Back to School: Living Trusts & Education Expenses

Backpacks are purchased, new shoes abound, and alarm clocks are ringing early across the nation as we celebrate the start of another school year.  Some of us complain about budget cut-backs in our public schools, others of us complain about the rising cost of private school tuition.  Either way, we realize that raising the next generation is an expensive task.

Then that that lurking fear comes back about how our children are going to afford to go to college.  Add to this angst that the University of California system, once upon a time a great deal, now budgets total cost for California residents at or above $30,000/year, and parents can really start to panic.

Savings for college is essential, but so is proper estate planning with regard to the education of your children.  Your living trust should provide details on how you intend to pay for your children’s education.  Or, very possibly, what you think your children should pay for.  The key is to use your living trust to instruct those that survive you how you want to deal with the costs of educating your children.

I’m paying for my kids’ college

How very generous of you.  Now, let’s discuss what and how.  If you have multiple children, what will happen if one goes to a community college and the other gets no financial aid but enrolls at Harvard?  Should the community college student get a later distribution for the expenses saved in going to a cheaper school?  And what about beauty school or a technical school:  is this a “college” expense you would pay for?  Are you paying for grad school?  How about a year off and a round-the-world plane ticket? 

By creating a living trust with specific provisions for the education of your children, you can detail how your money should be divided among multiple children and what type of expenses you are going to pay for.

My kids can take out loans – like I did

Hopefully your children will learn to appreciate the money spent on their education.  But beware, your kids are likely going to depend on financial aid and are very likely to need to take loans. Recently, Forbes reported that for 2018, 69 percent of first-time, full-time undergraduates took loans to pay for their education, up from 51 percent just 6 years ago.

The problem is that these aid packages usually require a co-signor or guarantor on the loans.  If, we, as parents are not alive at the time these tuition payments must be made, our kids could be left with few options.

Again, your living trust can help your children by making set distributions on a time-frame that agrees with your personal philosophical decisions.  Whether you give the kids some money at 18 or wait until they are 30, you can let your living trust replicate the financial decisions you would make if were alive at the time the kids head off to college.

So, after the homework is completed and lunches are made…

Take a look at your current trust to make sure it agrees with your current philosophy on paying for your child’s education.  If your kids are in private elementary, middle or high school now, does your trust provide for ongoing payments?  Does your trust reflect your current wishes for college and graduate studies?

If you don’t yet have a living trust, think seriously about your current situation: your children will receive any inheritance when they turn 18 and there are no rules about how the money is spent.  Consider whether you want to create a trust to provide some structure to their distributions before and after they turn 18, including a framework to pay for their education.

Copyrights: Estate Planning Conundrum

If you own a copyright and need to estate plan, you’re in good company:  James Joyce, Walt Disney, C.S. Lewis, and Andy Warhol faced your same dilemma.  Although the Sonny Bono Copyright Term Extension Act generously extended the length of copyrights, at some point in the future your copyright will be controlled by someone other than you.

The Life of a Copyright

It is commonly known that the U.S. Constitution granted authors the exclusive right to their writings for limited times, both incentivizing creativity and dissemination of ideas and ultimately giving the public access to creative works.  Copyright protection generally lasts of the life of the author plus an additional 70 years; for works for hire or for anonymous or pseudonymous work (unless the author’s name is revealed in the records of the copyright office), protection lasts 95 years from publication or 120 years from creation, whichever is shorter.

Making your Copyright Useful

Copyrights are designed to protect the use of our creative works.  What does “protect” mean to you? More importantly, what does it mean to your surviving spouse, children and grandchildren?  The usefulness of your works is the essence of your copyright and some important questions should be reviewed:

• Are you concerned about your work being reproduced without compensation?

• Are you concerned your work may be used for profit by another?

• How would you feel if your family “protected” your work by refusing all use?

Simply leaving your copyright to another as part of your estate plan is not enough.  You need to consider whether you want to leave more specific wishes for the use of your copyright.

Your Survivors’ Power to Terminate the Grant of Your Copyright

Let’s just say you grant your copyright during your lifetime for what you think is a GREAT purpose and/or financial gain.  As you may be aware, under the 1976 Copyright Act, the creator enjoys an absolute, nonwaivable right to terminate a transfer during a five-year window that begins 35 years after the assignment of the copyright.  Did you know that the creator’s “statutory heirs” have this termination right after the creator’s death?

In essence, this means that the creator’s surviving spouse, children and grandchildren may exercise this post-mortem termination right whether or not you agree.   This is concerning because your copyright may not be used as intended.  For example, in the case of James Joyce, his survivors have opted to take many of his works OUT of the public domain, which is widely seen as a disservice because, among other things, it can lead to the erosion of the author’s place in the literary world.

Estate Planning Tools for Copyrights

There is one limited exception permitted by the Copyright Act which allows the creator to waive this termination right and circumvent the statutory heirs’ termination right: the creator can transfer the copyright by Last Will and Testament.  However, at least in California, this can require a probate administration of the estate which can be time-consuming and expensive.  Therefore, the creator could consider transferring the copyright to a Living Trust.  However, the 1976 Copyright Act does not allow the creator to waive termination rights in a Living Trust or other state-recognized will substitute.  Therefore, it is possible that your surviving spouse, children and/or grandchildren could unwind the transfer made to a Living Trust.  Clearly, this is an estate planning conundrum.

Regardless of what approach you take, you may be inspired to create a plan for the use of your copyright by the approach of Andy Warhol, whose Will mandated that his works be managed by a foundation.  This foundation allows for Warhol’s imagery to be used widely in the interest of free expression, but aggressively defends the copyright when it is used for commercial purposes, such as coffee mugs, posters and other consumer items.  In this manner, the copyrighted materials further creative expression but protect the copyrighted materials from financial gain by others.

Like Warhol, your estate plan can leave instructions which restrict the license of your copyright for specific purposes, exhibition, publication, or production of your creative works, and the use of your name and likeness in connection with your copyright, all of which are likely very important to you as the creator of the work.  Given that the copyright protection lasts long after the death of the creator, it is very possible that you will never even meet or know the beneficiaries and/or heirs that will control your copyright even within 50 years of your death – well before the copyright may terminate.  Therefore, it seems like some basic instructions in your estate plan, at the very least, would be prudent.

Your Legacy

Whatever you chose, be it to transfer your copyright via your Will or Living Trust, it is clear that you need to give thought to how you want your copyrighted works used after your death.  Even if they are not widely used now, you need to contemplate future interest in your works after your death and consider leaving your survivors with some instructions.  After all, the creative works you have copyrighted may give rights to your survivors that allow them to control your legacy many years after your death.