Why should I have a will if my heirs are going to inherit everything under the law anyway?
This is a very common question I get on a regular basis. Let’s say you have a spouse and no children, or you don’t have a spouse but you have two children. Under the intestacy laws of North Carolina (which governs who gets your property if you pass away without a will), these heirs *should* inherit your property without the need for a will.
So why have a will?
1. To name an executor.
If no executor is named in the will, a friend or family member will have to volunteer and apply to the court. If someone has a higher degree of kinship than the prospective executor, they will be expected to sign a waiver of their right to serve as executor (i.e., creating more paperwork for your loved ones). For example, if your grandson is an attorney and he wants to, and is better suited to, serve as the executor, your daughter would have to fill out a form renouncing her right to serve because she is a higher degree of kinship than your grandson.
2. To waive bond for the executor.
This is very important, because I have actually seen this be prohibitive to prospective executors before. In North Carolina, an executor has to pay a bond unless (1) it is waived in a will or (2) the heirs, or other heirs, all sign a document waiving the requirement (again, more paperwork for your loved ones). If there are minors or incompetent heirs, they cannot consent, and the bond will be required. If the prospective executor is not a North Carolina resident, the court will require a bond, regardless of waivers.
The bond amount is 1.25 times the value of the decedent’s personal property or, if personal property is over $100,000, the value of the personal property plus 10%. A surety bond company will pay this amount to the court, and all the executor has to do is pay a premium. However, the executor has to qualify by filling out an application and having a credit check completed.
I have seen cases where the executor did not qualify due to their financial situation. I have seen cases where there were minor heirs who could not consent to waive the bond and the executor was out of state. I have seen cases where heirs were not willing to cooperate and refused to sign the waiver forms. All of this could be avoided by a will.
3. To give the executor powers in the will beyond those granted by law.
In North Carolina, if you die without a will, your executor may have to apply to the court for permission to do certain things. For example, the executor may need to sell some of your property to pay estate debts. The petition can be time consuming and costly. With a will, however, you can stipulate that you are giving your executor to power to do certain acts without getting the court’s permission. Again, this is saving your loved ones a lot of hassle.
To name a guardian over minor children, if any. When appointing a guardian for a minor, the court will give preference and priority to the person named as guardian in a will.
Did you know you could be held personally responsible for your corporation’s debts if the corporation is dissolved improperly?
The first step in closing your corporation is called “dissolution.” Once a corporation has filed for dissolution, it is no longer able to carry on business, except for business that is necessary to wind up the corporation’s affairs (for example collecting assets owed to the corporation and disposing of any corporate property).
One of the most important steps involved in dissolving a corporation, and the one that can get the shareholders in trouble, personally, is that of disposing of claims against the corporation (in other words, money owed by the corporation). The dissolving corporation must notify known claimants, in writing, that: it is dissolving; describe any information required by the corporation to process a claim; provide a mailing address where the claim can be sent; state a deadline (which must be no fewer than 120 days from the date of the written notice) by which the corporation must receive the claim; and state that the claim will be barred if not received by the deadline. For unknown claims, the corporation can publish this notice in a newspaper in the county in which the corporation had its principal office.
If the procedure is not followed, then the shareholders of the corporation could be held personally liable, up to the individual shareholder’s pro rata amount of the claim or up to the amount of the corporate assets distributed to that shareholder.
For example, XYZ, Inc. is a corporation with two shareholders that wishes to dissolve. XYZ, Inc. has $1 Million in assets which are distributed to each shareholder evenly. At the time of XYZ, Inc.’s dissolution, there was a known claimant who had a claim against XYZ, Inc. in the amount of $800,000.00. If XYZ, Inc. properly notifies the claimant of XYZ, Inc.’s dissolution, and the claimant fails to make a claim within the deadline, the claim will be barred, and the shareholders can split the remaining assets.
However, had XYZ, Inc. not followed the correct notification procedures, the claimant could recover $400,000.00 from each of the shareholders. This is bad news for the shareholders if they have already spent or invested the $400,000 they received when the corporation closed.
As you can see, liability issues do not only occur during the initial startup phase or during the day to day business operations of the corporation. Even once your corporation has been dissolved, claimants can come back at a later date and claim money from a corporation’s shareholders.
The attorneys at Jesson & Rains, LLP can help you avoid many corporate pitfalls and are able to offer assistance and counselling in all stages of your corporation’s life.
Subscribe to our newsletter.
Kelly Rains Jesson