Estate Planning for Musicians

Estate Planning for Musicians

New York is a mecca for the arts and there are approximately 12,000 professional musicians living in New York City and countless others just breaking into the music business. This includes studios musicians, band members, opera singers, soloists, hip hop artists, Broadway performers, orchestra musicians, composers, and songwriters. In addition to having the same estate planning needs as everyone – musicians must designate who will receive their copyrights, royalty streams, termination rights and preserve the integrity of their works upon their death. Moreover, musical copyrights are more complicated than other type of artists’ copyrights.

Music Copyright 101

Copyright exists as soon as an artist fixes the song in a medium – writes down or records the work. There is no requirement that a song (or any fixed art work) be registered with the U.S. Copyright Office. However, music must be registered before a claim of copyright infringement can be brought. Now, it is best to think of copyrights as not one single right, but a bundle of “rights.” Under federal law, the owner of a copyrighted work has the sole and exclusive right to (1) reproduce copies of the work, (2) permit a remix (a derivative work), (3) control distribution through licensing or sale, and (4)  publicly perform the work. What is unique in the world of musical copyrights is that each song performed has two distinct copyrights: one copyright in the composition (music and lyrics) and one copyright in the master recording. These two separate rights may belong to two (or more) different people. Consider “Crazy” sung and released by Patsy Cline in 1961 and written by Willy Nelson. Patsy (and likely her record label) has the copyright in the recording. Willy owns the copyright in the musical composition as the songwriter.

Mechanical Rights vs Performance Rights

The structure of the music business complicates copyrights further. The exact nature of the musician’s copyright and how a musician receives an income stream matters when it comes to drafting a Will or a Trust. In our country music example above, Patsy gets performance rights royalties each time her song is sold, downloaded, or streamed. Willy also gets performance rights royalties every time Patsy Cline’s Crazy is performed, streamed or sold. In addition, Willy, as the songwriter, receives mechanical royalties for every time the song is sold, downloaded or streamed.  The important part for estate planning is identifying which organization pays the royalty.

ASCAP, BMI, and SESAC collect and distribute all performance rights royalties in the US, which are paid to both the copyright owner of the composition (songwriter) and the copyright owner of the master recording (performer). The Harry Fox Agency, as representative of the major music publishers in the US, pays out mechanical royalties to the songwriter. Then there is SoundExchange, a nonprofit designated by Congress to collect and distribute sound recording  performance royalties from “noninteractive” digital mediums such as Pandora, satellite radio, and digital television music services on behalf of artists and labels. As to how such royalties are divvied up between band members, record labels, publishers, recording artists, etc. is beyond the scope of this article and depends on individual contracts the musicians made.

Why Copyrights Matter After a Musician Dies

Copyrights and royalties matter after a musician dies because they do not extinguish at the musician’s death. Royalty streams are how musicians make money these days through licensing their work (controlling the right to distribution in the copyright bundle).  Copyrights can provide a revenue stream for multiple generations after the original copyright holder’s death.

  • For all works created on or after January 1, 1978, copyright protection lasts for the life of the author plus seventy years after death.
  • The length of a copyright for a “joint work” is 70 years after the last surviving author’s death. A joint work is prepared by two or more authors intending to merge their contributions into a single inseparable whole.
  • “Work for hire” which is done within the scope of employment – which gives the copyright to the third party who commissioned the work. This is likely the case when an artist composes a song for a motion picture or videogame. The duration of copyright for a “work for hire” is 95 years from first publication of the work or 120 years from creation, whichever is shorter. The latter cannot be passed on by the individual artist – but the owner of the copyright can pass it on to heirs.

Anyone inheriting a musical copyright controls the rights in the bundle. In a practical sense, this means the rights to the royalties through licensing with the publishing organizations. If there is a market for the music, the copyright holder can benefit monetarily. This could include licensing a score for a video game, commercial or film.

Recapturing a Lost Copyright – If a musician sold their copyright and is now regretful because they didn’t know its worth- there is a brief window they can get it back. A creator can terminate a transfer of copyright during the five-year window beginning 35 years after the date of transfer. In the event the musician or author dies before the opening of the five-year window, the termination right passes to the “statutory heirs”, such as the surviving spouse and children when the author dies. The only way to bypass statutory heirs is to transfer copyrights by will, which cannot be terminated by the statutory heirs.

Post-Mortem Rights of Publicity – On December 1, 2020, New York passed important personality rights legislation for performers.  Section 50-f of the civil rights law permits the estate of a deceased performer or personality to control the use of the deceased individual’s name, likeness and voice for commercial use– for 40 years after death. A performer includes actors, singers, dancers and musicians. The bill defines a “personality” as someone whose “name, voice, signature, photograph or likeness” had commercial value at the time of their death or because of their death. The law only applies to famous deceased performers and personalities who resided in New York and died on or after March 30, 2021.

The law also requires heirs wishing to bring a claim regarding a deceased personality to register their claim with the Secretary of State – any use before registration is not actionable.  There is  no such requirement for bringing a claim on behalf a deceased performer under the new law. The civil rights law also relates to controlling the use of digital replicas—holograms—applicable to deceased performers. The law however exempts digital remastering that isn’t likely to  deceive people into thinking the use is endorsed by the deceased performer. So not sure how useful the law will be in preventing Whitney Houston like hologram tours.

Estate Planning Considerations for Musicians

A Will is divided up between “specific bequests” and everything else. Everything else is your residuary estate. If you never specifically mention copyrights in your Will – they pass as part of your residuary estate. This means that if you do not make specific bequests and leave your residuary estate to multiple people – there will be confusion. There is no assurance that your executor will divvy up the copyrights in a sensible manner, which could cause strife, tax and valuation issues. No matter if you own copyrights in a trust or company during your lifetime, a Will should be used to transfer copyrights to chosen beneficiaries to avoid termination of the transfer by the statutory heirs. Besides deciding who should receive specific compositions, musicians often have instruments and memorabilia that are imbued with special meaning that they wish to pass on to specific persons.

Even if you do not want a complicated estate plan, it is important to talk through possible issues with an estate planning professional. Once you tell us you’re a musician we ask all the right questions to anticipate potential issues. It may make sense for you to set up an LLC, S Corp or Trust to own your publishing rights, to which you assign your copyrights and register the chosen entity with the Performance Rights Organizations. Many successful performers use an LLC or corporate structure to limit liability and favorable tax treatment (known as loan out companies).

At the very least every musician needs a Last Will & Testament and a Power of Attorney. An estate planning attorney can review with your business manager any contractual agreements to determine if any terminate upon your death. We can work in conjunction to institute a business succession plan if your estate is complicated – putting in place an agreement for your works to be sold at your death by a knowledgeable and reputable party or further administered in trust for your loved ones. This could be a knowledgeable friend, colleague or professional familiar with your musical works.

Organizing your copyrights and licensing agreements is especially important when your family relies on the income stream. In such cases, a trust may be preferred over a Will so that there will be a seamless transition of royalties without the delay of probate. Although valuations of your work may still be necessary for estate tax purposes, at least an income stream will still be flowing.

When I do an estate plan for a musician, we discuss all issues inherent in copyrighted works, but it does not necessarily make a musician’s estate plan any more complicated or more expensive. I charge flat fees for all estate planning, so take advantage of this to make sure we cover everything. At the end of the planning, we might just decide to put a provision in your Will about your copyrights to draw attention to them and make sure they pass to the beneficiaries of your choice.

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