Jackson's Other Legacy: A Savvy Estate Plan

For a guy who squandered millions, Michael Jackson did something surprisingly sensible before his death: He set up a smart estate plan.

Jackson's will provides for the care of his loved ones. A separate document gathers his assets -- said to be more $500 million, exceeding his debt by about $200 million -- into a trust, ensuring that his affairs stay (mostly) out of the courts and (ideally) out of the public eye. The arrangements set the stage for an orderly disposition of his chaotic empire, says Todd Reinstein, an estate-planning lawyer in Los Angeles.

Here's what you can learn from the former pop megastar:

-- Write a will. A no-brainer? Actually, about two-thirds of Americans neglect to take on this basic estate-planning chore, allowing a judge to divvy up their assets by default according to state law. Had Jackson been similarly remiss, his property would have been split among his three children, as dictated by California law. Instead, he divided it the way he wanted to, reportedly leaving 40 percent of his estate to the children; 40 percent to his mother, Katherine Jackson; and 20 percent to charity.

Jackson avoided potential misunderstandings by citing each of his children by name and by specifically excluding his former wife, Debbie Rowe, from any inheritance.

-- Consider a living trust. Along with a will, Jackson established a living trust. This estate-planning tool lets you transfer property, including cars, bank accounts and real estate, into a separately owned entity -- in Jackson's case, the Michael Jackson Family Trust -- while maintaining control as trustee. At your death, control transfers to your designated co-trustee or successor trustee.

-- Name a guardian. Jackson created a legal framework for naming a guardian for his children. Without that document, the state -- not Jackson -- would have made the choice about who would raise the children. Jackson selected his mother as primary guardian and Diana Ross as backup.

-- Assemble a good team. Jackson named a top-notch lawyer, John Branca, and a savvy business executive, John McClain, as co-executors of his will and co-trustees of the family trust. Despite a challenge by Katherine Jackson, Branca and McClain were awarded control of the estate by a California Superior Court judge until the next court hearing in August. By relying on experts, Jackson improved the odds that his wishes would play out, Reinstein said.