10 Estate Planning Mistakes to Avoid

Estate Planning Mistake #7: Leaving Assets Outside Your Revocable Trust — Michael Jackson

Creating the trust is only the first step. Asset ownership determines whether it can do its job.

The Michael Jackson estate planning story illustrates an important point about revocable trusts.

Creating a trust does not automatically place your property inside it.

Michael Jackson had both a will and a revocable living trust when he died in 2009. His will directed that his probate estate be transferred to the Michael Jackson Family Trust.

That structure is common. It is generally known as a pour-over will.

But property that remains outside a revocable trust at death may still have to pass through probate before it reaches the trust.

Michael Jackson Had a Will and a Revocable Trust

Jackson signed his last will in July 2002.

The will stated that his entire probate estate would pass to the trustees of the Michael Jackson Family Trust, which had been amended and restated several months earlier.

The will also named John Branca, John McClain, and Barry Siegel as executors. Siegel later declined to serve.

After Jackson died, the will was filed with the Los Angeles probate court. Branca and McClain ultimately took control of the probate estate.

The trust itself was different.

Because a revocable living trust generally does not have to be filed with a probate court, its complete terms did not become part of the public probate record.

That distinction demonstrates one of the potential advantages of trust planning: privacy.

But a trust can provide that advantage only for property that is actually governed by the trust.

A Trust Does Not Fund Itself

Signing a revocable trust is only part of the planning process.

The next question is:

What property does the trust actually own?

Depending on the asset, funding may require changing the title to a bank or investment account, recording a deed, assigning an ownership interest, or taking another step to place the property under the trust.

Other assets may appropriately remain outside the trust. Some pass through beneficiary designations, joint ownership, or other arrangements.

The goal is not necessarily to place every asset into a trust.

The goal is to make deliberate decisions about how each asset will pass.

What Happened with Michael Jackson’s Estate?

Jackson’s will directed his probate assets to his family trust.

But those assets first became part of a court-supervised probate estate.

That probate administration became extraordinarily complicated.

The executors dealt with creditors, business interests, intellectual property, family disputes, tax issues, and the continuing management of Jackson’s valuable music assets.

Years later, the distinction between the estate and the trust still mattered.

In a 2024 decision, a California appellate court explained that Jackson’s will left his entire estate to the Michael Jackson Family Trust. The court also noted that, because of disputes with the Internal Revenue Service and others, the estate had not yet been fully distributed to the trust.

That does not mean trust funding caused every delay in the Jackson estate.

It certainly did not.

Jackson’s estate involved unusual assets, enormous post-death income, complicated valuation issues, creditors, litigation, and a lengthy federal estate tax dispute.

But it does illustrate an important point.

A revocable trust does not eliminate the administration of assets that remain in a person’s probate estate.

A Pour-Over Will Is a Safety Net

A pour-over will is useful.

If an asset remains outside a revocable trust at death, the will can direct that asset into the trust after probate.

That helps preserve the overall distribution plan.

But a pour-over will is generally a backup mechanism. It does not necessarily provide the same probate-avoidance benefits as placing an appropriate asset into the trust during life.

Think of it this way.

The trust tells the trustee what to do with property that reaches the trust.

The pour-over will helps move probate property into the trust after death.

Proper funding may allow certain property to begin inside the trust and avoid that probate step altogether.

The Michael Jackson Estate Planning Lesson

The lesson is not simply:

“Put everything in a trust.”

That can be bad advice.

Some assets should remain individually owned. Others pass efficiently through beneficiary designations. Retirement accounts require special consideration. Business interests may be subject to transfer restrictions. Real estate can raise tax, mortgage, insurance, and other issues.

Instead, every significant asset should have a plan.

Ask:

• Who owns the asset now?
• Should the trust own it?
• Does it have a beneficiary designation?
• What happens if the beneficiary dies first?
• Will the asset require probate?
• Does the result match the estate plan?

Those questions are part of the estate planning process.

They should not be left until after the documents are signed.

Review Your Trust Funding

A revocable trust can be an excellent estate planning tool.

But the document alone is not the plan.

The trust, will, beneficiary designations, account ownership, real estate, business interests, and other assets should work together.

Michael Jackson had a sophisticated estate plan. He also left a substantial probate estate that had to be administered before those assets could ultimately pass under his trust structure.

That is the lesson worth remembering:

Creating a trust is planning. Coordinating your assets with that trust is implementation. You need both.

This article discusses publicly available information concerning Michael Jackson and his estate for educational purposes. Jackson’s complete trust agreement has not been made public, and the public record does not establish that every asset he owned was outside the trust at his death.

How long has it been since you reviewed your estate plan with an attorney?