Covering Your Ass(ets) pt. 1 – Why Musicians should Get Their Ducks in a Row

Musicians usually think to turn to their attorneys for the big stuff: negotiating recording deals, licensing intellectual property and, of course, seeking legal ramifications when something goes wrong. An important part of a musician’s financial and personal interest, however, is the musician’s legacy.

While no one wants to think about the distribution of their assets upon their death, estate planning is critical to an artist’s legacy and, ultimately, the control of his or her property upon the artist’s death.  Although most people consider their estate to merely encompass money, cars and houses, an artist’s estate covers much more than this. When it comes to estate planning, artists should meet with their attorneys to discuss more than who will access to their bank account…especially since all of the artist’s financial and non-financial assets will affect estate taxes and estate debts!

Finances

Although there is much more to an artist’s estate than his or her finances, finances usually cause the biggest problems in estate disputes. For artists, finances can reach beyond the typical income flow. When creating an estate plan, there are a few considerations that artists may want to keep in mind:

  • Royalty escalation – a royalty escalation is a provision in some recording contracts in which an artist receives a higher royalty if a certain amount of sales – or other measuring unit – have occurred. For example, an artist may receive a 15% royalty for the first 100,000 albums sold, with a bump up to a 17% royalty for albums sold after the 100K mark. Because an artist may sell more albums after he or she has passed away, the artist may want to consider the legal – and tax – implications that such a bump in posthumous record sales will have on his or her beneficiary(s).
  • Licensing and Publishing agreements – many artist sign publishing agreements with an independent music publisher or incorporate a publishing deal into his or her recording contract. Likewise, many artists enter into licensing deals for the use of their music, image or other intellectual property for various uses, whether in conjunction with, or independent of, their publishing and recording deals. Depending upon the terms of these agreements, an artist may want to consult a lawyer to see how these deals will alter revenue streams that are paid out to his or her beneficiary(s).

Non-Financials

Non-financials are equally as important to the legacy of an artist, and his or her estate, as financials. As a result, artists should consider the distribution of their non-financial assets when creating a will. Such assets may include:

  • Copyrights and Trademarks – artists often retain interest in their copyrights and trademarks. As such, artists can assign an administrator to their intellectual property rights. Such an assignment is important with respect to the use of an artist’s intellectual property after he or she has passed on. This is an important consideration since whoever holds the copyright or trademark interest has the say as to the use of the intellectual property rights.
  • Internet and Social Media – Although the Internet and social networking is a relatively new component of the entertainment industry, it should not be ignored. As with intellectual property rights, an artist may want to consider who will control his or her online presence after he or she has passed away.
  • Memorabilia – many artists keep mementos from their music career. Rather it be concert posters, instruments, original lyrics or anything else of sentimental value, an artist should consider memorabilia when planning out an estate. As memorabilia can sold to help pay of estate debts, or used in a way that could be averse to an artist’s desires and interests, detailing who gets what can save an artist’s beneficiary(s) major litigation – and emotional – costs.

Estate planning is difficult for most people, but the lack of estate planning is difficult on family members and loved ones who may not see eye-to-eye on the distribution of assets. Often times, poor estate planning can force families, friends and other loved ones into long and bitter disputes that, often times, end in litigation. By sitting down with a lawyer to create a will, an artist can save his or her loved ones a lot of time, money and hurt feelings while preserving the desires and the interest of the artist.

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“Google Tax”: raising money for the arts, one ad-supported link at a time

France has become known for making novel steps toward fighting copyright infringement.  Like the proposed “three-strikes” rule, that would have kicked repeat infringes offline, few – if any – proposed legislation have actually become law.  Not being a country known to sit quietly, France has come up with a new plan to halt p2p activity while investing in arts.  With ideas like the “youth card“, which will subsidize music subscriptions for…well, the youth, France is thinking of a nifty way with raising funds to support the arts industry.

Dubbed the “Google Tax,” the proposed levy requires large website operators to pay each time a French internet user clicks an ad-supported link or banner.  The tax will place a levy on large website operators’ advertising revenue, even if the operator has no offices or subsidiaries in country.  Revenues from the tax will supplement the country’s dwindling creative sector, using funds to develop online music businesses and to subsidize digital music subscriptions for 15-24 year-olds.

Unsurprisingly, the targeted operators – such as the nick-namesake Google – are less than gung-ho about the proposed levy.  Of course a global, widespread Google Tax would ultimately have devastating effects on website operators, but should the concept of a Google Tax be written off?

According to Los Angeles Times writer Mike Boehm, “[t]aken together, the 50 states’ 2008-09 budgets include a pinch less for the arts than they did a year ago, down from $414.3 million to $412.5 million.”  During this same period, the national arts budget averaged $1.35 per capita.  Variety has reported that the arts index “fell in 2008 to a score of 98.4 even as the number of arts organizations grew…The current score represents a 4.2% drop from 102.6 in 2007.”

Taxing advertising revenues from website operators like Google – whose annual net profits rose 54%, totaling $6.52 billion by the end of the fourth quarter in 2009 – is a creative solution to reverse  and supplement the growing decline in the overall US arts budget.