Why Estate Planning and Copyrights Can Get Complicated Fast
Many are aware that the 1976 Copyright Act grants copyright protection for an artist’s lifetime plus 70 years. However, it also grants a less commonly known form of protection, which only became available in 2013: the right to terminate transferred copyrights.
If an artist transfers a copyright by gift, sale, or to a trust, the artist or the artist’s statutory heirs can regain those transferred rights during a five-year window. This window begins 35 years after the date of the grant; or, if the copyright included the right to publication, 35 years after publication or 40 years after execution of the grant, whichever is sooner.
This right is only available if the copyright transfer was made after January 1, 1978, and only if the material was not “made for hire”.
To exercise this right, the artist or his or her statutory heirs must notify the current copyright holder no sooner than 10 years before the start of that window and no later than two years before the end of the window.
Unintended Consequences of Reclaiming Transferred Copyrights
Many estate planning advisors are unfamiliar with this right to terminate, since it has only been available for a few years, but it should be considered carefully, since it can have unintended consequences.
The right to terminate could lead to windfalls for heirs the artist did not include in the estate plan. There may be unexpected gift and estate tax consequences. Huge complications can arise for an artist’s private operating foundation, which may rely on those copyrights for funding.
Consider these possible scenarios:
- An artist dies before the termination window, so he or she cannot choose which heir will be bequeathed that copyright. Due to the forced heirship of the statute, the artist’s statutory heirs automatically inherit the right to terminate.
- An artist dies after giving notice during that termination window – but before the termination date. The copyrights should pass under the artist’s estate plan or by intestate succession. However, it could cause the estate to remain open until rights have reverted to the estate, which can be up to 15 years.
Engage in Estate Planning with Help from an Intellectual Property Lawyer
These are just a few of the issues that can arise for artistic copyrights in relation to estate planning. With proper estate planning, you can take steps to prevent the unintended consequences of this law.
For example, the statute does not make exceptions for revocable trusts, but termination rights do not apply to copyrights transferred by a last will and testament.
And if an artist intends to leave their remaining works and copyrights to a private operating foundation, there are steps they must take to ensure the foundation can retain those rights.
It is important to plan for termination rights when engaging in estate planning. If you are an artist, consult with both an estate planning attorney and an intellectual property attorney to ensure your wishes are followed after you pass away.