Will Clauses…Part III…More Clauses

In the last two posts (here and here), I described several introductory clauses that can be found in a typical Last Will and Testament. This will be the last post in this series providing further explanations to some basic clauses found in your Will.

• Personal Representative Powers. Most wills simply state a personal representative will have all the powers necessary and provided by law to managing the estate administration. However, many attorneys explicitly state all the powers available in a will as a precaution. A testator can also limit the personal representative’s powers to only those specifically provided in the will.
• Selling Real Estate. One of the more important powers that a testator can bestow on a personal representative is the power to sell real estate. Many state, like Virginia, provide that real estate controlled by a will “drops like a rock.” This means real estate controlled by the will transfers immediately to the new beneficiaries upon the decedent’s death. The personal representative has only minimal power over this realty and only must ensure its gets to the correct beneficiary. Thus, in Virginia, if there is need for the personal representative to sell any real property, the testator’s will must expressly give the personal representative the power to sell the real property.
• Trust Management. Many wills establish trusts upon the testator’s death. This type of trust is called a testamentary trust. Like a revocable trust, a trust management clause will provide instructions from the testator to the trustee of the testamentary trust. Instructions could include items like how to disburse property, naming beneficiaries of the trusts, length of the trust, etc.
• Signatures. For a will to be valid, it must be executed in the proper fashion. Without a signature, the will has not been executed and is not valid. It must be signed by the testator or at the direction of the testator. (Read about how this was be an issue in Gene Upshaw’s Estate). The signature of the testator is generally on the last page of the will.
• Witnesses. The signing of the will must also be appropriately witnessed by the witnesses and their signatures must be signed on the will. The witnesses should be disinterested witnesses. A disinterested witness is one that will not inherit from the will or would inherit based on the intestate statutes. If an interested witness is a witness to the will that interested witness could be disinherited. Witness signatures are generally found below the signature of the testator.
• Attestation/Self-Proving Affidavit. The self-proving affidavit is a special document that is attached to a will that is signed by the same witnesses to the signing of the will. The self-proving affidavit indicates that all state procedures were followed, that the testator signed a will and that the testator did so willingly. The benefit of a self-proving affidavit is that it eliminates the need for witnesses to appear in a probate proceeding to testify about the validity of a will.
• Codicils. A codicil is a document that amends a will but does not replace the entire will. Amendments made by codicil may add or revoke small pieces of a will. For example, a codicil could change who is the personal representative. A codicil must conform to the same legal requirements as the original will and must be included with the will when the personal representative opens probate.

Hopefully, understanding the basic reasoning behind the clauses will aid you when it comes time to draft your own estate plan.

Will Clauses Part II…More

Last post, I described several introductory clauses that can be found in a typical Last Will and Testament. This time I will provide further definitions to some basic clauses found in your Will.

• Tangible Personal Property. Tangible personal property generally consists of a person’s clothes, furniture, dishes and the like. You can state whether a specific beneficiary should be entitled to a specific item like “Jane should get my good China,” or can speak in general terms e.g. “The executor should split up my property equally among my heirs.”
• Real Property. If you own property as a tenant-in-common or by yourself, the Will controls to whom the realty is given. In the alternative, you could have a clause confirming any realty owned by joint tenancy with the right of survivorship.
• Cash Bequests. If you are lucky enough to have assets that can be distributed to heirs, the decedent can create cash bequests to heirs. It can be given to a specific person, e.g. “I give Jane $10,000,” or it can be given to a class. An example of class gifts would be: “I give all my grandchildren $5,000.”
• Tax Apportionment Clause. This directs the inheritance and estate taxes to be paid. Many times taxes are paid from the remainder of your estate after your property and money are distributed to named beneficiaries. Look at this closely. Without this clause the beneficiaries will likely pay a share of taxes based on the amount they receive from your estate.
• Payment of Debts and Taxes. Prior to the personal representative distributing property to heirs, debts and taxes must be paid.
• Survival Clause. This clause is important when a testator is married and distributes all of the estate to the spouse. For example, if the married couple dies from the same incident, but one member survives a bit longer, than the other, normally probate would occur twice on the same assets. Double probate means additional probate, legal and professional fees. To avoid these additional costs, it is advisable to have a clause that states how long a survivor should live before that survivor can inherit assets.
• Residuary Clause. This clause will distribute any assets that might have been missed in the will or if a bequest fails for a particular reason i.e. the heir has died and is not survived by any issue. Typically, this clause will state that assets should be distributed to the spouse or heirs. If they are not alive, then the assets will be distribute according to the intestate laws or to some specific entity.
• In Terrorem Clause. An in terrorem clause is also known as a no-contest clause. This clause “threatens” to disinherit a beneficiary of the will if that beneficiary challenges the terms of the will in court and losses. Generally, the courts will allow for a no-contest clause so long as the person challenging the will does not have probable cause to do so.

