When we think of property, we generally think of tangible things. Land. Stocks. Paintings. However, in our new digital age many of the things we own are digital as well. Intellectual property. Cryptocurrency. NFTs. These properties need to be valued and accounted for in estate planning, so they can transition in an estate just like real property.
Some intellectual property is hard to value prior to death, and after death as well. As we saw from the contentious legal battles with the IRS, Prince’s estate had qualified appraisers with very different opinions of its value from the tax collectors (a discrepancy of over $100 million). Most families would like to avoid such proceedings for their heirs, which is where trust planning can come into place. One strategy to avoid valuation complications is to liquidate or sell the asset early. Last year, Bob Dylan sold his entire catalog to Sony records for an estimated $200 million. It is unknown whether this was for estate planning considerations or other reasons, but it will certainly make the estate valuation easier to do.
One of the reasons it can be hard to create a reasonable valuation is that it is uncertain how much income that intellectual property can bring in the future. Some intellectual property ends up bringing in no money at all without the driving force of the talent that originated it. Trademarks can be owned by individuals and companies, and some can be worth a considerable sum for licensing. One great example is “Let’s get ready to rumble”, a Mohammed Ali inspired catch-phrase by sports announcer Michael Buffer. According to an article from ABC News, “By trademarking his catchphrase, Buffer has generated over $400 million in revenue, selling the rights to music, video games, merchandise and while making personal appearances.” The story includes an interested interview where Mr. Buffer lets the reader know some catch phrases, such as “fasten your seatbelts,” that didn’t work before he settled into the iconic one that is recognizable today. With such a valuable revenue generating trademark, will monetization continue to be possible for his estate?
It is difficult to think about things that are personal, such as intellectual property, but there are many cases where property can continue to create an impact and produce income for one’s heirs. Case in point, Pirate Latitudes, an adventure yarn set in Jamaica in the 1600s, found in computer files left by author Michael Crichton. Then Dragon Teeth was published in 2017. Both were published after Michael Crichton passed away.
What if that hard-drive were password protected in a way that prevented access from ever occurring? This is one of the newer questions when it comes to the digital estate, one that comes with an implicit compromise. We are always striving for greater security, but that also comes with limiting access. Cryptocurrency utilizes more advance pass phrases to allow access only to the owner, but what if that phrase is lost or the owner dies? Even with the recent decline in bitcoin prices, billions of dollars worth of bitcoin may be stranded forever due to forgotten passwords.
Apple may potentially simplify life with their new passkeys with biometric sensing, eliminating passwords and helping to prevent identity theft and scams. However, it may make it even more difficult to access the accounts of the deceased by their loved ones and those who have permission to do so. It is not yet known how that will be handled because they are just introducing this feature, but it would be prudent to ensure access by creating a password list or other access that can be passed along.
Digital assets aren’t only assets that create revenue. There are sentimental digital assets to take into consideration too. Facebook and social media accounts may become family albums, or records of thoughts and opinions that loved ones want access too. Many purchases of digital content are actually licenses for usage only for the lifetime of the purchaser, but that isn’t true in all cases.
Although estate planning generally has to do with the smooth transfer of assets, there are also many things beyond the asset transfer which can be important to preserve familial harmony and create a lasting legacy. The digital estate should not be overlooked, and should be included in the planning process even for smaller estates that don’t think they own any intellectual property. One of the most powerful tools to provide instruction, ensure privacy, and provide continued management of assets are trust services. If you’d be interested in learning about how they could help your family, we would be pleased to elaborate. Please contact us.