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Sunday, August 8, 2010

How does an executor deal with a survivorship clause?

A survivorship clause is a sentence in a Will that defines how long a person must live after the death of the testator (person whose Will it is) in order to inherit from the estate. In most Wills, the clause simply says "a beneficiary must survive me by 30 days". Often the Will states 10, 15 or 20 days, but 30 is the most common and I've never seen a longer survivorship clause than 30 days.

The clause means that the estate doesn't necessarily go to whoever is alive on the day the testator dies; it goes to whoever is alive 30 days later. This means that if you are an executor who is very quick with his or her paperwork, and you get an Application for Probate down to the courthouse within those first 30 days (or other time specified in the clause), the court will not allow you to file it. You must wait out that period before filing. That's not usually a problem because it takes most people longer than that to get their papers organized, but it's something to keep in mind.

Throughout a Will you may see clauses that end in "if he/she survives me". For example, it might say "I leave $10,000 to my friend Sacha if she survives me". If the Will has a survivorship clause, Sacha has to outlive the deceased by the number of days specified in order to have legally survived the deceased and inherit the gift.

One of the reasons this clause is used is to save on expense and legwork in the event that a husband and wife are in a common accident. Say the husband is killed and the wife dies four days later. Rather than have to go through the work of transferring everything in the husband's estate into the wife's name, and then out of the wife's name to the beneficiaries, the executor could skip the first step. The executor will be able to deal with matters in one estate instead of two. (This is also one of the reasons that it makes sense for husbands' and wives' Wills to mirror each other - then it won't matter which Will is being used).

A question I see quite often is whether a beneficiary can be given some of the money before the 30 days is up. The answer is no. The 30 days is not simply a waiting period for a person who owns the money. Nobody is entitled to it until after the 30 days is up. Therefore nobody can get some of it "early" because we don't know yet who is going to get it.

An executor can get into a lawsuit without even realizing it by giving out estate money to someone who isn't entitled to it.

There is one person in the Will who should NOT be subject to a survivorship clause, and that is the executor. By this I mean a clause that says that someone is the executor only if he or she survives the testator by 30 days. Every year in my Will-drafting class I have at least one student who includes a survivorship clause for the executor, and I sometimes see it in Wills that cross my desk at work too.

If you stop and think about it, it makes absolutely no sense at all. Including a clause that says nobody is your executor for the first 30 days means that during that first month after your death there is nobody in charge of your affairs. Think of all the things an executor does in the first 30 days - arrange and pay for the funeral, secure the house, notify the family, put an ad in the paper, take valuables into safekeeping, deal with everyone from the banks to the insurance companies and hire a lawyer to take care of the probate. Why on earth would anyone want to make sure nobody can do any of that for 30 days?

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