A Primer on Estate Planning as a Writer

Today’s guest post is an excerpt adapted from The Law (in Plain English) for Writers by Leonard D. DuBoff and Sarah J. Tugman. It is run with permission from Allworth Press.

Awareness of estate planning issues can be especially important to writers because of the unique nature of property rights in written works. Proper planning ensures that the ownership of a writer’s works after his or her death will end up in safe and knowledgeable hands.

In addition to giving the writer significant posthumous control over his or her works, an estate plan can greatly reduce the overall amount of estate tax paid at death. Because valuations of written works for estate tax purposes are not precise, estate taxes may turn out to be significantly higher than might have been anticipated. Thus, it is very important for writers to reduce their taxable estate as much as possible.

An estate plan may be either will-based or trust-based. Each type has advantages, but both are legitimate forms of estate planning. Estate laws and probate procedures vary throughout the United States, and a plan that works well for one person in one state may be inappropriate in other situations. Proper estate planning requires a knowledgeable lawyer and sometimes the assistance of other professionals, such as life insurance agents, accountants, and bank trust officers.

The Will

A will is a unique document in two respects. First, if properly drafted, it is ambulatory, meaning it can accommodate change, such as applying to property acquired after the will is made. Second, it is revocable, meaning it can be changed or canceled before death.

When carefully prepared, wills not only address how the assets of the estate will be distributed, but also foster better management of the assets. Those persons responsible for administering the estate of a decedent are known as executors in some states and personal representatives in others. It may be a good idea for writers to appoint joint executors so that one has publishing or writing experience and the other has financial expertise. In this way, the financial decisions can have the benefit of at least two perspectives. If joint executors are used, it will be necessary to make some provision in the will for resolving any deadlock between the two. A lawyer’s help will be necessary to set forth all of these important considerations in legally enforceable, unambiguous terms.

It is essential to avoid careless language that might be subject to attack by survivors unhappy with the will’s provisions. A lawyer’s help is also crucial to avoid making bequests that are not legally enforceable because they are contrary to public policy.

Trusts

A common way to transfer property outside the will is to place the property in a trust that is created prior to death. A trust is simply a legal arrangement by which one person holds certain property for the benefit of another. The person holding the property is the trustee; those who benefit are the beneficiaries.

To create a valid trust, the writer must identify the trust property, make a declaration of intent to create the trust, transfer property to the trust (this is often a step that is missed and can create a multitude of problems), and name identifiable beneficiaries. Failure to name a trustee will not defeat the trust, since if no trustee is named, a court will appoint one. (The writer may name himself or herself as trustee.)

Trusts can be created by will, in which case they are termed testamentary trusts, but these trust properties will be probated along with the rest of the will. To avoid probate, the writer must create a valid inter vivos or living trust.

Advantages of Using a Trust

The use of trusts to prepare a trust-based plan will, in certain situations, have significant advantages over a traditional will-based plan. For example, the careful drafting of trusts can allow the writer’s estate to avoid probate, which in some states is a lengthy and expensive process. Similarly, the execution of an estate through a trust-based plan can ensure a level of privacy not possible in probate court. Although these kinds of provisions provide some control over the estate, writers are cautioned that trusts cannot adequately substitute for a will if used haphazardly. Professional assistance is strongly recommended.

Life Insurance Trusts

Life insurance trusts can also be used for paying estate taxes. The proceeds of a life insurance trust will not be taxed if the life insurance trust is irrevocable and the trustee is someone other than the estate executor. Even when the trust is irrevocable and the trustee is a third party, the proceeds are taxed to the extent they are used to pay taxes to benefit the estate. The advantage to this arrangement, then, is not so much tax avoidance as guaranteed liquidity. This advantage is especially important for writers and other creative people, since otherwise survivors can be forced to sell remaining works for much less than their real value in order to pay estate taxes.

For an in-depth guide to legal issues for the writer, check out The Law (in Plain English) for Writers by Leonard D. Duboff and Sarah J. Tugman.

Leonard D. Duboff and Sarah J. Tugman

Leonard D. DuBoff, founder of the law firm The DuBoff Law Group, PC, graduated summa cum laude from Brooklyn Law School, where he was the research editor of the Brooklyn Law Review. He was a law professor for 25 years, first teaching at Stanford Law School and then at Lewis and Clark Law School.

Sarah J. Tugman graduated from Lewis & Clark Law School in Portland, Oregon, and practiced for almost thirty-five years in Anchorage, Alaska.