Estate planning lessons from the $600M fight over Michael Jackson’s music catalog

But in mid-August, a California appellate court rejected Katherine Jackson’s claim in a final ruling that approved the proposed sale.

Legal requirements for a valid will

While it’s common for people to casually discuss estate plans with family and friends, those wishes aren’t legally enforceable unless they’ve been put in a valid will, trust, deed or contract.

In most states, including California where Jackson died, a will must typically be in writing, signed by its maker – called the "testator” – and signed by two witnesses who observed the testator sign the will.

Those requirements allow courts to distinguish early drafts and memos from the final version that the testator intends to take effect at death. Those rules also force testators to preserve reliable evidence of their estate plan, which becomes useful in probate proceedings that take place in a court after the testator’s death.

Interpreting a will’s text

When the meaning of a will is unclear, courts let witnesses testify about how the text should be interpreted. Katherine Jackson offered that type of testimony, arguing that when Michael gave his “entire estate” to his trust, he intended for the trust to receive estate assets in largely the same form as they existed when Michael died.

According to Katherine, Michael wanted to give the trust his music catalog, not proceeds from selling his music catalog, or even partial management rights over that catalog.

But the court disagreed with Katherine’s interpretation because Michael’s will also gave his executors broad powers while the estate was being probated. The court explained that the trust would receive distributions from the estate, but the executors had “full power to sell estate property” while managing the estate.

The executor’s power to sell estate property

During estate planning, people often overlook the importance of executor powers because they’re among the most technical terms of a will. But the fight over Jackson’s estate shows that executor powers can play a major role in the estate administration.

Estate planning attorneys typically advise clients to give executors broad powers to buy and sell estate property during probate so they don’t have to waste time and money seeking court approval for routine transactions.

Broad executor powers, as Jackson provided in his will, therefore reduce transaction costs in the long run. That increases the net value of the estate ultimately distributed to beneficiaries. Fiduciary law protects the estate by making executors personally liable for any abuse of power.

Estate planning for special assets

When advising clients with unique assets like Michael Jackson’s music catalog, estate planning attorneys usually discourage testators from restricting the sale of treasured property. That’s because it can be difficult to predict how circumstances might change in the future.

In a famous example of that misstep, 20th-century media titan Joseph Pulitzer – the founder of the Pulitzer Prize – left behind a will that barred his executors from selling shares of his prized newspaper business.

Twenty years after Pulitzer’s death in 1911, that newspaper business became unprofitable. So Pulitzer’s trustees sought permission from a New York court to revise the will, arguing that Pulitzer failed to anticipate the changed fortune of his newspaper. The court agreed, finding that “continuance of the publication of the newspapers … will in all probability lead to a serious impairment or the destruction of a large part of the trust estate.”

The Pulitzer case shows how restricting the powers of executors and trustees can backfire, a problem that Jackson’s lawyers clearly hoped to avoid.

Estate planning lessons

An estate plan is enforceable only if formalized in a document such as a will. Once formalized in writing, courts are reluctant to change an estate plan based on posthumous testimony about the testator’s oral statements – even when those wishes are expressed to a parent.

Testators should therefore pay close attention to every provision of a will, including technical terms that may require explanation by the drafting attorney. Testators should also be careful: It may be tempting to control property from the grave, but restrictions that seem desirable during life can backfire after death.

The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.