In: Finance
Michael Jackson Case:
Source: https://www.upchurchlaw.com/famous-will-contests/
At his death in 2009, Jackson had three minor children. He also left behind a fortune built over a lifetime of as one of the world’s most famous and successful performing artists. His Last Will and Testament, signed in 2002, was only a few pages long, which may seem odd considering how vast and potentially complicated his estate must have been. But there’s a good reason for the brief will—Jackson had a trust-based rather than will-based estate plan, meaning that the trust was “in charge” of managing the estate.
The Michael Jackson Family Trust agreement (21 pages long) that Jackson signed in 2002 was an amended version of his original trust agreement from 1995. It clearly stated Jackson’s wishes for how his estate should be distributed, as it should have, but that alone did not prevent the problems that would follow.
Although Jackson chose wisely when he named a music executive and an entertainment attorney has his estate executors—who better, perhaps, to understand the types of assets that comprised Jackson’s estates?—the executors grossly undervalued Jackson’s likeness and name at little more than $2,000. The IRS, unsurprisingly, took issue, and valued the brand at more than $400 million. The outcome, which remains to be seen, may result in a tax on the estate that could be several hundred million dollars.
The lesson: Assets, particularly unusual ones, should be properly valued for estate tax filing. An obviously over- or undervalued asset may draw the IRS’ attention and draw out what may otherwise be a straightforward estate settlement process.