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What happens to Jackson's finances?

June 26, 2009 12:00:00 AM PDT
Just a few years ago, Michael Jackson could afford just about anything he wanted. But legal troubles and dropping music sales took a toll on Jackson's finances.Michael Jackson was the "King of Pop," but unfortunately he was also the king of debt. Millions of dollars are now owed to several creditors, but is there enough money to pay them and who will get paid if there isn't? There is a chance his children will inherit very little, if anything.

How prophetic those words were when Michael Jackson announced he would do 50 concerts in London. Every one of the shows were sold out in just four hours and the sales would have made him millions.

Unfortunately the tour was to begin next month, and now AEG, Jackson's tour sponsor, is left holding the bag for $10 million to $15 million. And Jackson's estate is in major debt, somewhere between $400 million and $500 million, plus interest.

"On all the money he borrowed, interest is running. Some of it I saw was as high as 16 percent," said USC School of Law Dean Bob Rasumussen.

Rasmussen, dean of USC Gould School of Law, is also a contracts professor. He says it will likely take some time to figure out how much Jackson's estate is worth and who will end up with the money.

Although Jackson was well-loved and made a lot of money, he spent a lot too.

Jackson bought most of the Beatles songs for $47.5 million, and he picked up his sprawling 2,500-acre Neverland Ranch for $14.6 million. But then his financial and personal life began to unravel.

He was accused of molesting a 13-year-old boy and had to settle out of court. He then merged his Beatles collection with Sony and used the collection as collateral to take out a $200 million loan from Bank of America.

He was then accused of molesting another young boy. And he was spending $20 million to $30 million more per year than he was making.

Eventually he lost the title to the Neverland Ranch, and over and over again Jackson had to borrow money from friends and benefactors.

Rasmussen says now with the pop star's death those creditors are going to want their money, but who has first dibs?

Unfortunately his three children may be last in line.

"So you'll have two groups of creditors,' said Rasmussen. "You'll have the creditors for whom he promised they got first dibs on the assets. He collateralized the assets to them. And then you have the other creditors who are just your general unsecured creditors who will take what's left after the secured creditors get paid, and only after all creditors are paid, if there's something left, will the money go to the children."

However, if Michael Jackson set aside some of his money for his children into a trust account before most of his financial troubles, the three kids would get that money.

Also, there are some estimates that the estate is worth about a billion dollars, which is more than the debt. Not only that, chances are Michael's music over time will make the estate a lot of money, possibly more than Elvis Presley's.

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