Posted on: 3 May 2016
The recent untimely death of pop superstar Prince -- reportedly without a will in place to govern the ownership and use of a "vault" of unreleased recordings -- has illustrated a problem that affects far too many families. In fact, the majority of adults with children die without a will, often leaving a legal and logistical mess behind them as grieving family members struggle to piece together the financial puzzle. And dying with a source of residual income (like book or music royalties, a patented product, or certain types of small businesses) can become even more complex. Read on to learn more about how residual income from writing, music, or other types of business is handled after your death and what you can do to preserve your legacy long after you're gone.
What happens to residual income when the original artist or business owner passes away without a will?
If you die without a will in place, your assets (and occasionally debts) at the time of your death will be distributed according to your state's intestate succession statute. This statute dictates the percentage of your estate each surviving family member receives, and a portion of your estate may also be repossessed by the probate court to help pay the costs of administering your estate. For assets that generate residual income, they will be valued and distribution will flow according to this statute. Because it can be difficult to split an individual royalty or business into multiple shares (and percentages of shares), this often means selling assets rather than keeping them and allowing them to generate residual income.
In some cases, this can mean that your surviving relatives essentially inherit significantly undervalued assets, as the value of continued residual income over time is often much higher than the present appraised value of the asset. The best way to avoid this outcome and ensure your assets are distributed according to your wishes is to seek legal advice and execute a will that can allow your estate's executor and surviving family members to know your exact desires.
What can you do to best protect your works or business and keep the residuals flowing after your death?
While it's important for just about everyone who isn't entirely happy with their state's intestate succession laws to have a will in place, having both a will and a trust is important for those who own a business or receive residual income. A will can divide assets or vest ownership of a specific asset or residual in a specific person, but a trust can appoint a trustee to manage the preservation and marketing of your assets or business to continue to generate income that can be used to benefit various heirs.
A trust allows you to have much more control over your estate even after your death, and can help you provide a steady lifetime source of income to heirs who weren't even born at the time of your death -- rather than a lump sum that may be squandered by those who aren't in good financial situations or who are too young to have yet learned the true purchasing power of money. A trust can also help keep your business going long after your death, rather than allowing it to be mismanaged by someone who may not have other heirs' best interests in mind.
Although sample trust documents are available on a number of self-service legal websites, it's important to seek the advice of a probate lawyer before you execute trust documents. A badly-drafted trust or one that isn't valid in your state may create a legal mess after your death far worse than any that could have resulted from no will or trust at all.Share