By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Planning Attorney
Here’s an interesting case. This type of case has never come to me before. I haven’t done any research on the subject yet, either.
A musician wants to have his royalties paid after his death into some type of an account managed by an individual named in his Will who will have significant, but not total, discretion in how royalties are to be distributed. The musician will also name in his Will a finite set of individuals eligible to make mostly “discretionary distributions”.
The client has relatives and friends who have advised the client he cannot do this with a Will alone. They believe he must create a Limited Power of Attorney (POA) triggered upon his death which will name the individuals who are to set up the account, name the list of potential beneficiaries and grant authority to deal with the various royalty giving entities, etc.
I am not aware of any authority for any type of POA that becomes effective upon death. Indeed, I have only encountered Powers of Attorney which are extinguished upon death.
But the musician is convinced a POA is needed. I believe the individual’s wishes can be effectuated through the Will alone.
The client states that there is no way to designate royalty beneficiaries so that the royalties will pass directly outside the Will in a similar way as life insurance or some other assets can be structured.
I am aware of situations where a Will has named a separate “literary” or “art” executor who has been charged with managing intellectual property. Generally it’s been someone in the field who knows the ropes, has the contacts, etc., much like an agent. I have never seen that person given the job of making distributions because often he/she doesn’t know the people involved. I think the person needs to give some direction to whomever will be named as distributor otherwise he or she opens the estate to ongoing litigation.
At this point I think assigning his ownership of the business to a revocable living trust now so there is a smooth transition at death. He can name any class of beneficiaries as well as co-trustee(s) so that trustees can control how to manage the assets in the trust. This would eliminate the need for a POA.
Even better, is if he is able to “gift” ownership of his royalties into an irrevocable trust.
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