Understanding MJ Estate & Correcting Misconceptions

[ivy]

Over time some events and statements coming from the fans made us realize that not everyone understands MJ Estate, will and probate, trusts and this results in some common misconceptions. In this thread we will try to provide some brief information about stuff and correct some misconceptions.

I tried to answer most common questions. Please post any questions you might have.

Michael Jackson Estate is under probate.

Probate in layman's terms is the process of first paying the debts of the deceased and then distributing the assets to the beneficiaries.

MJ Estate is still working on paying the debts and believes they request at least one more year.

Q- Why are the beneficiaries being paid an allowance?

Because the law requires first the debts to be paid. Beneficiaries can only get the assets after the debts are satisfied

Q - How is the allowance is determined?

It's determined by a court on a need basis.

Q- What is court's role on this probate?

A judge is overseeing this process. Estate is reporting their accounting to the court and some decisions require court approval as well.

Can Katherine get information about what Estate is doing?

Absolutely. Estate is required to give her notice and basic information. She can also ask for detailed information - just as her lawyer currently have an ongoing motion to examine the accounting of MJ Estate.

Q - How much money did MJ Estate earned?

Per Estate Accounting filed with the court , they generated $475 Million in gross earnings as of July 2012.

Q - Didn't Billboard reported a $1 Billion number? What was that?

That was an estimation done by Billboard based on long term value of the deals and full prices. For example Billboard calculated CD sales by using an average CD price ($10 -$12) while actually Michael's share is significantly lower. That was a long term estimation of current deals in place.

Q- If MJ Estate earned $475 Million why didn't they pay all the debts?

Because $475 M is in gross earnings not profit. Estate still has to pay their expenses, salaries, beneficiary allowances, legal fees, taxes etc. So the net income is significantly lower.

Q - How much debt MJ Estate paid?

Significant amounts. They have reported that they expected to pay personal loans by the end of 2012. So most of creditor claims has been resolved (up to $30M), debt to AEG has been paid (around $30 M) and loan on Mijac (around $70 M) is to be paid by December 2012. It seems like the only debt remaining would be loan on Sony / ATV.

Q- Why hasn't MJ Estate given any money to charity as Michael's will requires?

As mentioned as probate rules, first the debt has to be paid and only after that MJ Estate can give money to the beneficiaries including the charities. Some people have been unfairly criticizing MJ Estate without understanding the basic legal rule. I also have to note that Estate also asked the judge to allow them to set aside $30 Million for the beneficiaries - which includes charities.

Q - Why is the probate taking this long? Is this normal?

Yes it's normal. The bigger and the more complex the business affairs the longer it takes. An extreme example would be Marilyn Monroe Estate which was under probate over 30 years - due to never ending disputes.

Q- What happens after the probate is over?

Michael's will asks the assets to be transferred into two trusts. One for Katherine and one for his kids.

Q- How much money would Katherine and MJ's kids will get after the probate?

Trustees (Branca and McClain) would continue to manage the trusts.

Katherine is supposed to get whatever is necessary for her care. There's no set amount for her. It's totally determined by the trustees/ executors. Katherine will not be getting any lump sum payment or ownership of any assets.

Michael's kids is supposed to get an allowance until they are 21 years old. Trust allows them to be given money for buying a house, starting a family & business , going to school etc even they are younger than 21. When they are 21 they start getting the income, starting 30 they are starting to get the principal assets. When they are 40 , they will get the full control of the assets.

Q - Is this normal?

Yes it is. In the case of highly valuable and high income Estates, it's common practice to divide up the distribution and give the control to the children at a later age. It's all to protect the children from being taken advantage of and giving them the control at a mature age. For example Lisa Marie Presley got control over her fathers Estate when she was 35 years old.

Q- Who owns Neverland?

Michael Jackson Estate with Colony Capital. MJ Estate owns 87.5% undivided interest at Neverland.

Q- What does undivided 87.5% interest mean?

It means although MJ Estate has a higher share and Colony Capital have the minor share, they have same use rights. In other words even though Colony Capital only owns 12.5% of Neverland, they can use the 100% of the property. It also means that all the decisions has to be done collectively.

Q- I'm hearing "Save the Neverland" or "Buy Back Neverland", what are those?

Those are either a huge misconception or a scam. As I said Estate owns 87.5% undivided interest in Neverland. Neverland is also being taken care of and in real good shape. It doesn't require any saving.

Fans trying to buy Neverland is impossible. First well because it's not for sale and second Colony Capital cannot sell their share without the approval of MJ Estate. So it won't happen, unless both Colony Capital and MJ Estate decide to sell it and a judge approves it. Just don't give anyone any money to buy or save Neverland.

[morinen]

Who is making creative decisions what songs to release - Estate or Sony?

[ivy]

Who is making creative decisions what songs to release - Estate or Sony?

Impossible to answer as Estate - Sony contract hasn't been public. However logically I would expect a joint decision making as it doesn't make sense that either party would leave the total control to the other.

[loveforever]

Why is the probate over when the biggest loan against Sony/Atv 280millions is unpaid? shouldn't the estate pay off all debts first before distributing money to the beneficiaries?