Next time, I will wrap up this topic by describing personal representative’s powers and the importance of the execution  portion of a testator’s Last Will and Testament.

Will Clauses – Part 1: The Introductory Clauses

Most clients say that all they need is a “simple” will. Beyond the fact that there is no such thing as a “simple” will, I thought a short primer on many of the clauses that should be found in a will is a good idea. There is a great deal of flexibility in drafting a will, and most wills have a number of typical sections, including:

• Exodium clause (Declaration clause). This is the “I, Tom Testator, Anywhere, USA being of sound mind and body…” clause that can be found at the beginning of each will. This sets the stage for a testator creating a will. This clause also will include information about the location of the testator. More than likely, a testator will move after executing a will. The location identified in this clause creates a starting point for someone searching for the testator or inheritance.
• Revocation clause. This clause is usually tied in with the declaration clause and typically includes the language “I revoke all previous wills and codicils that I have previously prepared.” This informs the reader that any prior will or codicil is no longer valid. This is an important clause. If the revocation clause is not included in the will and there is a prior will/codicil that prior will/codicil will be probated with the new will. The court will try to dispose of the estate pursuant to the terms of both wills, and if there is an inconsistency between the two, the terms of the most recent will take precedence. And if the estate is large enough there absolutely will be litigation.
• Family Information. “I have a spouse, Tess Testator and children, Joe Testator and Sally Testator.” This simply provides information on the familial relationships of the testator and will be used as a reference point later in the document.
• Personal Representative. “I name my spouse, Tess Testator, the personal representative of my estate.” This clause will nominate the person who will be in charge of your estate during probate and who will follow the instructions the testator provides in the will. In the past, this person was called the “executor” and, currently, is sometimes referred to as the “fiduciary.” Most married clients will nominate their spouse as the first personal representative. But, make sure that you appoint at least one successor personal representative. There is no requirement for a person to accept the nomination/appointment. Other reasons to nominate back-up personal representatives include: someone could object to the nomination or the nominated person is deceased or incapacitated.
• Guardians. If the testator has any minor children (i.e. under the age of eighteen), someone will need to be selected to watch over the children. Remember you can appoint a different person to be guardian for the person and guardian of the property.
• Bond. In most states, the personal representative is required to provide a bond when appointed. A bond is necessary to reimburse the estate for any losses that may occur because of negligence or wrongdoing. The fee to pay for the bond is usually charged against the estate’s finances. Many people see this as unnecessary, and, barring a court ordering otherwise, a testator can waive the need for a bond to be posted by the personal representative.

Next month, I will delve into the more interesting clauses of a will, those that distribute property and pay the debts and taxes of the estate.

Planning Your Digital Estate…Part II

Last post, I wrote about digital estate planning and you can read it more here. The question I raised is that there has to be a solution.  And there is partially one but there is not a full proof one.

You could simply have a slip of paper listing all your information and store it in your house somewhere readily available. That doesn’t sound completely safe.

One practical solution is to keep a list of passwords and similar information on a flash drive or stored on your computer somewhere but name the file something unique – i.e., not “passwords.”  Of course,  informing a person you trust about the file is important or no one will ever find it. Or you could put the flash drive in a safety deposit box making sure someone knows where it is. However, many providers require periodic updating of your password. That means a trip to the bank every time you update a password. That does not seem practical.

Another possibility is to create a power of attorney. That might grant access to email accounts but would not be a complete solution. The Power of Attorney might not trump every provider’s policy.

Where there is a demand for services, new companies will appear to meet those demands including several commercial providers to address this very issue. One commercial service, Legacy Locker, acts like a safe deposit box for your log-ins, account information, etc. Legacy Locker also provides personalized instructions to survivors as to how you want your online identity handled. As this market develops, I would guess more commercial services will open. As I have never used any of these services, I cannot vouch for them personally, but they are options to consider.

Even better news is that some states have started to recognize the need to plan a person’s digital estate. For example, on November 1, 2010, estate executors or administrators in Oklahoma will have the power to access, administer or terminate the online social media accounts of the deceased, according to a new state law. No cases have been brought to determine how the state law works within the confines of a provider’s service agreement, but it is a start.

With estate planning, most people think about creating a will or trust or protecting their home and do not think about their virtual life. As our lives have become intertwined with technology, the need to plan an “electronic” estate has grown such that ignoring your virtual life can trigger estate issues down the road.

