Tuesday, June 30, 2009

Calling All of Michael Jackson's Creditors

by Robin Sax

The buzz on the news is all about how tragic Michael Jackson's death is tragic. And for his fans, his family and loved ones, it certainly is. But is it a tragedy for the people he owes money to - or do those creditors lose the ability to pursue their claims as a result of Michael's death?

Based on recent news stories, Michael Jackson had a lot of creditors. It is the responsibility of the "personal representative" of his estate (or living trust - if he had one) to evaluate those claims, to compromise them and/or to cause those claims to be paid. An estate cannot be finally distributed until all of the creditor's claims are resolved.

Michael Jackson's biggest creditor is likely to be the IRS - in the form of estate taxes. Estate taxes are due 9 months after Michael's death. The tax is 45% of the value of his assets in excess of his $3.5 million lifetime exemption against those taxes (less the value of the debts he owed). The personal representative will likely need to sell assets to raise the cash to pay the estate tax.

There is a possibility of deferring tax on his music-related assets so that payment of the tax on those assets can be made over 15 years. That deferral provision will likely be used, as the cash generated by those types of assets comes in over time but the estate tax (unless deferred) is due 9 months after death. However, the value of those assets must equal more than 35% of his total assets in order for the deferral to be available. If this threshold isn't met, the music assets may need to be sold to raise money to pay that tax.

The IRS gets paid first - before any other creditor.

Any other creditor can seek payment from the personal representative, but must first follow special probate rules. These rules require the filing of the right papers with the probate court in order to preserve the creditor's right to pursue those claims. Creditors need to be sure to familiarize themselves with these rules and file their claims in a timely fashion, or they could very well find that their claims are barred. (The time for filing can be as short as 4 months after the personal representative of the estate is appointed by a court, and can never be longer than 1 year from the date of Michael's death.)

Keep in mind that the IRS and other creditors get paid before the beneficiaries of Michael's estate. Until those tax and creditor issues are resolved, the estate cannot be finally distributed. It is likely that this process will take years - at least 2 years and potentially many, many more.

That doesn't mean, however, that his children won't have access to cash for their support during the period of estate administration. The children (through their guardian) could ask the court to provide for their support until the probate estate is ready to be distributed by filing a petition requesting a "family allowance" if there is the probate of a will (or an intestacy). This option is unavailable if there is no probate or intestate administration.

So, if Michael's creditors file their claims properly Michael Jackson's death probably won't inhibit their ability to collect. But if they don't learn enough about the vagaries of California probate law, they could lose their right to pursue their claims. In other words - if they snooze, they lose!

4 comments:

Leah said...

Maybe California will get enough $$$ from MJ's estate to illeviate their deficit.

Delilah said...

It's a shame that Michael Jackson's bones will be picked by the media, his creditors, his family and his fans for a long time.

He will have a hard time resting in peace until such a time comes when we have nothing more to say about him and just enjoy the legacy of the music he left behind.

Hopefully there will be some good souls to look after his children, but then that's another media event to pick apart.

Jackie said...

It has always been that this blog written by these ladies and contributors was to be about "crimes", "seeking justice", and media issues surrounding "crimes committed".

This blog posted yesterday by Robin Sax personally blows me away, "Calling All Creditors" due to the fact that it has NOT been disclosed by an attorney, his estate attorney nor other authorities that any "crime has infact been committed", nor the need to date to "seek justice" in any way or the fact that creditors won't be paid. Many assumptions are being made and you know what "assume" means.

This blog by Ms. Sax was more of education for those Americans who have a lot of money and to be sure that they have their affairs in order because you never know when a tragedy may happen; a legal warning to creditors, and yet another stab at an icon.

Everyone knows that the IRS always gets paid first and everyone else gets in line. Is it really any of anyone's business though?

This blog was written to get the word out to his creditors (which I am sure that they jumped on it right away without any help from this blog or Ms. Sax), if they read it.

Again, this blog by Ms. Sax has nothing to do with:
1. a crime being committed
2. justice being sought
(you can't seek justice for something has hasn't happened yet).

This blog is simply about "tagging" to Michael Jackson and hoping to gain personal recognition in some form or fashion.

Here's a question, why hasn't Ms. Sax written about the finanical affairs of three other famous people or even included them in her blog that were lost the same day or within days of each other (Ed McMahon, Farrah Fawcett or Billy May)? They all had money, they all had estates, they all had wills AND THEY ALL OWED MONEY TO CREDITORS, maybe even the IRS. Seems that she just wanted to be a part of the frenzy and benefit in some sick/twisted way.

Perhaps because of so much "buzz" about Michael Jackson, his untimely death and the legacy this artist will forever leave in American history in so many ways is of envy and jealousy. Michael Jackson will never be forgotten even though some may wish otherwise.

Is it really necessary to drag any human through the mud (for God's sake he is dead), constantly making assumptions (no crime committed) and making personal assumptions about the family?

Is it possible to allow his family to grieve in solitude and allow him to rest in peace? We all pray for his children which will be a feeding frenzy.

I hope that the contributors of this blog won't go there. Rise above and stay focused on real crime and where justice needs to be served. There is so much more to write about and you will get acknowledged.

Remember, you are not the judge and the jury. We will all meet our maker on Judgement day.

Please stick to your thoughts/expertise on "crime and seeking justice" for same.

piper said...

Wow Jackie! Being the critic that you seem to be, maybe you should write your own blog and make the rules.