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What should you do after you complete the signing of your last will and testament?
It is important the testator (the person signing the will) keep the physical originals in a safe place. Although an attorney may provide the testator with a digital copy, the digital copy is only for convenience. The digital copy is NOT a substitute for the physical original.
Third parties frequently require that they see the original power of attorney. The principal, also known as the grantor, should keep the original in his or her possession. If the power of attorney is ever revoked, the grantor should demand the return of any copies and notify all third parties who were aware of the power of attorney.
Hospitals and doctors routinely accept copies of medical care directives. The grantor should thus keep a copy of the medical care directive on his or her phone. Most smart phones will let you take a photo of each page of the medical care directive and those photos can then be sent via text message to the doctor as the need may arise.
The testator should check the titling on all financial accounts and the beneficiary designations on any life insurance and retirement accounts with the relevant bank, insurance agent, and human resource officer.
For assets located in Virginia, there are various forms of ownership and each has its own pros and cons. A partial list includes the following:
(1) Tenants by the entirety: this type of ownership is available for a married couple and it gives extra protection from judgment creditors who attempt to seize the asset. The protection is not all-encompassing, but it is effective in many cases. The asset is jointly owned by both spouses with survivorship. It also prevents one spouse from selling the asset without the approval of the other. The downside is that both spouses must sign any retitling or conveyance of the property. If the asset is a checking account, both spouses must sign every check. Because survivorship is automatic, neither spouse can leave his or her one half share to someone other than their spouse. This type of ownership could save significant probate expense.
Some banks will not let a married couple own a bank account as Tenants by the Entirety. In that case, the couple can ask if the bank will title the account as “husband and wife with rights of survivorship.” As always, seek the opinion of an attorney when choosing how to title a bank account or other asset. A small change in the facts can alter what advice a client receives. For example, Virginia will not let a married couple title an automobile as Tenants by the Entirety.
(2) Joint Tenants: this type of ownership is available when there are two or more owners. Each owner has a equal share and and upon the death of one owner, their share automatically transfers to the surviving owner(s). Because survivorship is automatic, one owner cannot leave his or her share to someone other than the other owners. Judgment creditors can attach the asset and force its sale so that the sale proceeds can be divided among the owners and the creditor. If a creditor does not obtain a judgment and attach the asset prior to death, the creditor will be treated as an unsecured creditor and must seek collection through the probate process.
(3) Tenants in Common: the asset is owned by two or more individuals but there is no survivorship provision. The shares can be unequal. Upon the death of the owner, his or her share passes to his or her heirs and beneficiaries and the asset may be subject to the claims of creditors through the probate process. Prior to death, judgment creditors can attach the asset and force its sale so that the sale proceeds can be divided among the owners and the creditors.
(4) Sole Ownership: the asset is owned by a single individual. Upon the death of the owner, the asset passes to his or her heirs and beneficiaries unless there is designated beneficiary. The asset is subject to the claims of creditors while the owner lives. After the death of the owner, it is subject to the claims of creditors through the probate process.
In most cases, the individual owner can name a spouse, sibling, parent, etc. as a beneficiary. Some banks refer to this as either a P.O.D. (payable-on-death) or T.O.D. (transfer-on-death) clause. Assets with a POD provision typically do not go through probate and are thus not used to pay the claims of creditors. Rather, the asset typically passes directly to the named beneficiary at the moment of death. In rare cases, if the deceased had unpaid debts, creditors may make claims through the probate process and this could complicate the distribution of other assets. The POD asset will be subject to the claims of creditors only if other property is insufficient to pay those claims. Using a POD could save significant probate expense.
(5) Trust Ownership: the asset is titled in the name of the trust or sometimes the name of the trustee and it is held by the trustee pursuant to the terms of the trust. The trust can include a spend thrift clause which gives some protection from the claims of creditors. There are a myriad of factors governing the effectiveness of using a trust for asset protection and such protection is beyond the scope of this article.
(6) Corporate Ownership: The asset can be contributed to a corporation or LLC in exchange for stock in a corporation or membership in an LLC. Whether or not the stock or membership interest can be attached by creditors is fact specific but in general it is more difficult to attach an interest in an LLC.
(7) Life Estate: This type of ownership divides the ownership between multiple owners with one owner having the immediate right to possession and other owners have the exclusive right to possession only after the death of the life estate owner. One significant disadvantage is that it restricts the ability to refinance any mortgage or to get a secured loan because it requires everyone with any ownership or possessory interest to sign any deed of trust. It likewise restricts the ability to sell or give the property away.
(8) Transfer on Death Deed: This is a relatively new estate planning tool and was created in 2013 by the Virginia legislature. It can be used to easily transfer title to real property after the death of the owner or owners. The goal of the legislature was to reduce the cost in time and money related to the probate procedure. The owner(s) must have the deed properly recorded before death and the deed must not be revoked by another recorded deed prior to death.
A TOD deed does not affect the right of the owner to use the property as collateral for a loan, nor does it affect the right to sell or give the real property to someone.
Because some banks, credit unions and other lenders often require owners to terminate the trust ownership of the real estate to pledge the real estate as collateral for a loan, then put it back in the trust after the financing is completed, a TOD deed should be considered as an alternative to placing real property in a revocable living trust.
The testator should review the following types of asset:
(1) Banking Accounts:
(2) Brokerage an Investment Accounts.
(3) Retirement Accounts.
(4). Life Insurance.
(5) Real Estate.
(6) Time Shares. Time shares are often located in another state. Only an attorney licensed in the state where the time share is located can give legal advice regarding the time share, and only an attorney licensed in that state can determine whether a will meets the requirements of that state. Owners of time shares should speak with an attorney where the time share is located regarding the future disposition of the time share.
Other considerations:
(1) Online Access to Accounts. It is vital that the testator leave the Executor with sufficient information regarding his or her cell phone, online accounts, social media accounts, and email accounts. It is generally recommend the testator maintain a master list with a password manager. The testator and the future executor should each be able to open the password manager. If there is a physical master list, it is generally recommend it be kept in a safety deposit box or a home safe. Again, the future executor should know the combination or have a key to the safe.
(2) Umbrella Insurance. The testator should speak with his or her insurance agent regarding obtaining an umbrella insurance policy. The goal is to raise the liability coverage on the home and any automobiles, but at a reasonable cost.
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