I always cringe when someone asks me to draft their “simple” will. In my opinion, rarely is there such a thing as a “simple” estate plan. An estate plan should consider all of the assets of the individual and how those assets are held. When an attorney or a layperson tries to cut corners and save money on a proper estate plan, it typically leads to much higher legal fees down the road.
In many instances, during the final years of a person’s life, a child or another relative has their name added to the financial accounts of the aging person. This scenario happens quite frequently when this person is no longer able to keep track of their own finances. Many times, the bank, financial institution or investment firm does not fully explain what will happen to the accounts upon the death of the primary holder. It is important to pay close attention to whether the second person is being added to the account “with right of survivorship.”
Why is this important to estate administration?
The best way for me to explain this nuance is to use a hypothetical based on cases which I see regularly. Let’s imagine that an elderly woman has three children (all living adults). Often, one of the children is more involved in the care of the elderly parent and handles their finances. As is standard practice, this one child is named as attorney-in-fact in a durable power of attorney and has their name added to the accounts of the elderly mother. One thing that is overlooked is that this child may have been given the right of survivorship of the accounts once the mother passes away. If this happens, all of the money in the account will pass to that one child upon the death of the mother. Of course, this may not be what the mother intended. Most likely, the mother intended for a more equitable distribution of the property under a last will and testament.
What should the caregiver do if they discover this problem?
Obviously, family dynamics and feelings vary widely from case to case. If, upon the death of the parent, one child finds himself/herself as the sole beneficiary under a survivorship account, they may either (a) keep all the money (will most certainly lead to family bickering and hurt feelings) or (b) distribute the assets according to Virginia’s intestacy distribution (if there is no estate plan) or the plan contained in a will or trust. In order to distribute the assets according to a will, the person taking under a survivorship account should disclaim the right of survivorship so that all of the money will pass into the estate. It is important to properly draft this notice and an attorney’s advice and help would be useful.
NOTICE: The above information is general in nature, and is offered to increase public knowledge and awareness. It is not designed to provide advice on specific case situations.