Michael Joseph Jackson (AKA the King of Pop), singer, songwriter, record producer, dancer and actor was a global figure in popular culture. During a career that spanned over four decades, Michael Jackson was rarely out of the press, with his often colourful and at times troubled personal life and changing appearance being of interest to the press, public and adoring fans.
It is perhaps of no surprise therefore that following his untimely death on 25 June 2009, the interest in him and his estate has been the subject of worldwide press coverage. Last year he earned the title of ‘Top-earning dead celebrity’ by Forbes magazine, with his estate generating a reported $140 million from the film ‘This Is It’, the Cirque du Soleil show, ‘Michael Jackson: The Immortal World Tour’, royalties from the sale of over 500 million albums and various other ventures, thus surpassing the previous holder, Elvis Presley by a huge margin (reported to have generated $55 million).
Michael was survived by his three children – Paris Michael Katherine Jackson (now 17), Prince Michael Joseph Jackson Junior (now 18) and Prince Michael Joseph Jackson II (better known as ‘Blanket’) (now 13).
Putting your trust in someone
His will reportedly appoints John Branca and John McClain to act as his executors with his entire estate passing to a discretionary trust known as the Michael Jackson Family Trust. The guidance that he has given to his executors is that he would like 20% of his estate to pass to charity and the remaining 80% to be held for the equal benefit of his children.
Whilst his will was executed in accordance with the law of California (the detail of which is beyond the scope of this blog (but not beyond the scope of work undertaken by us and via our Terralex law firm network partners!)) this will structure is common to many jurisdictions - including Scotland.
A will that includes a discretionary trust in respect of the entire ‘residue’ (the estate after settlement of any debts and tax) is an extremely flexible will that can adapt to the changing circumstances of the testator – without the need for a new will. The will provides simply that the estate should be held on discretionary trust for the benefit of (what can be a wide) class of potential beneficiaries, which would typically include the testator’s spouse/civil partner/partner, their children and their siblings and registered charities.
The importance of the executors and trustees- a matter of discretion
As is suggested by the name, the retention and/or distribution of the funds held within the trust post death (in terms of both capital and the income generated) is entirely at the discretion of the executors and trustees – albeit that they are guided by a ‘letter of wishes’ in the exercise of their powers. Given the level of discretion involved and the associated length of trustee office (in Michael Jackson’s case the trust will continue until his eldest child turns 40, at which time he will vest in his one third capital share), the choice of trustees and executors is an extremely important one. The testator must be sure that he has the right balance of executors and trustees in place to give effect to his or her wishes beyond the grave, and ensure that any potentially competing interests of the beneficiaries (e.g. spouse and children) are balanced appropriately.
Family asset protection
Critically, assets held in a discretionary trust provide protection from creditors or matrimonial claims which can prevent assets in the estate from entering the wrong hands.
The guiding (white sequined gloved) hand of a letter of wishes
A letter of wishes is a document separate to the will which is written in plain English by the testator. Although not legally binding, it is an extremely important practical tool to assist the executors and trustees in reaching decisions and in managing family wealth and general family circumstances for many years following death. Crucially, it is the letter of wishes itself that details the testator’s wishes as to how the assets in the estate (and so assets in the trust post death) should be managed and eventually distributed and to whom. Commonly a testator will include his/her views in the letter of wishes as to what would be an appropriate age for young beneficiaries (e.g. his/her children) to receive the income and eventually capital of the trust fund. 21 years of age for income and 25 for capital are common choices but 30 and 40 respectively are typical for higher value estates. We have previously blogged on the value of letters of wishes.
As the personal and financial circumstances of the testator change throughout life, it is only the letter of wishes that requires to be altered - and not the will itself. Additionally as the letter of wishes is not binding, this gives the executors and trustees discretion at the time of death (which of course is often years after the signing of the will) to do what is best overall whilst taking into account the testators wishes, the circumstances of the beneficiaries at that time, as well as the tax rules in place in order to ensure that the estate is held and/or distributed in a tax efficient manner whilst achieving the testators overall aims.
Letters of wishes and privacy – masked to the outside world
Crucially, a letter of wishes (unlike a will) does not become a public document after death (whether via the Confirmation or Probate application to court or via registration with the Books of Council and Session), and is retained by the executors and trustees thereby shielding what can often be the most interesting and confidential information from being within the public domain.
Looking after children- the appointment of guardians
Michael Jackson had sole custody of his three children prior to his death and appointed his mother, Katherine Jackson and nephew, TJ Jackson to act as guardians in his will. According to recent reports, his children are flourishing on a yearly allowance of $8million which covers school tuition and regular vacations as overseen by Katherine and TJ.
Under Scots law, a parent can appoint a person or persons to be guardian to his/her children in the event of death but guardianship ends when the child reaches 18. Whilst the choice of guardian can be a tough decision, it is a crucial to ensure the testator’s children are properly looked after and protected.
Protecting artistic legacy and value
For artists in whatever field a will also very importantly protects your artistic legacy and the associated finances (e.g. royalties etc). Having a clear will and instructions as to the future use of your work can be critical. It will help avoid confusion, conflict and unnecessary tax. A will can make special provision for the future ownership and management of your work to best secure the artistic legacy and integrity of your creativity and in a way that you wish. Estate planning can be key where there has already been and/or will be in the future significant financial returns from the work.
Michael Jackson’s estate raises a number of important legal issues to be considered when instructing the preparation of a will. In particular, it highlights the importance of choosing the right guardians, the right executors and the right will structure to protect and enhance the value of the estate following death, and in turn safeguard and provide financial security for the beneficiaries’ future. It also provides an opportunity to put a stamp on the future legacy of your body of work and how it will be used in the future, These legal issues are particularly critical where the individual has a high value estate with creative business interests and artistic legacies which are likely to continue post death.
For more information, please contact one of the individuals below.