Celebrities loom large in the world of probate litigation. They’ve often lead messy lives, which means their estates are magnets for litigation [click here]. And (if their heirs are lucky), they leave  behind huge fortunes that actually get bigger over time. In fact Forbes publishes an annual Top-Earning Dead Celebrities list that tracks this phenomenon.

So far Michael Jackson’s estate is following the celebrity-probate script to a “T”. 

Jackson’s life was messy: three children by different women; complicated family dynamics involving his brothers, sister, mom and dad; drug abuse . . . you get the picture.  And even if Jackson’s will isn’t challenged or some unkown heir doesn’t come forward with some other type of claim, figuring out how to manage his estate will be a monumental task akin to reorganizing a multimillion dollar media conglomerate on the verge of insolvency. Here’s an excerpt from a WSJ piece entitled Jackson Will From 2002 In Spotlight that gives us a glimpse of what’s to come:

Unwinding Mr. Jackson’s estate is likely to be a thorny challenge, given the size and complexity of both the assets and the debts involved. In all, Mr. Jackson died with around $500 million debt, but the value of his assets probably outweigh that, possibly by $200 million or more, according to people familiar with the matter.

Mr. Jackson’s most valuable asset is believed to be his 50% stake in Sony/ATV Music Publishing, a joint venture with Sony Corp. That stake is collateral for a $300 million loan held by Barclays PLC. And Mr. Jackson’s level of control over the venture was reduced in a 2006 refinancing. For instance, he no longer has veto power over key executive appointments, according to people familiar with the situation. Sony also has the right to buy half of Mr. Jackson’s 50% stake when it chooses.

Mr. Jackson’s other assets include Mijac, a publishing catalog that comprises his own musical composition that is collateral for a separate $73 million loan. And control of the master recordings of his albums, currently in the hands of Sony, is set to revert to him in five years, according to people familiar with the matter.

But Mr. Jackson last year defaulted on a $24.5 million loan backed by another major component of his portfolio, Neverland Valley Ranch. He then became a partner in a venture — Sycamore Valley Ranch Co., LLC — that now owns the property. It is not clear what will become of the property once the will is executed.

On the upside, in the midst of this recession Jackson’s estate is the kind of economic stimulus package that’ll “provide a lifetime annuity for scores of trust and estate lawyers,” as predicted in the WSJ’s Wealth Report Blog [click here].

Stay tuned for more . .