What Happens to Royalties After You Die

Intellectual property concerns represent a complicated and multifaceted area of law. There are so many different types of IP out there – many of which generate their own source of revenue for owners, from the very large to the very small. 

But royalties aren’t just about income. They acknowledge the rightful owner of a particular piece of IP, whether it’s a song, a book, a patent, a piece of software, characters or logos – or anything else to which the creator (or subsequent owner) holds a legal claim to. 

For this reason, it’s vital that you consider what will happen when you die – who will stand to inherit that ownership, and how do you ensure it goes to the right person? 

Is IP Considered a Part of Your Estate?

Yes, provided you own the rights to a particular piece of intellectual property outright, it will be considered another part of your estate.

This means that, should you die intestate – meaning, without a valid will in place – any intellectual property you hold (and royalties you are entitled to) will be sorted and distributed to beneficiaries according to the rules of intestacy. These rules prioritise marital partners and biological or adopted children and certainly aren’t ideal for anyone who wants to ensure the right assets pass onto the right people. 

If, on the other hand, you are part of a partnership or hold joint ownership of the IP in question, then your beneficiary will inherit your portion based on the terms that are already stipulated within your existing agreement. If you stand to receive 50% of royalties, then so will your beneficiary. 

It’s important you understand exactly what you are passing on to your beneficiaries. If not, it’s common for disputes to arise, and for your loved ones to be forced to enlist the help of will dispute solicitors to find a fair resolution. 

Does IP Ownership Expire When You Die? 

No – in typical cases, intellectual property ownership lasts as long as the lifetime of its creator, plus an additional 70 years. This is why you hear of certain works of art, music, or characters entering the public domain many years after their creation. For instance, in the US, the copyright on Disney’s earliest images of Mickey and Minnie has now expired, and the characters have entered the public domain. 

It is possible to extend intellectual property rights through a trust or alternative legal arrangement, but you will want to consider this with your solicitor well in advance. 

Does Inheritance Tax Impact Royalties? 

Yes – since any intellectual property you own will be considered a part of your estate, then it will be taken into account when considering your inheritance tax liability. At the moment, the threshold for inheritance tax is £325,000 – anything that exceeds that value will be charged, and the typical rate of inheritance tax is 40%. 

If your estate (including your intellectual property) falls below that threshold, then you won’t need to worry about inheritance tax, but it’s vital that you talk this all through with a solicitor. Without proper guidance, it’s all too easy to forget about certain assets and to mistakenly believe that your family will inherit more than they will receive. 

There are ways to optimise inheritance tax liability, so make sure you start planning as soon as possible. 

Vinod