Blood test looks like a PR stunt but the prospect of another heir exposes weak link in singer’s estate plan at a moment when extremely highly paid trustees are already distracted and defensive.
Michael Jackson has been dead for four years, but as the eleventh-hour emergence of another potential heir demonstrates, the estate remains anything but settled.
The good news for the trustees is that the paternity test put forward on behalf of one-time Michael impersonator Brandon Howard looks like a fake.
However, the claim exposed a loophole in what initially looked like a solid estate plan, opening up the legitimate heirs to the prospect of having to share their birthright to anyone with the right DNA.
And given the other headaches facing the estate, handling that scenario wrong could cost the trustees an enormous account – worth fee income of tens of millions of dollars a year.
Anatomy of a perfect storm
The problem is that while Brandon Howard’s latest attempt to claim Jackson blood shows signs of being Photoshopped, a legitimate test would have given him access to the family trusts.
Jackson’s lawyers were careful to build multiple trusts into the singer’s estate plan that would provide for his aged mother and children.
Unfortunately, the documents fail to name or even number the kids, instead taking an open-ended approach that theoretically embraced all lawful issue born or adopted after Jackson signed the papers.
Someone like Brandon Howard would have been too old to squeeze through that window, but technically Jackson’s three legitimate children – all living at the time – were too old as well.
With no other limitation beyond California’s laws of succession on the class, any verifiable offspring Jackson may have somehow produced could make enough of a fuss to earn a settlement if not a full share of his legacy.
Given the weight California’s parental code places on DNA testing, a 99.9% match would have provided plenty of ammunition for an expensive courtroom battle even if Jackson himself had repudiated the son or daughter when he was alive.
It could have gone surprisingly badly with all those moving parts lining up to open the loophole lurking in the admittedly highly publicized plan. All they needed was a real test.
Luckily Michael Jackson probably doesn’t have too many secret illegitimate children out there, but his lawyers could have contained the prospect by explicitly naming those he did recognize as his heirs and revising the documents for necessary additions.
That way, an opportunist or sincerely deluded claimant would need a lot more than decent DNA to get in the door and the estate plan would play out exactly as he wanted.
As it is, all the primary beneficiaries of the Jackson trusts seem to be very well set up. The kids reportedly draw about $8 million a year and his 83-year-old mother may be entitled to a similar level of income.
They should be in a good place. Unfortunately, the estate still has plenty of issues to settle before they get a true “happily ever after” outcome.
Technically insolvent, the IRS says
For one thing, disgruntled relatives will always fight for access to the kids in order to divert a bit of cash flow to their own purposes.
Right now Jackson’s mother and Tito share guardianship but disputes have been frequent.
Since the kids have somehow reportedly managed to rack up $3 million a year in education bills and Harvard only costs $55,000 a year, there’s obviously a little spillage in the accounts.
Whether it’s enough to support claims that the trustees are overspending is a moot point for a simple reason: there are no other beneficiaries who might raise a fuss, so as long as the cash is flowing, nobody’s going to challenge the bills.
And the trustees have added plenty of value since they took over Jackson’s property in 2009.
Back then, he was generally considered to be deep in debt and living on fumes. Now the estate is generating about $150 million a year in fresh licensing fees – more than enough to keep the heirs comfortable.
However, the trustees apparently get 10% of the income as what amounts to a management fee, and all that value being added has attracted the IRS.
That’s a real problem because Jackson’s estate tax return added up to a net $7 million, of which 20% was handed out to children’s charities to reduce its overall size and tax liability.
Among other things, the executors claimed that Jackson’s personal debt and the economic value of his publishing catalog more or less canceled out, so the Beatles rights – for example -- were somehow worth exactly zero and had besides already been moved into the family trusts.
Now the IRS has challenged the entire structure, billing the estate for a staggering $702 million in unpaid tax and double normal penalties.
The auditors say Jackson’s intellectual property was actually worth well over $1.1 billion and that none of his attempts to transfer the songs into trust were actually valid.
Odds are good that they’re overestimating the money-making potential of a dead star a bit in order to enhance their ultimate negotiating position, but the trustees are in a Catch 22 situation here.
If they’ve managed to squeeze $150 million a year in new royalties out of a $7 million estate, the assets do look extremely undervalued by anybody’s standard.
And if they knew how much the rights could earn, the fancy footwork on the estate return is more than a little dubious.
Either way, if Michael Jackson wasn’t technically insolvent when he died, a $700 million tax bill will wipe out everything the trustees have worked to build over the last four years.
They’ll bargain, of course. But unless they can raise a lot of cash, they might need to sell some of the assets after all – and that’s the kind of situation that makes the beneficiaries wonder if it’s time to fire the trustees.
