The Gift of Copyrights

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Winter 2011-2012

Gifting a copyright to a loved one — whether it’s to a book, song or piece of art — means passing along a part of your legacy.  Since copyrights are representative of personal creativity, they may be valuable not only for the royalties they produce, but the identity to which they’re tied.


“It’s an artist’s thumbprint on what they did,” says Tom Fox, Managing Director of The Private Client Reserve’s Entertainment and Pro Sports Group.

Fox recalls a client who transferred a catalog of song copyrights through his will to his widow upon his death. For the wife, the gift represented part of their life together. “There can be a lot of emotion and time invested in these works,” he says. “The husband created it, and now his wife continues to build it. There’s a sense of duty to carry on the family legacy.”


Since an individual’s identity is connected to a copyright, the family member who receives it may be less likely to liquidate it. “They want to hang on to the family ties,” Fox says.


But the laws that govern copyright and royalty transfer are extensive and at times convoluted. Therefore, planning is vital, says Allen Blevins, CPA, a lawyer and Partner at Nashville, TN-based Crownover Blevins P.C., which specializes in copyright law and intellectual property, among other areas of expertise. Working with lawyers or administrators may help copyright authors and gift recipients anticipate lesser-known implications.


Here’s what you need to know that may ensure that when you gift a copyright to a loved one, their joy won’t be diminished by unexpected complications.



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Winter 2011-2012

Transfer Through a Will

Wills are the most common way for copyright owners to specifically designate who receives them. The copyright could also simply be included with the other assets of the estate and distributed according to the will’s stipulations for the division of general assets, Blevins says.


Transfer Through a Trust

A copyright owner may also gift copyrights through two different types of trusts during or after his or her life. With revocable trusts, the property transferred may be taken back and the trust terminated; once set up, irrevocable trusts can’t be changed.


Both types are often set up to transfer copyrights without having to stipulate the transfer in a will. This is usually done for privacy reasons since the individuals who own copyrights are often well known and may prefer to keep the gift confidential, Blevins says.


When the copyright is assigned into an irrevocable trust, the U.S. Copyright Act creates a termination reversion interest in the U.S. rights,

which means that the original author has the right to terminate the transfer, take back his or her copyright and receive the royalties related to U.S. exploitations, says Derek Crownover, a lawyer and Partner at Crownover Blevins P.C. trust. This intends to protect copyright authors who might not have anticipated the value of their copyright, since authors usually assign their copyrights before they can determine an accurate value. For example, if a song suddenly becomes popular again after it appears in a hit movie, the author can regain the copyright.


This right only applies to copyrights created after 1978. It exists for 35 years after the creation of the copyright, and the author must give a two-year notice prior to terminating the transfer. The termination right passes to an individual’s heirs upon his or her death. Keep in mind that a copyright can be included in an individual’s estate upon his or her death, and therefore the government will be able to tax it. “That’s an area that a lot of people miss in transferring copyrights,” Blevins says.


Transferring through a will, on the other hand, does not create the reversion interest and termination right.

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Winter 2011-2012

Transfer Through an Entity

Another way to gift a copyright during lifetime while potentially avoiding the reversion interest and termination right is to transfer it through an entity. When the author is the sole owner of an entity — generally an LLC — the entity can own the copyright instead of the individual. As long as the LLC owns the copyright from the start, you can transfer ownership within the LLC. “You can transfer ownership of the company to various trusts or to children in a way that gets it outside of the estate,” Blevins says. “So in that case, we effectively transfer the company, but we also transfer the copyright.”


Anatomy of a Copyright


Maintaining the Copyright

Regardless of the vehicle used, if a copyright is transferred in its entirety, it requires maintenance just like any other asset that could grow or shrink.

“Some people think it’s just a song or book and you can let the royalties come in,” Crownover says. “But you have to make sure you’re getting paid properly and trying to exploit it in different ways to make it evergreen. Good copyright administration and copyright administrators are extremely important for collecting the pennies of income sources around the world with regard to worldwide and famous ‘evergreen’ copyrights.”


The recipient of the copyright will assume the responsibility of maintaining that asset, he says. Professionals like lawyers, accountants, publishers and administrators can help protect and maintain copyrights so they continue to grow.


Despite the complex rules that govern the transfer of copyrights, Crownover says copyright gifts provide recipients the opportunity to grow the asset — and hold on to something the creator loves.


“It’s one way artists can continue living,” Fox says. “It’s an honor that can be built upon for years to come.”


U.S. Bancorp Investments, Inc. (and/or U.S. Bancorp Insurance Services, LLC) is not a tax advisor. When it is appropriate, you are encouraged to seek professional tax advice.

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