Are you a business owner or person with intellectual property? Have you considered how to pass intellectual property to your heirs? When you think of estate planning, what usually comes to mind is the process of transferring your assets and wealth to your family, along with consideration of any tax benefits. A properly drafted and comprehensive estate plan not only transfers the most common types of assets, such as real property, financial accounts, cash and personal property, it will also encompasses the transfer and passing of any intellectual property that you may own or to which you have rights.
Types of Intellectual Property
There are generally three subcategories of intellectual property: patents, copyrights and trademarks. If you hold one of these types of intellectual property, you have the exclusive control of it and the right to prohibit others from using it. If you are an inventor, musician, songwriter, author, artist or any other type of creative, you may have a patent, copyright, or trademark that you want to pass on to your family upon your death. Like any other asset, intellectual property is in fact something that can be passed on as part of your estate plan. After all your hard work, creativity, blood, sweat, and tears, you may not want your rights to your intellectual property to be lost when you pass. In order to protect your rights and your family’s continuing rights to your intellectual property, it is imperative that you plan ahead. There are strategies to ensure that you and your family retain the rights to these special assets.
Patents
A patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. According to the US Patents and Trademarks Office (USPTO), you can sell or assign a patent and transfer ownership to another by executing an assignment agreement that transfers their rights to the patent to another party. Once a person transfers their patent to another, they lose all rights and interests in the patent. If you have not planned ahead and you have a patent that is solely in your name, then, most likely, your patent would have to go through the probate process to transfer the patent to your heirs. All of the obligations associated with probate would fall on your Personal Representative to then deal with the Patent Office. If you create a revocable trust prior to your death, then your successor trustee could conduct business on your behalf without the interference of the probate court. Patents must be properly assigned and recorded to your trust prior to death in order to ensure continuing control and management. An assignment to a trust merely changes the legal ownership of the patent after your death, but all else stays the same. By being proactive, your beneficiaries or heirs would be entitled to receive future income from your patents for as long as the patent is valid and in place.
Copyrights
A copyright is the exclusive legal right, given to an originator or an assignee, to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same. Per USPTO, All copyright-eligible works created on or after January 1, 1978 are protected for 70 years after the death of their author. Copyrights can also be passed on to your heirs upon your death as part of your estate plan. A copyright does not die with the owner but rather passes through the owner’s estate. Your beneficiaries or heirs would be entitled to receive all future profits from the copyright. Additionally, if you have a will or trust, you can specifically outline how your works should be used after you pass away. For musicians, such as Adam Yauch of the Beastie Boys, he did not want his songs to be used for advertising purposes after his death and included a provision in his will that specified this restriction on future use of his work. When dealing with copyrights in your estate plan, it is important to consider a variety of things, including what copyrighted works you own, what registrations you have filed, what you want to happen to those copyrights after you’re gone, who do you trust to protect your legacy, and who you want to receive any future profits.
Trademarks
A trademark is any word, phrase, symbol, design, logo, or a combination of these, that distinguish or identify a particular business from another. It is often how a customer recognizes you in the marketplace. A few examples are the distinct and identifiable logos of Nike, Apple and Amazon. When dealing with a trademark, you should consider how your trademark will pass upon your death. It is not always simple. In order to transfer a registered trademark through your estate, your Personal Representative would need to take specific steps, including assigning the trademark, along with the goodwill that is associated with it. If this is not done properly, then the trademark may not transfer to the beneficiaries and may expire.
It is usually better to have a business entity own a trademark, rather than a person. If a business owns a registered trademark, the business will continue to own it after the owner’s death. The business would need to continue to pay any and all fees associated with renewing the trademark as and when necessary to maintain ownership.
With certain types of intellectual property rights, it is important to take the necessary steps associated with the ownership, such as renewing registrations and paying periodic maintenance fees for patents or trademarks. Otherwise, the important and potential valuable rights to the intellectual property may be lost, temporarily or permanently.
Anyone who creates new and innovative intellectual property should consider the impact that their disability or death can have on their creations.
At Frame & Frame, we’ve been helping business owners for over 70 years create estate plans that protect their family and their business. Contact us today to schedule a consultation.
SOURCE: This article was featured in I95 Magazine August 2022.