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 This informs the reader that any prior will or codicil is no longer valid.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.

How Do People Own Property or Assets? – Part II – Joint Tenancy

This is the second 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.

Property ownership and transfer on death gets much more complex when more people are thrown into the mix. Any property can be concurrently owned, at the same time, by several persons, all of whom have the right to ownership and enjoyment of that property.  There are three types of ownership of property:

• joint tenancy;
• tenancy in common; and
• tenancy by the entirety.

Each type of ownership has different legal ramifications and pro/con issues with respect to estate planning.

Joint tenancy means that each person has equal interest in the property. It typically arises between husband and wife with respect to ownership of real estate or parent and child for other property. But it can arise through two non-married people.

The primary feature of joint tenancy is the right of survivorship of that property.  This means that if two people own property and one of them dies, the surviving person will receive full ownership rights by operation of law in that property.  For example, if a husband and wife own a home in joint tenancy together and the husband dies, the wife will be the sole owner of the home.

A will stating otherwise is ineffective on the property because the passing joint tenant’s rights in the property extinguish on their death.  The property transfer to the other joint owners not the person listed in the will.

Under this type of ownership, the last living person takes ownership of the property and the property will be incorporated into their estate upon their death.

Joint tenancy can also be used to own financial accounts like a checking, saving or other financial institution account. To determine if a bank or brokerage accounts is jointly owned just look at the account name.  The acronym “JTWROS” or “JTROS” is commonly appended after the names in the account and demonstrates the owners’ intent for the property to be jointly owned with survivorship rights.

The next post will deal with ownership by tenancy in common and tenancy by the entirety.

Financial Emergency 411 Seminar

Sorry, to break into my series on asset/property ownership but I will be leading a “lunch and learn” seminar on Thursday, October 13th at 12:00 PM at the Arlington Chamber of Commerce. I will be hosting in conjunction with a CPA, Jay Reiner to discuss how your financial background, recordingkeeping and planning can mitigate the impact of Financial Emergency.

Basics about your Financial Background can Prevent a Financial Emergency.  We will drill down on the basics of personal taxes and estate planning to provide in-depth knowledge on how to limit the impact of financial issues that can incur during difficult and stress full times.  The one-hour seminar will include the importance of recordingkeeping, financial, tax and estate planning and perspective on how planning can save you and your loved ones time, money and heartache in times of difficulty.

If you would like more information, please click here.

How Do People Own Property or Assets? – Part I – Ownership by One Individual

Estate planning encompasses a wide range of topics from familial relationships to complex tax planning, understanding how property is owned and transferred upon death is vital to any estate plan.

For a single person, how property is owned is very simple.  It is very easy for people to understand that if they are single and have the deed to their home in their name, they are the owner of the house or after 360 monthly mortgage payments they are the owner.  Or, if someone opened a checking account in their name, they are the owner of that checking account.

If a single person dies, what type of property is owned will determine to whom the property is transferred and who the beneficiary of that property is.

Generally, when a person opens an account at a financial institution that person needs to designate a beneficiary(ies).  The designated beneficiary is the person who will acquire ownership of those accounts upon death of the account opener.  Brokerage accounts, 401(k)s, IRAs and many other types of financial institutional accounts have designated beneficiaries on the account. These accounts are generally referred to as payable-on-death (“POD”) or transfer-on-death (“TOD”) accounts.

A TOD/POD account’s ownership will be transferred to the listed beneficiary in the financial institution’s records, even if a person’s Last Will and Testament states otherwise.

If the designated beneficiary predeceases the owner of the TOD/POD account then the property will pass to the secondary beneficiary. If there is no secondary beneficiary or the secondary beneficiary also predeceases the account owner, then the property falls into probate and can be controlled by the will. If there are no listed beneficiaries or the listed beneficiary is the estate, the TOD/POD account will also be controlled by the will and probate.

If the asset is a piece of real estate, and, if there is a will, then the will is probated and property transfers to the person listed as the heir under the will. If there is no will, then the realty is transferred under the intestate laws of the state.

When property is owned by multiple people it gets even more complex and I will delve into that with my next post.

Interview with BBC Radio World Service Program on Digital Assets

Last week on September 13, 2011, I was interviewed by the BBC Radio’s World Service Program. The BBC wanted to know about the importance of estate planning a person’s Digital Assets i.e. Facebook page, ITunes, Blogs, FlickR, etc. The interview can be heard by clicking here. (Note: The interview can only be heard through Internet Explorer web browser.)

It is certainly a new area for estate planners because it is a new area of law.  Digital assets have only really come into existence in the last decade or so with the explosion of Social Media.  However, with more of a person’s content, property and information on-line, or in the cloud, that inherently means there is a value to those assets. That means a person needs to estate plan for those assets to protect them and ensure they go to the right person.

I wrote two articles for my newsletter over the last year or so detailing the importance of estate planning a person’s digital assets.  Those articles are titled:

• I need to Estate Plan My Gmail^TM Account?
• More Digital Estate Planning Issues

Feel free to check them out.

Summer 2011 Newsletter

I have not been posting my newsletters here but I thought I would add my latest one and try to make sure I post them in the future.

Summer 2011 “The Future Estate” Newsletter Topics include:

• The Trustee: Part III…The Responsibilities
• Basics of Estate Planning: Life Estate in Estate Planning
• Estate of the Month:Disinheriting a Child and Its Unforeseen Consequences

You can read more articles from my newsletter by clicking here.