As Estate Planning Attorneys, one thing that we cannot stress enough is the importance of having a will in place. Having a will is the only way to be certain that your wishes for your family and your estate will be honored when you pass away. Without a will, state laws determine what happens to your estate and even to your minor children. In the video below, attorney Kelly Jesson talks about some things that can happen if you pass away without a will in North Carolina. Please call Jesson & Rains if you have questions about getting your will prepared or updating an existing will.
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By Attorney Kelly Jesson
The Supreme Court has issued many newsworthy rulings recently, but one you might not be familiar with is the Connelly Case. In Connelly v. United States, the Supreme Court held that the value of life insurance proceeds paid out to a business after the death of one of its owners must be included in the date of death valuation of the business. For the past twenty years, life insurance paid to a business as the result of an owner’s death has not been included in the business valuation if the business had an obligation to purchase the deceased owner’s interest in the business back. The reasoning was that this was a liability that the business owed. If a business was paid $3 million dollars in life insurance but it was obligated to pay the deceased owner’s family $3 million dollars, then it’s a wash. The implications of this ruling are significant. A business that is the beneficiary of life insurance proceeds may be valued much higher than it “really” is. For example, let’s say there are two owners of Widget Corp. The business is worth $5 million, so the owners each had $2.5 million dollars in insurance taken out by the corporation. At the death of one of the owners, the corporation was to redeem the deceased owner’s shares, which were worth $2.5 million prior to death. After the Supreme Court ruling, the business is actually worth $7.5 million ($5 million + life insurance). If the agreement was to pay half the value, the corporation would owe the family $3.75 million but only have $2.5 million in cash to do so. For people who may have to pay estate taxes (oftentimes business owners!), the difference in a few million dollar valuation can result in huge tax payments. And to add insult to injury, the family could end up paying taxes on assets they didn’t really get. In the above example, the true value of the business interests was $2.5 million but they would have to pay tax on the $3.75 million valuation if it was a taxable estate. The ruling requires business owners to carefully review their buy-sell and operating agreements to see how valuations will be determined. Is it the date of death value, or the value put on the business at the beginning of the year, or the value of the life insurance? While you can’t exclude life insurance for IRS purposes, you may be able to for buy-out valuation purposes. One way around this ruling is to use cross-purchase agreements. Instead of the business owning the life insurance policy, the individual owners will own life insurance policies on each other. When one owner dies, the life insurance is paid out to the other owners, not the business. Also, more people may utilize LLCs to own life insurance policies. The problem with cross-purchase agreements is that if you have a lot of owners, you have a lot of policies. If there are three owners, for example, there are six policies. If you set up an LLC to own the insurance policies (and then the LLC uses the money to buy the deceased owner’s interest), there are fewer policies. In this example, there would be three instead of six. If you would like additional information, or if you need a review of your business’s insurance and operating agreements, please don’t hesitate to contact the attorneys at Jesson & Rains. By Senior Associate Jeneva Vazquez
As a parent, sending your child off to college is a significant milestone filled with excitement and a bit of apprehension. With all the preparation to send your child to college, one crucial aspect that often gets overlooked is guiding your child to execute key legal documents. Once a child turns eighteen, the child is considered an adult in the eyes of the law. This means that parents are no longer given access to their child’s financial, health, and educational records without the consent of their adult child. For this reason, it is essential for parents and young adults to discuss the importance of healthcare powers of attorney and durable powers of attorney before a child heads off to college or when your child turns 18 years old. We emphasize the importance of proactive planning for young adults and we can guide you through the essentials of a Young Adult Plan. Durable Power of Attorney: A Durable Power of Attorney is a legal document that allows your child to designate someone they trust—typically a parent—to make financial decisions on their behalf if they're unable to do so. The Durable Power of Attorney can be used to allow parents to pay a child’s bills, access the young adult’s personal bank account, or manage the child’s finances or legal decisions in the event of an emergency. Without a Durable Power of Attorney, you would not be able to manage your child’s financial and legal affairs during an emergency without petitioning a court to be appointed the child’s legal guardian, which can be a lengthy, costly, and invasive process. Imagine your child is studying abroad or incapacitated due to an illness or accident. Without a Durable Power of Attorney, you might face significant hurdles in managing their financial affairs, potentially leading to unpaid bills or financial complications. By establishing a Durable Power of Attorney, you ensure that you can step in and manage things, reducing stress during challenging times. Health Care Release of Information: Facilitating Communication The Health Insurance Portability and Accountability Act (HIPAA) protects your child's medical information, ensuring privacy but sometimes hindering communication between healthcare providers and you. A Health Care Release of Information authorizes specific individuals to access your child's medical records and communicate with healthcare professionals on their behalf. This is particularly important in emergencies where timely information is critical. Without this authorization, you might struggle to obtain necessary information about your child's condition or treatment options, potentially delaying crucial decisions. Health Care Agents: