In the case of Michael Jackson's estate, the executors certainly have their work cut out for them because the estate faces a whole host of legal problems:
1) The wrongful death case against AEG. Although the executors have mainly stayed out of the proceedings in which Jackson's heirs are seeking $40 billion (!) for the wrongful death of the singer, there was some drama when an estate consultant testified on behalf of AEG and against Jackson's heirs. The consultant claimed the executors gave him permission to testify, but the executors deny it. Either way, the testimony may cause headaches for the executors because the IRS may use the consultant's lavish estimates of Jackson's earning capacity against the estate in estate headache #2:
2) Estate tax battle with the IRS. Although Jackson allegedly died in debt, his executors have earned more than $600 million for the estate in the four years since the singer's death. While the executors claim that Jackson was only worth $7 million on the day he died, the IRS claims the total is as high as $1.5 billion. The IRS claims that the estate owes $702 million in estate taxes, and the executors have filed suit to challenge the IRS's claims. While the article believes the IRS might be overestimating the estate's value, it also highlights how the executors were probably too aggressive in its estate tax return, and dramatically undervalued the estate. The dispute will eventually be resolved, but at great expense to the estate, which means less money getting into the hands of the beneficiaries.
3) Custody battle for Jackson's children. A woman named Christine Leroux is claiming she was a longtime friend of Jackson's and that her eggs were used for all 3 of Jackson's children. She plans to seek custody of the children, allegedly because she fears for their welfare. Now, this claim may not go very far, unless she has some compelling evidence. Plus, just because you donate an egg doesn't make a "mother" in the eyes of the law. But yet again the executors are going to have to fight the battle in court, at the estate's expense.
4) Family conflict about the work of the executors. Some of Jackson's siblings think the will was fake and that the executors are not doing a good job. They have complained not only about the executors, but about their attorney, and blame them for the IRS dispute among other things. However, the only family member with legal standing to challenge the executors is Jackson's mother, Katherine, and she has not done so, despite alleged pressure by at least some of her children to do so. The article suggests the reason may be because in fact the executors have done a great job by bringing more than $600 million into the estate since Jackson's death, which is more than any living artist made in the same four-year period.
5) Yet another sex abuse claim. One of Jackson's defenders during his 2005 criminal trial for child molestation now claims he himself was a victim--a "fact" only brought to light in recent years through therapy. A quiet settlement seems unlikely, so here we'll probably see yet another court battle, paid for by the estate.
Obviously, most estates don't face problems of this magnitude. However, settling an estate is rarely without one roadblock or another. A good probate/estate administration attorney can make the process less daunting for the executor and the outcome more lucrative to the beneficiaries, but a good estate planning attorney can help before obstacles arise by developing an estate plan that avoids some or all potential pitfalls in the first place. For example, many of the legal problems currently facing Jackson's executors could have been avoided if Jackson's estate planning attorney had set up and properly funded a revocable living trust, which when done right serves the same purpose as a will, but without having to go through the public probate process (which is when most legal challenges to an estate arise).
All that said, there is yet another twist to the story of Jackson's executors--one that I am sure will spark some heated comments from my readers. Stay tuned for my next post--to be published on 10/8/13.
Until then, be well.