Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
Intellectual Property: Estate Planning Considerations
Published Date : May 2, 2017
Intellectual property (IP) is a critical driver of innovation and economic competitiveness. In the last several years, new groundbreaking products and services have been made available to the world markets from right here in Silicon Valley and surrounds: drones, back-lit LED plasma TVs, hybrid and self-driving cars (!), streaming video, smart phones, life-saving pharmaceuticals, medical tools, to name a few. Individuals, closely-held businesses and established companies hold IP rights to game changing inventions. My guess is that many of our readers own such property rights. As these products and services increasingly impact our world, associated intellectual property rights grow increasingly valuable.
Intellectual Property describes “creations of the mind.” They are protected by patents, trademarks and copyrights. Privately held IP rights are intangible assets which require careful, specialized attention as part of their owner’s estate plan. In fact, they may be as or even more important than traditional assets, such as real estate, financial accounts, and personal property. Unless otherwise specifically designated, IP rights will pass pursuant to the general terms of a will or trust to be divided amongst beneficiaries according to general instructions. Instead, earmarking them to be handled and administered by a specific person may be the most appropriate plan.
In a previous article, we explored the concept of appointing a “literary executor” for ongoing management of copyrights and royalties related to artistic and literary works, and associated contracts for authorized use. Similar to these forms of intellectual property rights, your heirs and appointments are best guided by a carefully-worded document specifically addressing any and all IP rights. In the case of patents, an individual must be designated to license them and make maintenance payments. At the death of the owner of a patent, documents must be filed with the US Patent and Trademark Office to record the transfer of it in order to allow the new owner to administer the patent registration and update it through other value-creating work.
Gaining thoughtful counsel on how best to manage and administer privately-owned IP rights is imperative. If carefully structured, the financial benefits of patents, trademarks, and other IP can flow to multiple beneficiaries while the asset can be managed and administered by the candidate most able to oversee and develop them further.
IP rights can be gifted during life or transferred upon death; however, if the rights are needed for on-going business purposes, many IP owners may not be willing to transfer them during their lifetime because they are essential to an ongoing business’s continuity. If the decision is made to transfer such rights during the owner’s lifetime, accurately valuing IP is extremely important due to potential gift tax implications. For 2017, the estate and gift tax exemption permits gifts up to $5.49 million for individuals, and $10.98 million for couples, free of gift taxes. Any excess up to the limit at the date of death can be applied to assets that remain in the decedent’s estate.
Intellectual property rights may be among your most important – and complex – assets. We encourage you to protect the value of your copyrights, trademarks, patents or other IP by working with your IP and estate planning attorneys to ensure these assets are handled optimally.
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