Whether you are a fan of the Beastie Boys music like Meghan here at Flick Law Group, PL or not, deceased Beastie Boys member Adam “MCA” Yaunch’s unclear handwritten changes to his will can teach us all why it is best to seek help from an estate planning attorney when we wish to update our estate plans. Below is an interesting article from Steve Leimberg’s Estate Planning Email Newsletter where attorney Wendy Goffe explores the potential ramifications of Yaunch’s simple handwritten revision to his will and the potential litigation his handwritten changes may have on his wife and children, as well as on the music industry and courts. Steve Leimberg’s Estate Planning Email Newsletter – Archive Message #2000 Date: 21-Aug-12 From: Steve Leimberg’s Estate Planning Newsletter Subject: Wendy Goffe on Adam Yauch’s Will: Handwritten Changes to Will Could Prompt Years of Beastie Litigation “Adam Yauch’s will demonstrates one of the greatest fears of estate planners, the client who modifies our best drafting – after it leaves our office. It isn’t clear yet whether Yauch edited his will outside the presence of his attorneys or in his attorney’s office. But it is clear that not as much time was put into his quick hand-written edit as the rest of his very well-thought-out will. It is a good reminder to us all to have clients sign wills in our presence whenever possible, so we can monitor any last minute self-lawyering. It is also a reminder that clients have a variety of motives behind their will provisions, not all of them necessarily in their family’s best interest. If you decide to be a part of drafting an estate plan that makes a statement, keep in mind that you may later be called as a witness in the litigation that may ensue.” Now, Wendy Goffe provides members with a fascinating look at how a deceased celebrity musician may have created what she describes as “years of Beastie litigation.” Wendy S. Goffe, a LISI Commentary Team Member, is of counsel with the law firm of Stoel Rives LLP, Seattle, Washington. She is a Fellow of the American College of Trust and Estate Counsel (ACTEC), a member of the ACTEC Publications Committee and a frequent blogger on Forbes.com. She has a comprehensive estate planning practice that involves all aspects of estate planning for high-net-worth individuals and families, advising both individuals and charitable organizations concerning planned giving, probate and trust administration. Wendy has an extensive and constantly updated analysis of the legal and tax implications of same-gender and other non-traditional family relationships, and an active part of her practice involves this work. She is a past member of the ABA Taxation Section Community Property Comment Project, the Executive Committee of the Estate Planning Council of Seattle, the Acquisition Committee of the Tacoma Art Museum, the Executive Committee of the WSBA Real Property, Probate and Trust Section, and the Ethics Committee of Valley Medical Center. She is also a past member of the Board of Directors and Grants Committee of The Women’s Endowment Foundation, a supporting foundation of the Jewish Community Endowment Fund, Seattle, Washington. The author and LISI are grateful to Wendy’s colleagues Gary W. Glisson, Anne W. Glazer and Catherine Parrish Lake of Stoel Rives LLP for sharing their intellectual property expertise. Portions of this commentary were first published on Forbes.com. See “Part Of Beastie Boy Adam Yauch’s Will, Banning Use Of Music In Ads, May Not Be Valid.” Here is her commentary: EXECUTIVE SUMMARY: Adam Yauch’s will demonstrates one of the greatest fears of estate planners, the client who modifies our best drafting – after it leaves our office. It isn’t clear yet whether Yauch edited his will outside the presence of his attorneys or in his attorney’s office. But it is clear that not as much time was put into his quick hand-written edit as the rest of his very well-thought-out will. It is a good reminder to us all to have clients sign wills in our presence whenever possible, so we can monitor any last minute self-lawyering. It is also a reminder that clients have a variety of motives behind their will provisions, not all of them necessarily in their family’s best interest. If you decide to be a part of drafting an estate plan that makes a statement, keep in mind that you may later be called as a witness in the litigation that may ensue. Yauch’s situation also highlights the messy intersection of estate planning and intellectual property.[i] FACTS: Adam “MCA” Yauch of the Beastie Boys band died on May 4, 2012 of cancer, leaving his wife, Dechen Yauch, their daughter, Tenzin Losel, and an estate of approximately $6.4 million. Yauch had a reputation for being an iconoclast as one of the members of the most famous and accomplished alternative rock bands, the Beastie Boys. Yet, Yauch’s lawyers were able to help him craft a sophisticated and well-thought-out will. (His will is a public document that pours his estate into a trust that is a private document, so the contents of that document might never be known.) I was sad when I read about his death. I was horrified when I read about his handwritten edit to his will. When I wore my analytical estate planning and probate attorney hat, Yauch’s handwritten addition to his will caused dozens of bells to go off, or more aptly, thousands of cigarette lighters to light up, in my head. It would be interesting