As we have written about in the past, many celebrities die without an estate plan, and sometimes even without a simple Will. It appears that, like Barry White, Jimi Hendrix, Bob Marley, Amy Winehouse, Kurt Cobain, and many others, Prince died without a Will and without any plan for who is going to control his royalty rights, the fate of his unreleased music, his image and likeness. It is very likely that because he did not plan, Prince’s music, image and likeness may be used in ways that he never intended or would have endorsed.
With advanced thoughtful planning, Prince’s situation could have been avoided. When working with artists, athletes, celebrities, or almost anyone, here are some simple techniques that any client can use.
- Create a Will. Many people do not want to take the time or spend the money to do a Will. Because no one expects to die tomorrow, clients put off preparing a Will and doing estate planning until a later time, when it is more convenient. There no better time to start the estate planning process than right now.
- Create a Trust. There are many types of trusts and they can be used for many purposes. Probate avoidance is one goal of one type of trust. Prince may have preferred to avoid the public knowledge of his affairs after this death. It is most important to name a trustee individual to be in charge after death. That person is called a trustee or executor. Clients possessing literary or artistic IP may also wish to appoint an individual with experience in copyright law.
- Keep good records. This is especially true for artwork, copyrighted materials, royalties. If the goal is to assign the right and income from copyrighted materials, royalties to a particular individual ro trust, then the copyright must be registered and clearly identified. Specifically,. Musicians and authors should keep a complete and up-to-date running inventory of their works, including when each was first created and fixed in a tangible medium, as well as signed copies of all agreements of sale, loan agreements, deeds of gift, publishing contracts and grants of rights to others to prepare derivative works or reproductions, as well as records of all copyright registrations, deposits and notices. Further, entries should specify whether the work was created as a joint work, a work for hire or a derivative work. Records should also be kept of all licenses, grants and gifts (including the duration and territory encompassed by such license, grant or gift), all devisable ownership interests and any and all exercises of termination rights and any other contractual rights.
- Plan estate. Some important questions:
Who is the beneficiary? i.e. Who is going to benefit from your assets when you die?
Where is the money going to come from to pay any estate or inheritance tax? While there will be significant value to Prince’s unpublished works, image, likeness, any estate tax is due 9 months after someone dies. The tax rate could be as high as 50% (Federal and state). If the goal is to use the assets to generate income streams after the death, then where will the money come from to pay the estate tax?
Who is going to be in charge?
- Don’t forget valuation. Estate taxes involve valuation and liquidity. The highest and best use of the deceased’s name will be considered for valuation. This may be at odds with how an artist lived his or her life. It may make sense to make gifts of works during the artist’s lifetime, when the value of the work may be lower.
The Bottom Line
Do yourself a favor. Put your wishes in writing and then review and revise these wishes often to make sure your plan stays up to date.
-Gary Altman, Esq.