Honoring Your Child's Wishes A Health Care Agent, designated through a Health Care Power of Attorney, is someone your child chooses to make medical decisions for them if they're unable to do so. This ensures that their healthcare preferences are honored, even if they cannot communicate for themselves. A Health Care Power of Attorney is crucial for children who are going to college outside of North Carolina because the laws of that state will control who may be able to make medical decisions on behalf of the child if they are incapacitated. In North Carolina, the majority of the child’s parents can make healthcare decisions if the child is unable to. This means that parents will be joint decision-makers and must agree on all actions taken by doctors. However, other states may be different. There might not be a default decision maker for healthcare decisions in your child’s state. Taking the First Step: Parents should know that the adult child must be the one to hire the attorney, and the child is free to name anyone they want to serve in these roles. The child can keep these documents on file with their university or medical provider so that it can be easily accessed if needed. Finally, now that your child has turned eighteen and is getting ready to enter adulthood, it may be a good time for you to review your estate plan to make sure that it still meets all of your needs and goals. Now that they are adults, your children can serve in important roles for you. Please call Jesson & Rains if you have questions about these documents or want to learn more about protecting you and your child’s interests through estate planning. We spend a lot of time speaking with clients about estate planning, and over the years we have heard many misconceptions on the topic that seem to come up over and over again. Today we are talking with attorney Kelly Jesson about the three most common estate planning myths. Please call Jesson & Rains if you have questions about getting your estate plan in order or updating an existing estate plan.
By Associate Attorney Katy Currie
Valentine’s Day is a holiday to celebrate the endless love we have for the loves of our life. What better present to give your Valentine this year than ensuring your estate planning is done? There are many important aspects of sitting down and planning for your future through your estate planning documents, and unfortunately, there are countless issues that could arise without proper estate planning. Without a will you lose the control you have over who inherits what when you pass away, and this could have huge implications on your loved ones. You are deemed to have died “intestate” if you die without a will. North Carolina has an Intestate Succession Act which is the default law that kicks in if you should pass away without a will. It names which of your surviving family members are considered your legal heirs in North Carolina. The most common misconception surrounding intestate succession is that your spouse will inherit everything if you pass away without a will. This is not always the case if you have probate property and are survived by children or parents in addition to a spouse. For example, if you do not have a will and are survived by a spouse and one child (or grandchildren if that child is deceased), or a spouse and a living parent if you have no children or grandchildren, in addition to receiving the $60,000 spousal allowance, your surviving spouse takes the first $60,000 of your personal property, ½ of your real property, and ½ of whatever remains of your personal property while the child/grandchildren/parent inherits the remainder. If you are survived by multiple children or grandchildren, that number is cut to 1/3. Additionally, in North Carolina, a will is the only way to name a guardian for your minor children in the event both parents pass away. You can also create a testamentary trust within your will, which will name a trustee who can be the money manager for inheriting children until they reach a certain age (later than the default age of 18). So, while enjoying a nice romantic dinner to celebrate and show your love for your Valentine, it is also an opportunity to discuss planning for your future while you have some alone, intimate time together. If you approach the conversation with care and thoughtfulness, it could help you break the ice for those difficult, but important, decisions for your estate plan which will have a positive impact on your Valentine for years to come. If you would like to take the next step and work on your estate plan, give Jesson & Rains a call! By Attorney Kelly Jesson
This year, make a resolution to prioritize estate planning. Estate planning allows you to gain control and peace of mind over difficult and unpredictable situations. We have previously written about the difficulties caused by dying without a will in North Carolina and the pitfalls of the probate process in North Carolina; however, many of the “worst-case” scenarios can be avoided with proper planning. Let us help you make 2024 the year you plan for emergency scenarios and protect your business and personal assets for the benefit of your loved ones through estate planning. Estate planning allows you to plan for what happens when you pass away, including naming a trusted person to handle your final affairs, name guardians for minor children, and distribute your assets according to your wishes. In addition to planning for death, our office drafts durable and health care powers of attorneys, where you can name agents to make both financial and medical decisions for you if you are incapacitated and cannot communicate. There is no reason to wait to do planning, as you should get a plan in place before it is ever needed. If you do become incapacitated or ill, it may be more difficult or impossible to get documents in place, as you must have testamentary capacity to create valid estate planning documents. Some of our clients delay estate planning because they do not have any friends or family members they trust to serve in fiduciary roles. In some circumstances, members of the firm may serve in these roles for the client if the client feels comfortable. It is better for you to take control and name someone yourself than to have the government appoint someone in an emergency or when you pass away. We want to help you take CONTROL in 2024! Please call Jesson & Rains if you have questions about getting your estate plan in order or updating an existing estate plan. While You Build, We Protect. |
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