By Attorney Kelly Jesson
I am not an insurance salesperson. However, I often give my estate planning clients one common piece of advice – get life insurance if you can. This is typically easier for my younger clients, but for my older clients, the importance of having life insurance is greater.
Here’s the reason for my advice: First, life insurance passes outside of the probate estate, beyond the reach of any estate creditors (for a refresher on what is included in your “probate estate,” see this blog post). This means that your loved one will receive a check without an estate being opened or finalized and it will belong to them outright. Often, my probate clients who have lost loved ones have already received their life insurance check before they ever even come into my office to see me to probate a will or settle an estate.
This can result in a tremendous burden being lifted. While your loved one is still obviously grieving the loss, your loved one does not have to be concerned with paying funeral expenses, medical bills, or even a mortgage payment, for example. This is especially true if you do not have joint bank accounts. If an estate has to be opened and settled for your loved one to receive their inheritance, they will not get that money for at least six months (and sometimes even one year). Also, spouses are required by law to pay the funeral expenses and medical expenses of the deceased spouse. These bills can sometimes wipe out savings. Additionally, if you pass away with debt, some savings accounts and other assets are included in your probate estate. Your loved one may not inherit anything if your estate assets are needed to pay your final debts.
Many people opt to forego life insurance in exchange for passing on retirement accounts like 401Ks and IRAs. While this is certainly an option, your loved one may not have near instant access to pay your final expenses. Depending on whether your surviving spouse is your heir or your children (or someone else), there may be restrictions on the use of the funds. Importantly, life insurance is passed on tax free while your beneficiary will be responsible for paying taxes on withdraws taken from retirement accounts.
Furthermore, if you are a business owner, and especially if you are in business with a spouse, life insurance can ensure the survival of your business.
Finally, I have started recommending life insurance policies that contain long-term care riders. If there is ever a need for you to enter a long-term care facility, you can use those funds for that. I have a couple of clients who are in moderate-to-nice assisted living facilities who have told me that they would not be able to live there had they not purchased long-term care insurance years ago. People are living longer, and medical care is getting more expensive.
While some people use these products to ensure they pass along an inheritance to their loved ones, these products also alleviate stress and potential burden on your family members (whether that means at death or in the event you can no longer care for yourself). Do not hesitate to contact me if you would like to be referred to an insurance professional to find out more information. I am not being paid to promote life insurance, but I feel strongly about these products, and I believe that it is an important part of the estate planning process.
By Associate Attorney Danielle Nodar
Many people associate “trust fund babies” with millions of dollars, royal babies, and celebrity kids, but with proper estate planning, anyone can leave their children a trust fund to provide for them once both parents are gone. The goal is to make sure your children’s basic needs are met, not to spoil them. By using either a revocable living trust or testamentary trust, parents can create a plan for how money will be used for their children’s care if both parents pass while a child is still too young to manage money on their own.
A trust is an agreement where the settlors, the creators of the trust, entrust money and other assets to a trustee for the trustee to hold, manage, and ultimately distribute to named beneficiaries upon the happening of some event. Without utilizing a trust, the law generally allows for any adult, meaning anyone eighteen or older, to inherit money outright, regardless of their maturity level, ability to manage finances, or the amount of money being inherited. Prior to turning eighteen, assets inherited by a child will be kept in a custodial account to be managed by a surviving parent or legal guardian. The adult in charge will manage the money for the child’s benefit and can use the funds for the child’s education, support, health, and maintenance until the child turns eighteen and inherits the remaining assets outright.
A testamentary trust or revocable living trust allows parents to name a trustee to manage any inherited assets for children until the child inherits outright according to the terms of the trust. The Trustee will be managing the estate assets and making distributions of the funds for your children’s care according to the terms of the trust. You can give the trustee a lot of discretion over what the money can be used for. They also will be able to seek professional guidance to assist them with managing funds, as part of their job requires them to make sure that the estate assets continue to accrue income while the trust is in existence. Finally, the Trustee does not have to be the same person as the person who you name as a legal guardian for your children. If you think one person would be better suited as a caregiver and another would be better at managing money, you can have both people serve in different roles and work together in making sure that your children’s needs are met.