to know whether his lawyer was even aware of his handwritten change until after Yauch had died. The original will contained the following provision: “Notwithstanding anything to the contrary, in no event may my image or name be used for advertising purposes.” Not an atypical provision for a celebrity. But Yauch, before signing, interlineated an additional phrase so that the will now appears as follows (his added handwritten provision is in italics): “Notwithstanding anything to the contrary, in no event may my image or name or any music or any artistic property created by me be used for advertising purposes.” The will was just filed with the New York Surrogates Court in Manhattan on August 6, 2012. So one can only speculate as to what legal repercussions might transpire over the next few months and years. But here is where I think this may be headed. COMMENT: Publicity rights and copyrights are two distinct rights. Did Yauch protect those rights in his music with his last-minute handwritten notation, or did he just create fodder for years of litigation? First, some background to help understand the issues: While he lived, Yauch had a right to protect the use of his image and his name, referred to as his publicity rights, which have value because he was a celebrity. Publicity rights may not be commercially exploited, including in advertising, without the consent of the person whose rights are being exploited. Violators are typically required to pay a fine or the value of the damages caused, and any profit made as a result of the violation, to the person whose rights were used. Publicity rights are governed by state law and vary widely from state to state. Not all states protect publicity rights, and even those that do don’t always do so after the death of the right holder. New York does, but only for 70 years after death. The laws vary from state to state, and Yauch’s heirs, who likely inherited his publicity rights, may have no recourse in a state that doesn’t regulate them or one where protection of publicity rights ends at death. A copyright is a legal right that gives the creator of a literary, artistic, musical, or other creative work the sole right to publish and sell that work. Copyright owners have the right to control the use of their work, including the right to receive compensation for that use. Violation of a copyright is infringement. In the music industry, copyright protection is extended to musical compositions (i.e., sheet music, including song lyrics) and sound recordings. The composer of the music and the lyricist are both considered authors, to make things more complicated still. While state laws protect publicity rights, copyrights are federally protected under the United States Copyright Act. First, to understand to what extent the terms of Yauch’s will can be enforced, one has to know who owned the copyrights associated with his music. If the copyrights in the work are owned jointly, say, by all the members of the band, then Yauch’s heirs would be prohibited by the terms of his will from using his image or his work for advertising purposes, but each of the other owners can exercise their rights as an owner of the works and would simply owe a portion of any profits to the others, including Yauch’s heirs. The Beastie Boys have worked under four labels since they started recording in 1979: Rat Cage, Def Jam, Capitol and Grand Royal. Authorship and ownership may be two different things. According to Copyright Office records, there are 220 separate records related to Adam Yauch, mostly registrations of music and sound recordings. The records also reflect assignments transferring rights to entities such as publishers and Brooklyn Dust Music. (The three band members also acted individually under the name Brooklyn Dust Music.) For example, one of their most famous songs, from 1986, “(You Gotta) Fight for Your Right (to Party),” which first appeared on the album Licensed to Ill (Def Jam Recordings), is registered in the name of the band members individually, plus Brooklyn Dust Music and their producer at the time, Def Jam Music, Inc. So it is clear that the band members, over time, assigned away some of the rights to their works to their recording labels and other companies. This is very common for musical artists early in their careers, when they have little negotiating power. Later on, if successful, they often buy rights back from the label. A lawsuit brought by the Beastie Boys and the surviving band members (with Yauch’s wife as Executor of his Estate representing his interest) against Monster Beverage Corporation reveals some information as to how many copyrights are currently held. According to the document they filed with the court, the Beastie Boys are organized as a New York partnership that owns or controls the performances, sound recording copyrights, trademarks and publicity rights of the band members, including as the composing, recording and performing group Beastie Boys. According to the Monster Beverage Corporation lawsuit, the partnership Brooklyn Dust Music jointly owned the copyrights to over two dozen musical compositions and recordings. Presumably these are the recordings used by Monster Beverage, so it isn’t clear if it isn’t clear if their entire discography’s copyrights are jointly owned. The heirs who now own the copyrights to the works would assume all rights of an owner and could do what they want