Michael Jackson, known as the “King of Pop” had always caused controversy. He became the father of three children, Prince Michael Jackson II. Paris-Michael Katherine Jackson and Michael Joseph Jackson, Jr. Jackson had created a trust for the purpose of caring for his children, other family and friends but he had never funded it. Because of that, there were endless probate battles between his family members, the executors and the IRS.
4 Essential Purposes of a Trust
According to the IRS “a trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another”. A trustee holds assets for the beneficiaries. The four primary benefits of a trust are:
- To avoid probate – Funded trusts do not go to probate but unfunded and underfunded trusts usually do need to go through probate, just like wills.
- To maintain privacy – Probate is public record but trusts that do not need to go to probate keep their privacy.
- To mitigate the chance of litigation – Keeping a trust out of probate keeps it private and not public record. This allows only a few people to know the details of the estate plan and thus mitigates the chance of litigation.
- To provide asset protection – Using a trust to pass assets to loved ones can allow you to protect those assets from predators and creditors.
These are the most essential reasons for using a trust but a trust can also affect your estate taxes as well.
Jackson had created a “pour-over” will that was supposed to put his assets into a trust after he passed. But because it was a will it had to go through probate and so he was not able to take advantage of the above benefits of using a trust. The probate of his estate caused problems. Everyone wanted a piece of his large estate. Who he chose as his attorney and executor, a music executive instead of family, also caused problems. If he had planned a little better, this could have been avoided.
Don’t Burden Your Family!
Losing a loved one is hard but makes it even more difficult when legal battles occur afterward. Having a proper estate plan, Jackson could have avoided the litigation, legal fees and public display his family had to deal with after his death. Jackson had hundreds of millions of dollars but anyone that has assets they want to protect needs to learn from this lesson.
With so many different types of trust and estate planning tools available, no one should leave their family having to deal with legal battles after they are deceased. Our office can show you the best options for your situation. We can help you protect your loved ones by putting together the best estate plan for your needs.