The Probate Lawyer Blog featured this article about the Michael Jackson Estate several weeks ago, posing the question of whether it is ethical for estate executors to seek a 10% fee for certain business deals they reach for such a high-profile estate. It's especially problematic when you factor in that one of the executors was Michael Jackson's attorney.
Well, this attorney, John Branca, and his co-executor, John McClain (a music executive), just hit the mother-load. It was widely reported yesterday that they brokered a deal worth up to $250 million dollars (that's right -- one quarter of a billion dollars!). What was the deal for? Sony announced a seven-year distribution agreement for unreleased music recorded by the late King of Pop (as well as related video footage).
Yes that means that Branca and McClain earned $12.5 million each for one deal.
Why do we question this? For several reasons, actually. First, it's the job of executors to bring in as much money as possible for an estate that has earning potential like this estate has. They shouldn't need a 10% incentive to do the job they're required by law to do.
Would it be ethical for an attorney, or his law firm, to create a will for a client to sign that leaves $12.5 million to that attorney as a direct beneficiary? In most cases, no, it wouldn't. So why is this attorney allowed to earn that much as an executor fee?
Finally, there's the issue which we discuss in our book, "Trial & Heirs: Famous Fortune Fights!", that Michael Jackson's Trust wasn't funded properly. If it had been, then his estate would have been kept out of court and handled in private. It's also entirely possible that his trust document (which hasn't been released to the public) may have specified what compensation the trustees would have received.
IF that's the case (just speculating here), then Branca and McClain wouldn't necessarily have been able to receive this percentage fee. But, because Jackson's Trust wasn't properly funded, thereby requiring it to pass through the probate court process, it opened the door to allow this type of fee to be approved by the judge (again, if the trust document addressed their compensation, which isn't unusual). And the judge did approve the executors' 10% fee in this case.
A properly-used estate plan would have bypassed court entirely. Jackson's estate plan didn't do that. The attorney whose law firm prepared that estate plan now just earned tens of millions of dollars because of that estate plan.
And it's all legal. But is it ethical?
Some feel it is. After all, Branca is a respected entertainment lawyer and McClain is an experienced music executive. They have the expertise to broker deals like this. And clearly, judging by the amount of money they've brought into the estate, they're good at what they do. And Michael Jackson's heirs are benefiting from their expertise.
If it's standard to compensate entertainment industry experts with this type of fee, why shouldn't Branca and McClain earn what may be considered fair compensation in that line of business?
There is some merit to this position. After all, Michael's mother, Katherine Jackson, spent months battling McClain and Branca in court over this estate (until she hired a new attorney, at which time she changed her position). Yet she didn't object to their 10% fee. If a primary beneficiary of Michael's estate didn't object to this generous fee, why should anyone else?
What do you think?
Posted by: Andrew W. Mayoras & Danielle B. Mayoras, co-authors of Trial & Heirs: Famous Fortune Fights! and co-founders of The Center for Probate Litigation and The Center for Elder Law in metro-Detroit, Michigan, which concentrate in probate litigation, estate planning, and elder law. Andrew & Danielle are husband and wife attorneys, professional speakers and consultants across the country.Follow us on Google+