with the works, subject to any valid restrictions placed on them by the conditions in Yauch’s will. But Yauch could only give away what he owned. If a right was owned by the partnership, it may not be his to give away. On the other hand, he likely had the ability to give away rights owned through Brooklyn Dust Music. If a copyright is owned jointly, a will restriction may bind those whose rights are inherited from Yauch but would not bind other joint owners who aren’t subject to the terms of his will. As a result, his will may tie the hands of his heirs but not the hands of other band members or their heirs from using property subject to the copyrights. The extent of the difficulties caused by his handwritten directions regarding music and his other artistic creations is only beginning to become clear. Here are just a few of the resulting questions. Surely there are more to come. What Did He Really Mean? Conditioning a license on a nonprofit requirement would be within the owner’s rights. But what did Yauch mean by this direction? Did he intend to refer only to music or art created solely by him, or to any music or art he participated in creating? Is it even enforceable? If it is, how broadly did he consider the term “advertising purposes”? Did he mean using his voice in any recordings for profit, ever; using his image on a poster or album cover; or just that he didn’t want to appear on a box of Wheaties or a roadside sign advertising the McDonald’s at the next freeway exit? Interpretation of Yauch’s handwritten edits may result in years of litigation. Did He Consider the Compulsory License? Music copyrights are further complicated by a compulsory license. When songs have been distributed to the public under certain conditions, the owner of the composer’s copyright cannot prevent other artists from “sampling” or making “covers” of the song. The compulsory license right supersedes the owner’s discretion and forces the owner to license the rights to others, who may make their own recordings and sell them for a profit. See https://www.copyright.gov/circs/circ73.pdf. (Whether Monster Beverage exceeded the rights afforded by a mandatory compulsory license, and therefore infringed on the Beastie Boys’ copyrights, is the subject of the lawsuit.) It may be the case that Yauch’s heirs are forced to license his work, whether or not the terms of his will allow them to derive any profit from doing so. Who Really Owns All of the Rights at Stake? The band members, the band and Yauch’s estate will need to sort out who owns the various copyrights so they can determine what Yauch had a right to give to his heirs. This too could take years. How Can You Value Rights When You Don’t Know What He Owned? The issue of how to value his rights must be determined, possibly before the ownership issue has even been resolved. Publicity rights and copyrights, especially when they involve a Beastie Boy, have tremendous value, which includes the stream of future income reduced to present value. Unfortunately for his estate, for estate tax purposes these rights are valued at their highest and best use prior to transfer. An analogy would be the single-family home in Midtown Manhattan that a family wishes to maintain in perpetuity. The owner can leave it to his heirs, but it won’t be valued as a single-family home. Instead it would be valued as a skyscraper (its highest and best use), taking into account the tremendous stream of rent a skyscraper could bring in. Will This All Be Sorted Out Before Estate Tax Returns Are Due? The value of what he left to his heirs for estate tax purposes must be determined within nine months of his death, and state and federal estate tax returns filed by February 4, 2013. Yauch’s estate will be subject to estate tax on the full value of what he owned without any reduction for the restrictions he placed on his estate. Transfers to a U.S. citizen spouse aren’t likely to be subject to estate tax (Yauch’s wife is American-born, of Tibetan descent). Transfers to a non-spouse over and above Yauch’s estate tax exemptions ($5 million at the federal level, $1 million for New York residents, for 2012) are taxable. It is likely that his heirs will be forced to file tax returns with estimates of value, possibly pay tax on that estimate, and then apply for a refund once the ownership and value are finally sorted out, reducing his estate through yet more legal costs. Conclusion Yauch was likely making a statement to the world that life is about more than profit. He attempted to exercise control over his name, image and legacy in order to make that point. The sad irony is that Yauch’s heirs may desperately need that profit to pay for the inevitable litigation that is likely to ensue in the effort to discern and protect the intent of this final act of defiance. HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE! Wendy S. Goffe CITE AS: LISI Estate Planning Newsletter #2000 (August 21, 2012) at https://www.leimbergservices.com/ Copyright 2012 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission. CITATIONS: ________________________________________ [i] Not discussed above is the unusual guardian appointment provision in his will, which provides for one set of guardians if he dies in an even year and a different set in an odd year. For a discussion of this aspect of his estate plan see Deborah L. Jacobs, “Adam Yauch’s Will Reveals His Private Dilemma.”