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Now that you have a grasp of the peculiarities of transferring copyrights, we can jump into a brief, but necessarily complex discussion of estate planning and the applicable tax issues. Although you may find much of this material difficult to understand, it is important to remember that our goal is not to make you an expert in estate planning and Gift and Estate Tax law — we just want you to be aware of certain estate planning issues and the options available to you. Once you have given these questions some thought, consult with a professional advisor for more assistance.
A. What is Estate Planning?
"Estate planning" is nothing more than providing for the disposition of the property, including your copyrights, that you accumulate during your life. An estate plan can, at its simplest, be reduced to the following interrelated questions:
- To whom do you wish to leave your property?
Many can answer this easily, and the list usually includes family members and perhaps charities.
- What share of property shall each beneficiary receive?
- When should you transfer the property to the beneficiaries?
For many, the only option is to transfer property at death since the property is needed during your lifetime. However, those who have more than sufficient assets to satisfy lifetime needs may find that lifetime giving is an important part of your estate plan.
- How should you transfer the property to the beneficiaries?
Outright gifts are the most common form of transfer, but trusts can be extremely useful in tax planning, and can also be used to protect minors, other incompetents and spendthrift beneficiaries. This question also raises whether you need to appoint guardians or make other special arrangements for any minors or incompetents.
The purpose of this brief treatment of estate planning is to point out some of the information you may need to know to answer these fundamental questions and to get you thinking about how you want to prepare for the future. In addition, we will focus on the estate planning considerations relevant to copyright assets.
Not surprisingly, one of the key considerations in estate planning is "transfer" taxation, including estate, gift and generation-skipping transfer taxes. Not only can these taxes be expensive (reaching rates in excess of 55%), but the taxes are complicated, and may change depending upon who receives your property. Proper planning for transfer taxation is very important. We will explore below the basics of transfer taxation, when they apply, and how their impact can be reduced through planning.
B. Estate Planning Isn't Only For The Rich
But wait, you ask, why should I do any estate planning if I am not rich? This question exposes a common misconception. The truth is that everybody needs some form of estate plan to dispose of his or her property. While complicated and expensive planning may be more appropriate for wealthy individuals, even people of modest means should plan for the orderly distribution of their property to the beneficiaries they choose.
C. Avoid Intestacy
One clear goal of estate planning is to execute an appropriate will and thereby avoid "intestacy," or dying without a will. We have all heard horror stories about people who die intestate leaving a messy estate for their children or other beneficiaries to squabble over. Don't be one of these people. The will is, in most cases, a simple document that can be prepared economically.
Those of you who have never prepared a will may be surprised to learn that you nonetheless effectively have one — it has been written by your state legislature. If you die intestate, then state intestacy laws determine who gets your property at death without any regard to your particular wishes or your survivors' needs. Avoid intestacy. Execute a will.
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