$600M Dispute Over Michael Jackson’s Catalog Teaches Estate Planning Lessons

When Michael Jackson passed away in 2009, he left behind a complex legacy. His music, however, continues to generate millions of dollars annually. With a biopic expected in 2025 and his Broadway show MJ bringing his music to theaters worldwide, Jackson remains a prominent figure in entertainment.

Despite the success of his music, Jackson’s estate has been mired in a protracted tax dispute with the IRS, concerning over $700 million, and other legal challenges for more than a decade. The latest twist in this saga unfolded on August 21, when a California appellate court approved a $600 million sale of assets proposed by his estate.

As law professors who teach trusts and estates, we believe Michael Jackson’s estate offers important lessons for anyone considering writing a will, regardless of wealth. When Jackson signed his will in 2002, he left almost everything to his children through a trust, granting his mother a small interest during her lifetime.

His will included a common clause allowing his executors to sell the estate’s assets under terms they deemed best, with proceeds going to his children. In February, Jackson’s executors arranged a significant deal to sell a portion of his music catalog to a joint venture with Sony for $600 million. However, Jackson’s mother, Katherine Jackson, objected on grounds that Michael had told family members the assets should never be sold.

In mid-August, a California appellate court rejected Katherine’s claim, approving the proposed sale. While people often discuss estate plans casually with family, those wishes aren’t legally binding unless they’re in a valid will, trust, deed, or contract.

In California, where Jackson died, a will must be in writing, signed by the testator, and witnessed by two individuals who saw the testator sign the document. These requirements help courts differentiate between early drafts and final versions, ensuring reliable evidence of the testator’s intentions during probate proceedings.

When the meaning of a will is unclear, courts allow witness testimony to interpret the text. Katherine Jackson argued that Michael intended his trust to receive his music catalog in the same form it existed at his death. However, the court disagreed, citing the will’s broad powers granted to the executors during probate. These powers allowed the executors to sell estate property while managing the estate, ultimately benefiting the trust.

Executor powers are often overlooked during estate planning but can play a significant role in estate administration. Attorneys typically advise clients to give executors broad powers to manage estate property during probate, reducing transaction costs and increasing the estate’s net value. Fiduciary law safeguards the estate by holding executors personally accountable for any power abuse.

When advising clients with special assets like Jackson’s music catalog, estate planning attorneys discourage restricting the sale of valuable property due to unpredictable future circumstances. A notable example is Joseph Pulitzer, whose will barred the sale of his newspaper business. Eventually, the business became unprofitable, prompting trustees to seek court permission to revise the will. The court allowed the change to prevent financial harm to the estate.

This example highlights how restricting executor powers can backfire, a scenario Jackson’s attorneys aimed to prevent. An enforceable estate plan must be formalized in writing. Courts generally avoid altering an estate plan based on testimony about the testator’s verbal statements, even if expressed to a parent.

Testators should pay close attention to all provisions of a will, including technical terms explained by an attorney. It may be tempting to control property from beyond the grave, but restrictions desirable during life can backfire after death.

Source: The Conversation