Mr. Jackson was wealthy, but this bequest could be quite problematic in today’s situation. The lesson here is that an estate plan should be reviewed periodically as family needs and financial situations change over time.
Special Needs Trusts: Farrah Fawcett died leaving behind a son who is in jail with addiction problems. Issues for people with children with special needs are often downplayed, overlooked, or not fully considered. As her only daughter, did she leave all her wealth to her son? Did his will to her provide that he would receive her estate on her death or provide a trust for her benefit? If she established a trust, what kind of provisions and conditions did she make to provide you with benefits? These difficult questions arise not only for children with addiction problems, but also for children with cognitive deficiencies, physical disabilities, and emotional problems. Additionally, special needs trusts may be necessary when children receive public assistance from state and local governments.
The bottom line: Protect your family and protect your hard-earned wealth. Spend time planning your affairs with an experienced estate planning attorney. Remember, if you die without a will or trust, your state’s intestacy laws will control who gets your assets and how they get your assets. When it comes to young children, courts generally place the children’s estates in trust according to what the judge deems appropriate. In addition, the judge will determine who will be the trustee of any trusts placed on your children and 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 don’t leave problems like Michael Jackson and Farrah Fawcett may have left behind.
© Steven J Fromm, 2009
