Wednesday, November 08, 2006

Thirty-Day Survivor Clauses

In British Columbia, estate planning lawyers often draft wills to provide that a beneficiary must outlive the testator by a period of time (often 30 days) to receive the gift in the will. For example, your will might say the you give everything to your wife if she survives you by thirty days.

Why have a clause saying the beneficiary must outlive the testator by thirty days to benefit?

The purpose of this clause is to avoid assets going from one estate to another in case of a common accident.

For example, supposing a family of three, the parents and one child, are tragically killed in a car accident. The father dies first, then the mother, and then the child, all within a short period of time. If there is no clause requiring a beneficiary to outlive the testator by a sufficiently long period of time, then the father's estate goes to the mother's estate (assuming the father left everything to the mother). If the mother left everything in her will to the child in these circumstances, the mother's estate would then go to the child's estate. Finally, the combined estates would then go to the child's beneficiaries.

In this case, it might be necessary to probate the father's will, then the mother's will, and finally the child's will (or for someone to get letters of administration if the child did not have a will.) Each time a will is probated (or letters of administration granted), probate fees would be payable to the provincial government, and the probate fees might be payable in respect of the same assets three times.

If the father's will and mother's will provided that a beneficiary must survive for thirty days to benefit under the will, then each one's estate would pass directly to whomever each selected as his or her beneficiaries in case both the spouse and child died first or within thirty days.

There is nothing magic about thirty days, but it is long enough to reduce the risk of assets going from one estate to another estate if a family dies in a common accident, but not so long that it delays the administration of an estate. You can select a different time period than thirty days.

What if, in the above example, all three died at the same time, or no one knows who died first? In B.C. under s. 2 of the Survivorship and Presumption of Death Act, RSBC 1996, c. 444, the eldest is deemed to have passed away first, and then the second eldest next. (There is a different rule with respect to the presumption of the order of death for the purpose of determining if a beneficiary of a life insurance policy has survived the life insured, but I will save that discussion for another post.)

With a thirty-day survivor clause, it would not matter who was presumed to have died first.

No comments: