The estate you leave behind after your death consists of all real and personal property as well as tangible and intangible assets owned by you, or in which you share an ownership interest. For most of my clients, that includes common assets such as a home, vehicles, investment accounts, and securities. Quite a few of our clients at Clarity Legal Group have written books or are recording artists. Obviously, these people own a valuable interest in intellectual property. When clients own intellectual property, I stress the importance of specifically and thoughtfully accounting for those assets in their estate plan.
Intellectual Property Rights Basics
Intellectual property can be defined as “a work or invention that is the result of creativity, such as a manuscript or a design, to which one has rights, and for which one may apply for a patent, copyright, or trademark.” If you are an author, artist, or inventor, you might have applied for the rights to your creations yourself. In that case, your intellectual property rights are likely a valuable part of your income. Many people, however, acquire intellectual property rights when they are passed down through the family. In that case, your intellectual property rights may not be particularly valuable or important to your overall livelihood. Keep in mind though, the value of intellectual property is subject to change – and sometimes does change dramatically – as the interest and perceived value of the underlying creation increases or decreases.
How to Incorporate Intellectual Property into an Estate Plan
If you own an interest in a trademark, copyright, or patent, it is essential that you decide how you wish to incorporate that asset into your estate plan. There are two important reasons for doing so. First, failing to transfer ownership of intellectual property could void the protection offered by the copyright, patent, or trademark and/or could lead to the expiration and missed opportunity to renew the protection offered by the copyright, patent, or trademark. The other important reason to make sure your intellectual property is included in your estate plan is that if the property is valuable, it could trigger a federal gift and estate tax debt that must be paid out of your estate assets during the probate of your estate. Therefore, the following steps should be taken now, to ensure your intellectual property is properly incorporated into your comprehensive estate plan:
- Get the intellectual property appraised. That copyright your dad left you to a book you’ve never heard of might be worth a small fortune now. Likewise, the patent your business partner applied for in both of your names might suddenly be worth much more than you think if the invention takes off. Have a professional appraisal done to determine what the asset is worth so you can decide how to proceed.
- Decide whether to keep the property. If you are the creator/inventor/artist who originally applied for the copyright, trademark, or patent you may depend on the property to produce income. If not, it may simply be “sitting around” and not something you really need. If that is the case, it may be wise to gift the property now instead of holding on to it.
- Check the lifespan of the patent, copyright, or trademark. Intellectual property rights expire. Exactly when they expire depends on things such as what type of intellectually property is involved and when it was originally acquired. Find out the lifespan of yours and whether the rights can be renewed or not.
- Decide whether to gift it now or later. Decide whether gifting the asset now or holding on to it until your death makes more sense. Discuss both options with your estate planning lawyer to ensure that you understand the tax consequences of both options.
- Identify all of the associated rights. It is essential that you and your estate planning lawyer understand how the intellectual property is owned and identify related contracts, licenses, and rights. The best planning likely involves the use of a revocable living trust. That means the ownership of the intellectual property and related contractual rights will need to be assigned to the Trust.
Contact Durham Estate Planning Attorneys
If you are ready to get started on your estate plan, please contact the Durham estate planning attorneys at Clarity Legal Group by calling us at 919-484-0012 or contact us online.
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