You can control the age and conditions in which your children will inherit funds outright. You can break up the distribution into different percentages at different ages so that children are not inheriting everything in one lump sum. For example, you can have a child inherit 25% at age 22, then another 25% at age 25, and the remaining assets at 30. During this time, the Trustee will still be making distributions for a child’s health, education, and support, but the child will get additional distributions of larger sums of money as they are more capable of making financial decisions on their own. A trust also allows you to give the Trustee discretion to distribute additional funds for whatever you’d like, such as travel, weddings, and purchasing a residence. Finally, you can name either trust as a beneficiary of a life insurance policy, which would allow any money that a child was to inherit to instead flow through the trust to be administered according to the trust’s terms. Without this, a child could ultimately inherit the entire proceeds from the policy at eighteen.
As you can see, all parents, and not just those who are royalty, celebrities, or have millions of dollars in assets, can benefit from having a trust for their children’s benefit included in their estate plan, as it allows you to name a trusted adult manage funds for your children if you are no longer living, and it also allows you to implement conditions and instructions for how money will be used and ultimately distributed. If you have questions about the best option for your family, please call Jesson & Rains!
By Associate Attorney Danielle Nodar
After creating your estate plan, you should review your documents after a major life event such as marriage, divorce, births, deaths, or moving to a new state. While most properly drafted estate planning documents are still valid after moving to a new state due to the Full Faith and Credit Clause of the U.S. Constitution, which says that the states must recognize the legislative acts, public records, and judicial states of the other states within the U.S., there may be some state-specific requirements that could impact how the will is interpreted and the difficulty of the overall probate process in the new state.
For example, most states require that the testator, the signer of the will, sign his or her will before witnesses who must also sign the document. The rules between the states vary as to who can serve as a witness and how many witnesses are needed in order for the will be to be valid. Also, some states require that the signatures of the testator and witnesses be notarized. While North Carolina does not require a will to be notarized, having a notary validate the signatures of the testator and witnesses makes the will “self-proving,” which makes the probate process easier because the court can accept the will without contacting the witnesses who signed it first. For people with out-of-state wills, tracking down witnesses could be difficult.
Another important consideration when moving to a new state is whether your chosen executor can or wants to serve in your new state. For example, North Carolina requires that all personal representatives who reside out of state post a bond, with the amount of the bond based on the value of the probate assets. The bond requirement can be waived in a will for any North Carolina resident executors, but it cannot be done for executors residing outside of the state. In order to obtain the bond, the executor will need to locate a surety company, pay a bond premium, and pass a credit check. Additionally, an out-of-state executor must appoint a resident agent residing in North Carolina to accept all legal documents for the estate. This typically results in the executor hiring a probate attorney to serve in this role. The entire bond/resident agent process can be avoided altogether if the executor resides in state and the will expressly waives the bond requirement. For people without friends or family in the state, there is also the option of creating an estate plan that avoids probate altogether through the use of a revocable trust.
Finally, different states have different requirements for witnessing and notarizing durable powers of attorney, healthcare powers of attorney, and living wills. These are documents that third parties would be reviewing and analyzing in the event of an emergency. Even though the documents may be valid under the Full Faith and Credit Clause, you don’t want to risk having your agents have to argue the validity of the document during an emergency. We often recommend that our clients update these documents to conform with North Carolina procedural requirements.
These kinds of small but significant differences in state law that could impact whether your estate plan needs to be revised when moving to a new state. Please call Jesson & Rains if you need to determine that your existing estate plan still works based on your new location and to ensure that it may not be unnecessarily difficult for your loved ones to probate your will in North Carolina.
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 2021 the year you plan for emergency scenarios and protect your business and personal assets for the benefit of your loved ones through estate planning.
Unfortunately, COVID-19 has shown us that there are no guarantees, but it has also highlighted what is most important to each of us: family. 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, and as the pandemic continues to be a part of our “new normal,” 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.
