Intellectual Property Assets(IPA), are easy to overlook during estate planning since they are intangible having no physical existence as opposed to the tangible personal property or real property that can be touched. Most business owner’s, entrepreneur, and many others own some form of their intellectual property,” or creation of intellect”, but athletes and “creative” clients including authors, songwriters, entertainers, and visual artists or even more likely to own IPA’s.
Lifetime Transfer vs. Testemenatry Bequest
There are many ways to transfer your IPAs. Most typically you can assign them by written agreement executed during your lifetime or grant IPAs after death by trust agreement, by will, or by inestate succession laws if you do not leave a will. Or depending on the nature of your IPAs a hybrid approach may offer best solution.
When evaluating whether IP assets should be transferred during your lifetime or passed on as a testamentary bequest it is important to consider the likely tax implication of an IP transfer or bequest. Federal gift or estate tax treatment could be determinants in your decision-making. Other factors to consider include age and maturity of receipts and their ability to protect and exploit IPA’s.
Proper Planning is Critical
If proper laws for transferring IPA rights are not put in place, those right will often pass via will’s residuary estate.
Black’s Law Dictionary states,” residuary estate”, as part of descendants estate remaining after all debts, expenses, taxes, and specific bequests, and devices have been satisfied. In short, any property not specifically bequeathed in the will, will become “residue”. Ownership of residuary estate passes to the beneficiary designated in the will. If there is no will, the decent dies intestate and the laws of intestacy of the state where she had the permanent residency at the time of her property.
Intestacy or poorly drafted will, could both yield disappointing results since, the “random”, the beneficiary may not effectively exploit the rights held in song, photographs, books, patents, trade secrets, trademark, or other IP assets. As a result, you may wish to take intentional steps to ensure that they go to a person or entity who can best steward those assets on into the future, for the benefit of those you choose.