There are specific considerations to take into account when preparing a Will for published authors who hold intellectual property rights arising from their written works. Royalties are the most common and valuable example of such rights. For example, the estate of Agatha Christie, who died in 1979, still earns annual royalties in the sum of around £1.8m.
Literary rights are usually governed by contracts with the author's publisher. The contracts can be for a licence period but are usually for the legal term of copyright, which is the span of the author's life plus 70 years (section 12(2) Copyright, Designs and Patents Act 1988). Given the rights will continue for a significant period beyond the author's death, considering the succession of these rights is important.
Reviewing the literary contracts in place will be the starting point when considering the succession of literary assets. Often, after an author dies their beneficiaries (as identified under a valid Will or under the relevant intestacy rules) will step into the author's shoes in respect of the literary contracts, meaning they automatically receive any royalties due from the author's works. In that situation, there should be no need to novate or assign the contracts to the beneficiaries unless any revisions or variations need to be made. However, some contracts will include specific requirements for assignment, such as written consent from the publisher.
Under a Will, one or more executors will be appointed to administer the estate and ensure assets are distributed to the intended beneficiaries (after payment of inheritance taxes, if chargeable). For authors, it is possible to appoint what is known as a ‘literary executor' who has powers over the literary assets only.
A literary executor will be someone with knowledge of literary contracts. A literary agent or a friend or family member who has publishing knowledge can be a good choice. Unless they are also general executors, literary executors are not involved in the rest of the estate and will have to take out a separate grant of probate, which will be limited to dealing with the literary assets.
The role of a literary executor is quite personal. As well as collecting in royalties and distributing them to beneficiaries, the literary executor will have to deal with issues such as whether to republish, grant film or television rights or translate works into foreign languages. It is therefore vital that the author appoints someone they trust and who has relevant experience in this sector.
A literary executor's duties come to an end when (i) the term of copyright expires, (ii) the literary executor appoints a successor (who could also be one or more of the intended beneficiaries) or (iii) the literary executor dies. In the case of a literary executor dying without appointing a successor, the literary estate will pass to their general executors, which may not be the author's intention. We recommend having a conversation with the literary executor(s) being appointed, so that appropriate planning can be put in place.
Valuation of literary assets
Literary assets will be subject to UK inheritance tax if the author is UK domiciled or deemed domiciled or if they are situated in the UK (for which, see ‘International considerations' below) and so the literary executor(s) will need to be able to value the rights. This is not a straightforward process and there is no one single rule, but typically a valuer will look at projected income streams to work out what the ‘open market value' of the assets is at the date of death. This may be based on the past five years of income but if this varies greatly then that may not be an appropriate method. The figure will then need to be agreed between the executors and HMRC.
Often an author will have literary contracts in multiple jurisdictions so that their works can be published overseas. Under English conflict of laws rules, the situs of intellectual property (which include literary assets) is the country that governs its existence and so an author who has signed multiple contracts with publishers located in different jurisdictions and therefore subject to different laws, may have intellectual property assets in several countries. As with other types of assets, when multiple jurisdictions are involved it is important to consider whether the Will should be ‘worldwide' and cover all jurisdictions, or if certain jurisdictions should be carved out of the Will and dealt with separately. This will depend on each country's specific requirements in terms of the validity of a Will and how best to deal with literary assets. The situs of the literary assets will also have an impact on the UK inheritance tax exposure, particularly where the author is resident in the UK but not UK domiciled or deemed domiciled. Relevant estate tax treaties may also be considered in order to assist determining the situs of these rights.
Withers have experience in drafting such worldwide Wills and can advise on situs issues in respect of these intangible assets as well as coordinate with foreign lawyers, as required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.