As an author or other creator, it is entirely possible that some of your most valuable assets when you die will be intangible. While most people think of their “stuff” when they commit to planning their estate – their house, bank and retirement accounts, vehicles, collectibles, and the like – they often overlook assets that are in the form of intellectual property.
What is Intellectual Property?
“Intellectual property” is a broad term that refers to four primary types of intangible assets. These are:
- Proprietary information (including “trade secrets”)
Trademarks indicate the source of goods or services. The term “trademark” can loosely be translated to “brand,” and some of the most well-known trademarks are words and logos that we see every day – Starbucks, Apple, and Hilton Hotels just to name a few.
As an author, your name may be protected as a trademark, as well (even if you do not realize it). After all, your fans buy your works because they know who you are. Without your authorship, even your most well-recognized work would be just another option in the long list of search results on Amazon.com.
How can you own a trademark and not know it? Because it is possible to obtain trademark rights even if you do not do anything other than use your name or promote a brand in commerce. However, trademarks can also be registered with the U.S. Patent and Trademark Office (USPTO), and there are several important benefits to registration.
But, when talking about authorship, the most-relevant form of intellectual property is the copyright. Copyrights protect creative expressions of ideas fixed in tangible media – books, magazines, recordings, photographs, online publications, and the countless other ways in which your works of authorship are preserved for posterity. Copyright law affords authors (or other owners) a bundle of exclusive rights, including the rights of publication, reproduction, modification, and public performance.
Like trademark rights, copyrights are automatic. However, here too, there are numerous benefits to registering your copyrights with the U.S. Copyright Office. This can be especially true in the estate planning context.
Patents and Proprietary Information
Patents and proprietary information tend to be less relevant to authors, so we will just briefly mention them here. Patent law protects inventions, and patent protection requires USPTO registration. Proprietary information is anything that derives value from not being publicly known (such as the Coke recipe), and for obvious reasons there is no registration process for proprietary information.
Methods of Transferring Intellectual Property
While you might expect the estate planning process for transferring intellectual property to be unique, the truth is that trademarks and copyrights can generally be addressed as just another aspect of your overall estate plan. As assets that you own (assuming that you own them directly and not through a business entity such as a limited liability company (LLC)), they can – and should – be covered in your will, revocable living trust, or other estate planning documents.
Although usually not ideal, one way to transfer your intellectual property assets upon your death is through your will. Many people are surprised to learn that most attorneys no longer recommend wills as the primary tools for estate planning, but the truth is that there are a number of reasons why you will most likely want to explore other alternatives.
A major issue with wills is that they are subject to what is known as “probate.” In probate, your will goes through a (public) judicial process that is usually slow and is generally not well-suited for distributing complex estates and estates holding valuable intellectual property.
That said, as we will touch on below, not having a will is undoubtedly significantly worse than having one in place. As a result, at Jiah Kim & Associates, we generally recommend having a simple will as a “back up” just in case some of your assets are not covered by your other estate planning documents.
For most people, a better option is the estate planning tool known as the revocable living trust. With a revocable living trust, you can retain control over your assets during your lifetime, and also keep them out of probate when you die. Revocable living trusts afford a significant amount of flexibility in crafting your estate plan, and are usually a very good option for individuals needing to pass on their intellectual property rights.
In addition to the revocable living trust, there are also various forms of irrevocable trusts. Many types of irrevocable trusts offer unique tax and other benefits; however, the drawback is that you cannot pull assets back out of the trust during your lifetime. While this can often present challenges when it comes to trademarks and copyrights, irrevocable trusts can be options worth considering, as well.
3. Company Ownership
A third option for transferring ownership of intellectual property assets is company ownership. We have previously discussed asset protection and succession planning with limited liability companies (LLCs), and that discussion is certainly relevant here, as well. Many authors and other creative professionals choose (smartly) to operate their businesses as LLCs or other legal entities. In this scenario, it is possible that any trademarks and/or copyrights that “you” own will actually be owned by the LLC. If that is the case, then in order to address the transfer of your intellectual property rights, what you really need to address is the transfer of your ownership interests in the LLC.
4. International Estate Planning
If you work while traveling, or if you moved from the US overseas, this unfortunately can create some additional complications when it comes to intellectual property estate planning. This is because intellectual property rights are country-specific – meaning that you may have acquired rights in some countries but not others. As part of the international estate planning process, you will need to be sure to carefully account for not only (i) what intellectual property rights you own, but also (ii) where in the world those rights exist.
What Happens to Your Intellectual Property if You Don’t Have an Estate Plan?
So, what happens if you don’t have an estate plan in place? We alluded to this scenario above, and if you own intellectual property, it is absolutely one that you want to avoid.
If you die without an estate plan (or with an estate plan that does not cover all of your assets), your assets will be probated according to the laws of “intestate succession.” This is, in effect, a double whammy.
Intestate succession laws vary by country (and by state in the US), and what they do is establish a complicated hierarchy of who gets what when someone dies. This frequently leads to undesirable consequences, and with something like a trademark or copyright, it can create convoluted scenarios where distant relatives are suddenly joint owners of a single piece of intellectual property. When you throw in questions of valuation, taxation, and the various other complexities that come into play during probate, as an author, avoiding intestate succession should be something that you try to do at all costs.
Fortunately, it actually isn’t that expensive to put a comprehensive estate plan in place.
Contact Jiah Kim & Associates about Planning Your Estate Today
If you would like more information about addressing intellectual property rights in your US or cross-border estate plan, we encourage you to contact us for a confidential consultation. To speak with an attorney at Jiah Kim & Associates, call (646) 389-5065 or get in touch online today.
This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.