Planning Your Digital Estate…Part I

I’m going to date myself, but I still vividly remember signing up for my first “electronic” mail account in the early 90’s when I was a freshman in college. I guess it was memorable because it required traveling down into a dark basement underneath one of the buildings. I picked a really strange address name at the time instead of my name, but I have learned to keep my email identity simple since. Email has been joined by a myriad of other internet services. Everyday someone can upload videos onto the net, pay bills on-line, connect with others via social media websites. Fast forward almost 20 years; the internet has become ubiquitous.

Integration has given birth to a person’s “digital life” and the need for your estate plan to determine who should have that digital asset.  Many fail to see how their email account would even be part of their estate.

A few years ago, Justin Ellsworth, a U.S. Marine, was killed in Iraq and his family requested access to his Yahoo email account to retrieve pictures, emails, etc. residing in Justin’s account. Yahoo, citing its privacy policy, did not relinquish access to Ellsworth’s family. Eventually, Ellsworth’s parents successfully sued forcing Yahoo to turn over the information. However, it cost the Ellsworth’s untold hardship along with a great deal of money in legal fees to gain access to something that normally is only clicks away on a keyboard.

To appropriately plan your virtual life, it is important to understand internet providers’ privacy policies.

Here is a quick rundown of the major providers:

• Google: Google mail requires a copy of a death certificate, copy of a power of attorney or birth certificate and a copy of an email sent from the account you are trying to close. A Google account will stay open forever barring a request to delete it.
• Yahoo: Has not changed their policy since the Ellsworth case and there is no right of survivorship and non-transferability. Upon receipt of a death certificate, Yahoo will terminate the account and delete all of the contents. Yahoo accounts only have a ninety (90) day window before deleting an account based on inactivity.
• Hotmail: Falls in between Yahoo and Google. They will grant access to the account after being provided similar information as Google but will eventually delete the account after a year of inactivity.
• Facebook: The account is turned “off” and made into a memorial for the person upon request. Facebook grants no ability to edit, limits access to the site but will remove the “person” based on requests from next of kin after being provided similar information as Google.
• Twitter: Has what appears to be no official policy but states they cannot disclose account information or passwords to anyone, even post-death. Twitter will remove an account after given notice with a death certificate and may remove an account based on 6 months of inactivity.

A simple glance reveals that each provider has a slightly different privacy policies with respect to their willingness to open up a user’s account to a non-user. If a decedent or incapacitated person has a number of accounts, that means a multiple hurdles to overcome.

There has to be a solution and I will get into that next time.

New Washington, D.C. Address

I am sorry for being in the dark for so long but work has been crazy. Naturally, at my busiest time, I decided to move to a new office.

Starting on today, December 1st, my new DC location is as follows:

Law Office of Christopher Guest, PLLC
888 16th St. NW
Suite 800
Washington, DC 20006

But, all the rest of my information is still the same.

Contact Information:
(VA) 703.237.3161
(DC) 202.349.3969
(Fax) 703.574.5654
(email) cguest@guestlawllc.com
(website) www.guestlawllc.com
(twitter) @vaestateplanner

How Do People Own Assets? Part III – Tenants in Common and Tenancy by the Entirety.

This is the third in a series of post in what manner people, either individually or collectively own property, and how that property transfers upon death.  The first post can be read by clicking here (individual ownership of property).  The second post can be read by clicking here (joint tenancy ownership).

The second form of co-ownership is called tenants in common.  Each person is still entitled to possession as a whole but can have unequal interests in the property. For example, two people can have a 60/40 split ownership of a property or three people can split the property 40/30/30.  For real estate, this form of ownership is most common where the co-owners are not married or have contributed different amounts to the acquisition of the property.

Further, unlike joint tenancy, tenants in common have no right of survivorship.  This means that if one tenant in common dies, the decedant-tenant’s interest in the property will be part of his or her estate.  The interest will pass by inheritance to that owner’s devisees or heirs, either by will, or by intestate succession.  For example, if an unmarried couple purchases a house, and one of them dies, the surviving member of the couple would not take over full ownership of the home, but the interest in the house of the dying person would pass to that person’s heirs by intestacy or probate.  The same outcome would occur if two people own a checking account; the heirs of the dying person would inherit their interest in the checking account.

The last type of ownership is tenancy in the entirety or entireties and is only available to married persons and generally restricted to real property. Ownership of property is treated as though the couple were a single legal person. Like joint tenancy, the tenancy by the entirety also encompasses a right of survivorship, so if one spouse dies, the entire interest in the property passes to the surviving spouse, without going through probate. Further, only a joint creditor to the married couple may severe the tenancy.

I hope this helps those out there understand a little more about property ownership.