The other day I wore a Jerry Garcia tie while I ate Cherry Garcia ice cream. Jerry Garcia, for those of you who don’t know, was a former member of a popular 1960’s era band, The Grateful Dead. He was a colorful artistic man whose paintings became popular. Now deceased, his estate continues to bring in royalties associated with his music, artwork, image and name.

When most people think about their estate planning they consider how to protect and distribute their real estate, financial assets and tangible personal property. But as the Jerry Garcia example illustrates, there exists another type of asset in today’s modern economy – intellectual capital and intellectual property rights. If you have authored a book and collect ongoing royalties, trademarked a brand or process or patented an invention, then you have likely created valuable intellectual property that ought to be addressed in your estate planning documents.

The first item to consider with intellectual capital is its registration and protection. This is usually accomplished by having an attorney who specializes in intellectual property rights file the necessary paperwork to document your trademark, servicemark, patent or copyright. Once protected, you should advise your estate planning attorney that you own intellectual property. He can then coordinate your estate plan with your intellectual property attorney to ensure that this asset is properly funded into your revocable trust, family partnership or other estate planning vehicle.

In a typical revocable trust, you act as your own trustee during your lifetime. In the event of your incapacity, you typically name a disability trustee to act for you. You might consider naming an independent trustee to protect, preserve and distribute your intellectual property rights. This trustee might be separate from the trustee who is in charge of your investments. A financial advisor who is adept at maximizing the income and growth you realize off of your stocks, bonds and mutual funds probably has different attributes than the trustee you would choose to deal with a publishing company, the manufacturer of your invention or the marketing of your artwork.  

In the case of those who are famous, even the use of their name or image must be protected. Elvis Presley’s estate, for example, reaps millions annually. Longtime baseball broadcaster Harry Carey’s estate protects his name and image used in everything from restaurants to T-shirts. Famous Captiva resident and artist Robert Rauschenberg is in litigation with someone who allegedly rummaged through his trash in an effort to resell it as legitimate artwork.

The estate plan of someone who owns intellectual property rights might have a succession plan built in, much like those found in family businesses. The estate planning documents might call for the creation of a committee, similar to a board of directors, to ensure that the intellectual property maximizes its income and remains protected.

The protection of individual intellectual property rights should be run like a business. Consider that Fortune 500 companies spend billions of dollars protecting their intellectual property.  A legal assistant in my office has a son who is employed by the Abercrombie and Fitch clothing company to protect their intellectual capital. He often flies to China and other Asian countries in efforts to combat the manufacture, distribution and sale of knock-off clothing bearing the company’s name and logo.

Another issue that one’s estate plan must cover is how the intellectual property rights are to be valued upon one’s demise. There are various specialists who can so value the rights, as these are often based on expected income flows. These valuations often are important when the estate or trust must divide and distribute the assets upon the intellectual property owner’s death.

Estate tax laws, such as those associated with the marital deduction may come into play. If the intellectual capital rights are funded into a Marital Trust upon the owner’s demise, certain requirements must be satisfied under the tax laws to qualify for the marital deduction and therefore defer any estate tax until the surviving spouse’s death.

Further, the apportionment of taxes and expenses of the intellectual property owner’s estate can be important and should be addressed in the documents. The estate planning documents can address such important questions such as: Does the intellectual property bear its proportionate burden of the taxes and expenses associated with the death of the property owner? If so, from where does the money come from to pay those taxes and expenses if the income is erratic? Who is entitled to the income earned from the intellectual property? If the income is far more or far less than expected, does this change the distribution?

The documents might also dictate which parties are to benefit from the intellectual property rights. What happens upon the death of the income beneficiary? Is charity or a private foundation the ultimate beneficiary? If so, does the subtrust dealing with the intellectual property rights qualify for the federal estate tax charitable deduction?

There are a host of other important intellectual property rights to address. Make sure that your estate planning attorney is aware of any intellectual property that you may own so that your plan can adequately address them.