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Trust Law/Level VII · Property and business/7.3 Employers and special assets/Lesson 4

Specialty assets: art, collections, intellectual property

How trusts handle art, collections and intellectual property: valuation, insurance and care, the copyright termination right, and directed-trust structures.

Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. The cheapest protection for most collections is a clear inventory, provenance records and a trust or will clause saying who receives each item; these cost little and head off later disputes.
  2. Let the trust terms waive diversification for a collection meant to stay together, and name an expert trust director where the Uniform Directed Trust Act is enacted, instead of paying a trustee to learn the field.
  3. For art appraised at $50,000 or more passing at death, by gift or to charity, an IRS Statement of Value under Rev. Proc. 96-15 costs $8,400 for one to three items in 2026, plus $800 per additional item.
  4. Copyright transfers by will escape §203 termination, while lifetime transfers to a trust can be terminated by the author or heirs; a termination notice must be served 2 to 10 years ahead and recorded with the Copyright Office.
  5. Insure valuable items separately where standard policies cap cover; storage, insurance and appraisal fall on the trust and art earns no income, so the terms should fund a cash reserve or allow sales.

Materials17 U.S.C. §203, on termination of copyright transfers, from law.cornell.eduThe Uniform Law Commission’s Uniform Directed Trust Act (2017), and lesson 2.3.3 on protectors and advisersThe IRS Art Appraisal Services page on irs.gov, which explains its Statement of Value programme

Wonder

  1. Who decides how a painting held in trust is stored, insured or sold?
  2. How can a trustee value something that has no market price until it is sold?
  3. Can a copyright transferred to a trust ever go back to the author or the author’s family?

Explore

  1. A trust can hold art, collections such as coins or manuscripts, and intellectual property such as copyrights, patents and royalty rights. These assets differ from cash or listed shares: they can be hard to value, may need physical care and special insurance, and some carry rights set by federal law. The trustee holds them for the beneficiaries under the trust’s terms. This lesson describes the issues; it does not recommend holding any asset in trust.
  2. A trustee’s investment duties apply to these assets too. Under the Uniform Prudent Investor Act (1994), a trustee must diversify unless it reasonably decides that, because of special circumstances, the trust’s purposes are better served without diversifying, and the trust’s terms can change this default rule. A settlor who wants a collection kept together can say so in the trust document. A trustee may also delegate tasks, such as managing royalty rights, to qualified agents.
  3. Some trusts separate roles. The Uniform Directed Trust Act (2017), enacted in a number of states, lets the trust’s terms give a ‘trust director’ powers over matters such as investment, so a person with expertise in art or music rights might direct when to sell. A trust director has the same fiduciary duty as a trustee in a like position, and a directed trustee that follows a direction is liable only for its own willful misconduct (lesson 2.3.3). State versions differ.
  4. Valuation matters for estate and gift tax, for insurance and for dividing assets among beneficiaries, and is usually done by a qualified appraiser. The IRS reviews art valuations through its Art Appraisal Services office and an Art Advisory Panel. Under Rev. Proc. 96-15, a taxpayer can ask for a Statement of Value before filing for an item of art appraised at $50,000 or more that passed at death, by gift or as a charitable contribution. Art values change, so appraisals may need updating.
  5. Insurance and care are practical duties. Standard property policies may limit cover for valuable items, so collections are often insured separately, sometimes on scheduled or agreed values. Proper storage, conservation, condition reports and records of provenance, meaning the history of ownership, help protect value and can show the trustee acted with care if an item is lost, damaged or its title is challenged. Storage, insurance and appraisal are paid for from the trust, and art itself usually produces no income to cover them.
  6. Federal law adds rules for intellectual property. Copyright generally lasts for the author’s life plus 70 years; a utility patent generally lasts 20 years from filing. Under 17 U.S.C. §203, an author, or after death certain heirs, can terminate a copyright transfer executed on or after 1 January 1978 during a 5-year window that generally starts 35 years after the transfer, notwithstanding any contrary agreement. Works made for hire and transfers by will are excluded, so it can matter whether a copyright reaches a trust during life or by will.

Key facts

  • Art, collections and intellectual property can be held in trust but raise issues of valuation, care, insurance and federal intellectual property law.
  • Under the Uniform Prudent Investor Act (1994), a trustee must diversify unless special circumstances justify not doing so; trust terms can change this rule.
  • The Uniform Directed Trust Act (2017) lets a trust director with relevant expertise direct the trustee; a directed trustee is liable only for its own willful misconduct.
  • Under Rev. Proc. 96-15, the IRS can issue a Statement of Value for an item of art appraised at $50,000 or more transferred at death, by gift or to charity.
  • Under 17 U.S.C. §203, an author or certain heirs can terminate a copyright transfer made on or after 1 January 1978 during a 5-year window generally starting 35 years after it.
  • The §203 termination right does not apply to works made for hire or to transfers made by will.

Exercise nine, six, three, one

9CollectList up to 9 facts about a specialty asset that could be held in a trust, from this lesson, a sample appraisal or a source you are reading (some sources give fewer), such as how it is valued, where it is kept, how it is insured and whether federal rules affect transfers of it.
6ClusterSort them into 6 categories: valuation, physical care, insurance, income, legal rights, and facts you are unsure about.
3DistillReduce the 6 categories to 3 groups: facts that affect value, facts that affect the trustee’s duties, and facts that limit who keeps the asset.
1CrystallizeWrite 1 sentence explaining, in your own words, why it can matter whether a copyright reaches a trust during the author’s life or by will.

Fact check

Dates, figures and claims checked against the published sources listed below.

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