Estate planning, by definition, involves making plans for your estate assets in the event of your death. Your estate 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, at the time of your death. Assets such as your home, vehicles, investment accounts, and securities likely come to mind when you contemplate estate planning; however, there is another category of assets that may also need to be considered – intellectual property. Whether you own intellectual property rights acquired directly by you because of your own work or because they have been gifted to you, they could be very valuable and must be addressed within your estate plan. A Los Angeles estate planning lawyer at Collins Law Firm explains how to include intellectual property in your 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 crucial to your income stream. 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.
Incorporating Intellectual Property into Your 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 ensure 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:
- Ascertain the value. 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 if you need 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 property. Intellectual property rights expire. Exactly when they expire depends on things such as what type of intellectual property is involved and when it was originally acquired. Find out the expected lifespan of the property and whether the rights can be renewed or not.
- Decide whether to gift 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.
Contact a Los Angeles Estate Planning Lawyer
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about including intellectual property in your estate plan, consult with an experienced Los Angeles estate planning lawyer. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.
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