Taxpayers who own intellectual property (IP), such as a patent or copyright, need to know how to account for it in their estate plan. IP generally falls into one of these categories: patents, copyrights, trademarks, or trade secrets. For estate planning purposes, IP raises two important questions:
- What’s it worth?
- How should it be transferred?
Valuing IP is complex, so it is best to obtain an appraisal from a professional with specific experience in IP valuations.
Once the value is established, you need to decide whether to transfer the IP to family members, colleagues, charities, or others through lifetime gifts or through bequests after your death. The gift and estate tax consequences will impact your decision, but you must also consider your income needs, as well as who is in the best position to monitor your IP rights and take advantage of their benefits.