[ivy]

Why is the probate over when the biggest loan against Sony/Atv 280millions is unpaid? shouldn't the estate pay off all debts first before distributing money to the beneficiaries?

probate isn't over. in the second accounting they asked for at least one more year. they might ask for more time when they filed the third accounting. I just posted what would happen when the probate is over.

I also have to add that I don't know what would happen if they refinance the loan and pay off the existing note. It might have allow them to satisfy the probate process or it might not. We need a more experienced person for that question.

[marebear]

So the kids get an allowance till 21 but they can ask for more money if they need it for school or business? When they are 40 they get full control of the estate and Prince will reach that first? I was reading about Whitney's daughter and she gets $20 million and gets divided at different parts when she reaches certain ages. Is it different between the 2 estates? Also when Katherine passes away her part goes back to his kids?

Thanks for explaining. It does get confusing.

[ivy]

So the kids get an allowance till 21 but they can ask for more money if they need it for school or business?

exactly. The trust says to pay living expenses for the kids until they are 21 which is equivalent of an allowance (determined by the Executors). However the trust also says that kids can get money from the Estate for buying a house, getting an education, getting married, starting a business etc. So it allows for more money to be given to them for life events. So for example when 18 Prince says I want to start my own production company and I need $30 Million dollars, MJ Estate can give that money to him - as long as they think it's a sound business decision.

When they are 40 they get full control of the estate and Prince will reach that first?

When all of them are 40 they will have the full control. However starting when Prince turns 30 they would be getting partial control. Of course it's technically possible for them to be given an official or unofficial position after they turn 18.

I was reading about Whitney's daughter and she gets $20 million and gets divided at different parts when she reaches certain ages. Is it different between the 2 estates?

The idea is the same. Bobbi Kristina will receive 10 percent of her inheritance when she turns 21, 20 percent at age 25 and the balance on her 30th birthday. In Michael's trust the ages are income at 21, and principal in portions at 30, 35 and 40.

Also when Katherine passes away her part goes back to his kids?

Yes. I'll give a really simplified example : Imagine that when the probate is over MJ Estate has $100 Million , that would have made 40% $40 Million. This would have been put into a trust in Katherine's name and whatever is necessary would be used for her well being and care. Imagine that at the time of her death $10 Million was spent for Katherine and $30 Million was still remaining in her trust. That $30 Million then would be moved to MJ's kids trusts.

In other words Michael's will takes care of Katherine when she's alive but it's actually leaving everything to his kids.

[Petrarose]

This thread makes a lot of sense.

[marebear]

Thank you. I am understanding it a lot better. I think Michael did a good job in how he outlined it all in his will.

[ivy]

Although I briefly covered this topic before , I will provide detailed information as some people are circulating

"PER TRUST: Clarified: Kids will NOT get any payout until Age 30 (1/3); 35 (1/2 of Remaining) & 40 (Remainder)!"

This is wrong.

The trust document says

"The net income of each share .. shall be paid or used for the benefit of the child ... under the discretion of Trustee until such child attains 21 year of age"

This means that until the kids 21 the trustees (Branca / McClain) give whatever they think needed or necessary for the children - kinda like an allowance.

Trust document continues

"Thereafter , the Trustee shall pay to or apply for his/her benefit the net income of his/her share ..."

This means that after the kids are 21 they are getting the net income.

It continues

"Upon each child's 30th birthday .. shall be distributed 1/3 of the principal of his share ... 35th birthday 1/2 .. 40th birthday the remaining"

This shows that they are getting the principal starting when they turn 30.

It also says

".. shall be in need of funds to purchase a home, start a family, .. engage in business Trustee may accelerate the distribution ... in his sole and absolute discretion"

So it's absolutely wrong that the MJ's kids will not get a payout until they are 30. They will start getting the income at 21. Furthermore the last provision about home, family, business does allow the Estate to speed up the distribution.

[elusive moonwalker]

if colony paid around 25 mill for only a 12% share of the ranch does that mean the ranch is worth say upwards of 80 mill or whatever the exact maths are interms of its resale value?? seems alot to pay for a small % or does it not work like that

[ivy]

if colony paid around 25 mill for only a 12% share of the ranch does that mean the ranch is worth say upwards of 80 mill or whatever the exact maths are interms of its resale value?? seems alot to pay for a small % or does it not work like that

No it's not about the home value - at least not exactly. Colony Capital paid the $23 Million mortgage on Neverland that Michael was about to default. We don't see the details of the agreement between them but Estate called it highly unfair to Michael at Tohme lawsuit. We also know that it's undivided and even though Colony Capital has 12.5% , they do have equal power and full use of the property.

In 2012 for tax purposes Neverland was valued $29.2 Million by Santa Barbara County. Of course the actual value is generally higher - on the average of 30% which would bring it around $40 Million in real value. Also you need to add the symbolic value, meaning that as it's not just any regular house, if sold Neverland could be sold higher than it's real value. I did read that Colony Capital in 2008 estimated that it could fetch up to $100 million.

[elusive moonwalker]

Thanks. so if the ranch was sold would colony get 12% of whatever it was sold for. would u say its seen as a bad deal for mj cause even though colony only own 12%

they have equal say and usuage

[OnirMJ]

When Katherine dies, does her trust go to the kids trust or to whoever she decides?

[elusive moonwalker]

It goes to the kids as written futher up