Michael Jackson’s untimely exit from the global stage has sparked an outpouring of grief from around the world. But for the family of the late King of Pop, issues surrounding his estimated US$1 billion estate are posing a real legal thriller, with his mother Katherine Jackson already having challenged the will’s executors and creditors waiting in the wings.
Sadly, legal battles over estates are not restricted to superstars like Michael Jackson, or in Australia’s case, former INXS lead singer Michael Hutchence. Brisbane has seen long-running disputes involving the well known Mayne and Sinnamon families, while earlier this year Queensland cattle baron Jock Logan settled out of court a lawsuit by his twin sons over his $60 million beef empire.
Estate planning is all about making sure that the appropriate assets end up with the appropriate people at the appropriate time. It is much more than just about simply making a will; careful thought must be given to what you own and how you own it, and your wishes and intentions must be balanced against the needs of your surviving family members and dependants.
Michael Hutchence probably failed to give adequate thought to his estate planning before he passed away in 1997, with the result being years of protracted litigation over his estimated $20 million estate, and a result which probably would not resemble his true wishes.
In the media recently, there has been much discussion around Michael Jackson’s estate and it is apparent that he too may not have given sufficient thought to his estate planning. He had not reviewed or updated his will since 2002, and his estate is structured in such a way that it is crippled with debt and involves a family trust as the major beneficiary.
While the ongoing royalties from the superstar’s music should eventually see significant benefits flow through to his family, the next year or two will be very difficult and Michael Jackson’s creditors will demand repayment of the monies owed to them in priority to any benefits flowing through to his three children and family.
Fortunately, not everyone has to face the kind of issues that arise from the premature departure of superstars. However, if careful thought is not given to your estate planning, the result will be traumatic for those family members left behind, with the only people benefiting from your lack of thought being the lawyers fighting over your will and estate.
For small business, there is the additional issue to consider of how best to pass control of the company or family trust to the appropriate persons, given that you cannot through your will, gift assets which are owned by your company or trust as those assets remain the property of the respective entity.
Generally speaking, the trustee of a trust has the immediate control of the trust, in the sense that it can, depending on the terms of the deed, distribute income and capital and handle the day to day affairs of the trust.
However, the principal or appointor of a family discretionary trust generally has ultimate control of the trust in that they have the ability to appoint and remove the trustee of the trust and name the vesting day.
Obviously this is the most important role in the succession plan of the family trust and should be passed on to the appropriate persons through your will (subject to the terms of the trust deed). You should also consider the impact of beneficiary/loan accounts with the trust as they may become an estate asset on your death.