Whitney Houston’s Estate Plan: Good, But Not Great

Whitney Houston’s tragic death provides an example of how a trust that takes effect upon death can work as part of an estate plan. But Houston’s estate plan has some surprising aspects as well; there were pieces of her plan that could have, and likely should have, been better.

The late singer’s will leaves everything to her 19-year-old daughter, Bobbi Kristina, but Kristina can’t access her mother’s estimated $20 million fortune right away because it is in a trust.

According to news reports, Houston’s will sets up what is known as a “testamentary trust” for her daughter. A testamentary trust is a trust created by a will. The will names a trustee and specifies what property will be put in the trust. Such a trust has no power or effect until the will of the donor is probated (processed through the legal system). Although a testamentary trust does not avoid the need for probate and becomes a public document because it is a part of the will, it can be useful in accomplishing other estate planning goals, such as providing for a child or reducing estate taxes in certain circumstances.

The person creating the trust may want to prevent a beneficiary who is a child or young adult from inheriting a large amount of money before he or she can handle it. One option is to pay the beneficiary in stages when the beneficiary reaches a certain age or achieves a specific goal.

This is what Whitney Houston’s trust does.  It reportedly allows Houston’s daughter to receive a 10 percent payout when she turns 21, another one-sixth when she turns 25, and the remainder of the trust’s assets when she turns 30. In this type of trust, the trustee usually has the discretion to distribute trust funds to the child at any time prior to attaining these ages, if needed for education or other reasons.

Will Never Updated

Now to the surprising parts of Houston’s estate plan.  First, as Forbes magazine columnists note, Houston could have accomplished the same goals through a living trust, a type of revocable trust, which would have kept the provisions of the trust private because it would pass outside of probate. Second, Houston was relying on a will that was created in 1993, when she was married to Bobby Brown, and it apparently was never updated, even after she and Brown divorced in 2007.  The will names Brown as the suggested guardian for Bobbi Kristina.  Although Bobbi Kristina is no longer a minor, Brown could still gain control of Kristina through a Conservatorship, as was done in the case of Britney Spears.  Finally, the will provided that if Houston had no living children at the time of her death, her fortune would be split between Brown and several family members.

Perhaps all this is what Houston wanted, even after her divorce from Brown, but that should have been made clear in an updated will.  As it stands, it appears that Houston simply neglected to do something elder law attorneys urge all clients to do: update their estate plan after a divorce or other major life change.

Trusts — either testamentary or living — can be set up for many different purposes. To decide if a trust is right for you, consult an elder law attorney.

Contact Attorney Kristina Vickstrom for more information on trusts.

Photo credit: asterix611 / cc by-sa 2.0

Michael Jackson’s Estate Plan Manages to Keep Some Private Matters Private

The media has been covering Michael Jackson’s death quite extensively and many regularly scheduled programs will not air tomorrow as his memorial service is broadcast live around the world. News outlets are digging, trying to answer many questions surrounding his untimely passing, including estate and guardianship issues involving his children. However distasteful, it isn’t surprising that Michael Jackson’s Will was made available for anyone to see online within hours of it being filed with a Los Angeles Probate Court.

Ever wonder what a pop icon’s Will looks like?

Shocked that such an intimate document is available for public reading? Don’t be. Wills become public documents when they are filed at the local Probate Court.

So what did we learn from his Will?

• His ex-wife, Deborah Rowe received nothing,
• He named his mother, Katherine Jackson, to act as guardian for his children and their estates  if he died while they were minors.
• The successor guardian, if Katherine can’t serve in that role, is none other than Diana Ross!! (Huh?!)

So what do you do if you don’t want all your estate planning wishes to be read and scrutinized by anyone, including the media? How do you maintain your privacy? You create a Revocable Living Trust in conjunction with your Will. Michael Jackson did and you don’t need to be a superstar to have one drafted to protect your family.

Jackson created the Michael Jackson Family Trust, which is referenced in his Will. Both were signed in 2002. These are the most recent estate planning documents Jackson executed that have been presented to the court, to date. There is a chance that more recent documents will surface in the near future. In Massachusetts, anyone holding a Will of a deceased person has 30 days to file it with the appropriate Probate Court.

So how much money did Michael Jackson have? Who gets his real estate and assets under the Will? His entire estate was  transferred to the Michael Jackson Family Trust, a private document that is not scrutinized by anyone other than his named trustees.  Arguably, not even the Probate Court in Massachusetts would be involved had he been a resident. Logically, his three children are would-be beneficiaries, but no one knows for sure because the Trust is a private document.

So, despite all the media kerfuffle that has occured since Michael Jackson’s passing, the King of Pop has managed to keep some private matters private through proper estate planning, something even the average American should consider.

So when is a Will not enough? Want to know if a Revocable Living Trust is right for you and your family? Set up a consultation with Vickstrom Law to review your family’s specific needs.