Survivorship Requirements in Your Estate Plan

It's a good idea for your estate plan to include a survivorship requirement for beneficiaries.

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A survivorship requirement means that a beneficiary cannot inherit from you unless he or she lives for a certain period of time longer than you do.  In general, it’s a good idea to include a survivorship clause in your will or trust.

Survivorship Periods in Wills and Trusts

A “survivorship period” is a standard feature of many wills and trust documents. A survivorship clause states that beneficiaries named in the document cannot inherit unless they live for a specific amount of time after the will- or trust-maker dies. This time is called a survivorship period, and commonly ranges from about five to 60 days. For example, a will might state that “a beneficiary must survive me for 45 days to receive property under this will.”

It’s unusual to see a survivorship period longer than 60 days. If a survivorship period is more than 120 days, it could jeopardize the estate-tax-free transfer of assets from a deceased spouse to the survivor. Federal estate tax isn’t a concern for most people (more than 99.5% of estates don’t owe any tax), but even without the tax consequences, a long survivorship period isn’t necessary.

Survivorship Periods Imposed by State Law

If the will itself doesn’t impose a survivorship requirement, state law may. (If the will does have a survivorship period, that’s the one that will apply.) In many states, all beneficiaries are subject to a five-day (120-hour) survivorship period. The law applies to beneficiaries who inherit under wills, trusts, or state law (in the absence of a will). It generally does not apply to people who inherit under beneficiary designations (for example, because they are named beneficiaries of insurance policies or pay-on-death bank accounts) or to surviving co-owners when property is held in joint tenancy, tenancy by the entirety, or in other ways that give surviving co-owners automatic ownership of a deceased co-owner’s share.

A survivorship requirement is in effect in most of the states that have adopted a set of laws called the Uniform Probate Code or the revised version of the Uniform Simultaneous Death Act.

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States With Automatic Survivorship Requirements

Alaska

Kansas

New Jersey

Arizona

Kentucky

New Mexico

Arkansas

Maine

North Dakota

Colorado

Massachusetts

Ohio

District of Columbia

Michigan

South Carolina

Hawaii

Minnesota

South Dakota

Idaho

Montana

Virginia

 

Nebraska

Utah

Why Have a Survivorship Requirement?

Survivorship requirement are designed to come into play in case of the simultaneous (or near-simultaneous) death of a will-maker and a major beneficiary—for example, a husband and wife.  Such occurrences are extremely rare in real life, but the possibility worries a lot of people when they sit down to write their wills. Here’s the worry: Your assets would pass under your beneficiary’s estate plan, not yours.

An example may make it clearer. Say that in her will, Sara leaves everything to her brother Tomas, and names her favorite charitable organization as the alternate beneficiary. So under normal circumstances, at Sara’s death, her assets would pass to her brother; if he were no longer alive at Sara’s death, her assets would go to the charity. But let’s say that Sara dies, and then Tomas dies 10 days later. Without a survivorship period, he would inherit everything. The assets would then pass under the terms of his will—perhaps to Sara’s no-good nephew—not to the charity that she named as alternate beneficiary. The family would also have the added financial burden of two probate proceedings (one for Sara’s estate, another for Tomas’s estate) before the assets could be transferred to their ultimate owner.

If, however, Sara’s will contained a 30-day survivorship period, then nothing would go to her brother. Instead, her assets would pass to the charity, as she intended. Her estate plan, not her brother’s, would determine where her assets ended up.

by: , J.D.

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