Our office has created new procedures due to COVID-19. Our office staff wears masks, and masks are required by every person entering the office. We also social distance as much as possible, with witnesses watching you sign the documents through the conference room windows. We do not share or reuse pens that may be used by clients and we wipe down all surfaces before someone comes in to do a document signing. We are also meeting our clients in the parking lot, where they can remain in the car while signing documents, which limits their exposure to germs in the building. For all appointments prior to the signing appointment, we offer virtual appointments so we can still “meet” our clients while reducing risks of exposure.
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 2021! 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.
By Associate Attorney Danielle Nodar
With the holiday season upon us, many people are considering how they can give back to their communities, particularly after a year where many have been adversely impacted due to the longstanding impact of COVID-19. Like many industries and people, the pandemic has also taken a toll on nonprofit organizations. Revenue streams have been reduced due to limits on regular fundraising activities and economic hardships befalling individual or corporate donors. This strain on nonprofits is coupled with an increase in demand for many services provided by nonprofits, particularly those combating difficulties caused by the pandemic, such as food insecurity, homelessness, and elder and medical care.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides several provisions that increase tax incentives for charitable contributions by both individuals and corporations, which may be an added incentive for people to make gifts at a time when they may be most needed. The CARES Act provides that individual taxpayers who do not itemize their deductions can now deduct up to $300 for cash gifts made to public charities in 2020. Another bonus to this new change is that it will not expire this year unless the legislation changes; however, to take advantage of it this tax year, all cash or check gifts must be received or postmarked by December 31, 2020. Individuals who itemize their deductions may now deduct cash contributions to public charities up to 100% of their Adjusted Gross Income (AGI), an
increase from the 60% Adjusted Gross Income limit that used to apply before the CARES Act.
For both groups of people, these gifts must be made to a public and not private non-operating foundations, donor advised funds, supporting organizations or split-interest trusts such as charitable remainder trusts. Also, keep in mind, you must provide a receipt to show proof of cash gifts of $250 or more.
Finally, this spirit of giving is not limited to individuals as the AGI limit for cash charitable contributions was also increased for corporate donors with the changes made by the CARES Act. Corporate donors can now deduct up to 25% of their taxable income, an increase from the 10% in previous years.
In order to ensure that your charitable contribution is maximized, you should consult with your tax professional and attorney. For questions about how you can incorporate charitable giving in your estate plan, please contact Jesson & Rains!
By Attorney Kelly Jesson
What happens when you get married, but you don’t update your will?
The good news is that North Carolina law will prevent a surviving spouse from getting nothing with their spouses passes away. In North Carolina, we have what is called “an Elective Share.” That means that a spouse, whether or not there is a will, and whether or not they are omitted from a will, can elect to take a share.
The amount of the share is determined by statute. I will not go into specifics here, but if a spouse is omitted from a will, they can take a percentage of the deceased spouse’s estate (not just their probate estate, but everything, including life insurance proceeds, stocks and bonds, etc.), and the percentage is based upon the number of years they have been married.
So this is good – if you have a will and you get married, but you pass away before you can revise your will, your surviving spouse will not be left out in the cold. However, if you intend for your spouse to inherit 100% of your estate, you may need to revise your will.
Now, let’s say you have a will, you’ve left property to your spouse, but then you get divorced:
What happens if you do not update your will after a divorce?
Well, there’s good news here, too. In North Carolina, the divorced spouse will get nothing under the will, and if you have the spouse listed as an executor, trustee, or guardian, the spouse will not be permitted to serve as one of those, either. However, we still recommend that a divorced person revise their will. There may be other provisions in the will indirectly
impacted by the divorce that are not automatically revoked. For example, maybe your wife’s sister was to serve as your successor executor, and you’d prefer someone from your own family to serve now? Maybe you had provided for your husband’s step-child in your will and you would like to remove the step-child? These provisions are not automatically revoked upon divorce.
So, as you can see, North Carolina law does a great job protected spouses from unintentional disinheritance and from their ex-spouses inheriting. However, a revised Will will do an even better job at making sure your wishes are carried out. Give Jesson & Rains a call if you need to draft or update your documents!
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