Posted on July 3, 2009 by David Shulman

Speculating on what the Michael Jackson Family Trust Provides

It’s not my intention to turn this blog in to a celebrity gossip site.  However, there are a number of legal issues regarding Michael Jackson’s estate that are continuously being reported on by reporters who do not fully understand (or do not care about) the nuances involved.  The latest batch of confusion involves the disposition of Jackson’s assets in the Michael Jackson Family Trust.

As I previously posted, on July 1, Jackson’s Will was filed with the Cour  along with a Petition for Probate.  His will is what is known as a “Pourover Will” because it pours over any assets that Jackson owned in his individual name and not in the name of the Michael Jackson Family Trust, into the Trust.  The Petition for Probate listed Jackson’s mother Katherine and his three minor children as primary beneficiaries, along with a number of other Jacksons (who I assume are his nieces and nephews) as secondary or contingent beneficiaries.

There is no legal requirement for a Trust to be released to the public.  In fact, one of the reasons to do a Trust, especially if you are very wealthy or a celebrity is to keep your affairs private after your death.  That being said, like everything else involved in this case, I expect a full version of the Trust to be leaked any day now.  Already the press is reporting on, as TMZ so bluntly put it, “Who Gets What”.  According to the reports, “Katherine Jackson will get 40% of the assets.  Michael's 3 kids will get another 40%. And the remaining 20% goes to several children's charities.”

This cannot be completely accurate.  While I have not yet seen the document, I am 100% positive that each of Jackson’s mother, and his children are to receive their shares in trust, with a the trustee having the power to make or not make distributions of income or principal according to certain standards.

There are a number of reasons for this, from a tax perspective, from a creditor and asset protection perspective, and from a “Control” (yes, that’s Janet, not Michael) perspective. 

Later today I’ll explain why.  (I’d do it now but I have to go to a client meeting.  Blogging is fun but doesn’t pay my mortgage).

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Posted on February 11, 2009 by David Shulman

Good article in the WSJ on Charitable Lead Trusts

There was a good article in yesterday's Wall Street Jounral on an esate planning device known as a chartiable lead trust or CLT.  Under a CLT, the donor sets up an trust, drafted by an estate planning attorney in which the donor funds the trust with an initial amount of money up front, let's say $1,000,000.  The Trust then pays to a charity for a term of years chosen by the donor (for example -- 5, 7, or 9 years) either an annuity or a unitrust amount each and every year.  At the end of the term of years, the property remaining in the Trust goes to the donor's heirs (which could be children, grandchildren, or whoever the donor chooses).

There are a number of complex rules and regulations set forth by the IRS for establishing a CLT, but the benefits of a properly structured CLT are as follows:

  1. The Donor can receive a charitable deduction for income, gift, or estate tax purposes.
  2. Interest rates are currently at a historical low, meaning that the amount that is required by the IRS to be paid to the charity each year is low, thereby increasing the amount that the Donor's heirs may receive.
  3. Because the stock market has declined so greatly, a Donor can fund the Trust with depressed assets that they believe will increase in value over a number of years, thereby removing all of the future appreciation from the Donor's estate, and decreasing the amount of estate or gift tax that the Donor will eventually have to pay.
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