By Associate Attorney Danielle Nodar
The holiday season always comes with numerous reminders about giving the perfect gift to express love and gratitude to our loved ones. This season of giving also inspires increased donations to charitable organizations. However, many people are not aware that they can use their estate plan as a tool for charitable giving and how these gifts can have benefits that extend beyond the charity, such as minimizing taxes during one’s lifetime or after death.
For lifetime gifts, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provides several provisions to help individuals who give to Section 501(c)(3) tax exempt charitable organizations through the end of 2021. One change impacts the majority of taxpayers: those who elect the standard deduction. Ordinarily, these individuals cannot claim a deduction for contributions to a charitable organization, but the law now allows these individuals, including married individuals filing separate returns, to claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. For married couples filing jointly, this amount increases to $600. There are certain cash contributions that may not qualify, including gifts to private foundations or donations carried over from previous years, so it is important to work with your tax preparer to ensure that this gift qualifies.
There are also many methods of including a charity in one’s estate plan. A charity can be a named beneficiary in a will or trust, with the terms of the will or trust designating the asset being distributed and the charitable purpose of the gift. Your named Trustee or Executor will be responsible for making the distribution to the charity. When considering what to give to a charitable organization, it is important to remember that your gift can go beyond cash, but can include assets like a stock portfolio, artwork, a car, or even real estate.
Another way to include charitable giving in your estate plan is by naming a charity as a beneficiary of life insurance policies, annuities, IRAs, or other retirement plans. Depending on the other assets you have at death and their value, these gifts may have tax benefits to your loved ones or estate. For example, naming a charity as the beneficiary of a retirement accounts may be a wise choice for some individuals as retirement accounts are some of the highest taxed assets in any estate. By gifting your retirement account, your estate tax burden is reduced because your estate will receive a federal estate tax charitable deduction on the value that is held in the account. Furthermore, the charity does not have to pay income taxes on this gift.
Finally, when making a charitable gift through an estate plan, there may be benefits to your estate and loved ones. Gifts, during life or at death, to Section 501(c)(3) charities do not count towards the total taxable value of your estate. Thus, naming a charity as a beneficiary will reduce the value of your estate at the time of death, which can lower or eliminate the amount of estate taxes owed by your estate.
During this season of giving, we recommend that you not only think of the legacy you can leave your loved ones, but also the gift that can be made to a charitable cause during your lifetime or after your death. Contact Jesson & Rains for assistance with considering your options for charitable giving in your estate plan.
By Associate Attorney Danielle Nodar
There are plenty of things new parents need to tackle on their to-do list to provide the best environment and future for their child. However, one big thing that often gets overlooked is planning for the unexpected with estate planning. Some of the factors new parents should keep in mind when considering estate planning are:
1) Naming a Guardian for Minors
One of the most important considerations a parent can make is naming a legal guardian for their minor children. A guardian is the person who will assume responsibility for all aspects of your child’s care if they are under eighteen when you pass away. This person will make all medical decisions, educational decisions, and step into the role of the parent in the eyes of the law.
In North Carolina, the only way a parent can designate a guardian is through their Last Will and Testament. A guardian named in a will is usually appointed by a court unless the person is unfit or incapable. Without a named guardian in a will, a court chooses the guardian based on its determination of what is in the best interest of your child. This may result in loved ones arguing over your children or the guardian being someone you would not have chosen.
2) Managing Inheritance for Minors with Trusts
If you leave assets outright to a minor child, those assets 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 until the child turns eighteen or twenty-one and inherits the remaining assets outright. Even when a child reaches the age of majority, many parents worry about a child’s ability to manage finances on their own, especially if it is a large amount of money being inherited. To have more control over your child’s inheritance, many parents set up a trust for the benefit of their children. Parents can create a trust with either 1) a revocable living trust, which is a separate trust agreement that is funded by the parent with their assets during their lifetime or 2) a testamentary trust, which is created in a will and only goes into effect at the death of the parent.
Both types of trusts allow the parents to name a Trustee to manage any inherited assets for children until the child inherits outright at a later age, such as twenty-five, for example. The Trustee will manage the assets and make distributions of the funds for your children’s health, education, maintenance, and support according to the terms of the trust. You can determine how much discretion you give the Trustee is managing the trust, and you can also provide them with clear guidelines of what are permissible expenses.
3) Updating Beneficiaries on Financial Accounts
If you have accounts that allow you to name a beneficiary, such as life insurance, retirement, or investment accounts, those funds will automatically go to the named beneficiary, even if your will names different beneficiaries. If you are creating or updating your will to include children, it is important to review your beneficiary designations to make sure that those assets will go where you want them to and that your plan works with both your will and beneficiary designations.
4) Updating Your Living Documents
Another key part of estate planning is naming who would make legal or medical decisions for you in an emergency where you cannot make those decisions for yourself. By naming agents under a healthcare power of attorney and durable power of attorney, you can ensure that if you become incapacitated, someone you trust can access your funds to care for you and your child and make medical decisions for you until you recover.
5) Considering Life Insurance
Many new parents consider life insurance to ensure funds are available for your children’s needs if they pass away while their children are still young. There are many factors to consider when looking into life insurance but finding a trusted insurance professional to assess your family’s specific needs is the first step in the process. Finally, if you do create a trust for your child, you can name the trust as a beneficiary of the life insurance policy, which would allow those funds to be used by the Trustee for your child’s benefit according to the trust’s terms.
If you have questions about how to create or update your estate plan to best protect your family, please call Jesson & Rains!
By Attorney Kelly Jesson
We previously wrote about the importance of keeping good business records in order to avoid personal liability for business debts. However, did you know that certain business records can act as estate planning tools?
Your interest in your business, whether an LLC interest or corporate stock, is personal property that you can leave to a family member when you pass away. Unfortunately, it will go through probate unless you transfer it to a trust or enter into a transfer-upon-death (TOD) or joint with rights of survivorship agreement with your heir. The court collects a fee based on the amount of personal property that goes through probate, so if your business is worth some money, you want to avoid this.
What if you have a business partner? Perhaps you don’t want to do business with his/her spouse or child if your partner passes away? That’s where an operating agreement or a shareholder’s agreement comes in handy—in either of these agreements, the owners can agree that if one of them passes away, the other will buy out their interest. This is helpful for the survivor, who will remain in control of the company, and this is helpful for the deceased owner’s family, who will get a sum of money. These agreements (also called buy-sell agreements) are oftentimes funded with life insurance, to ensure that there is liquid cash available to pay the family.
In either of these agreements, the owners can promise the other not to transfer their business interest to third parties while they’re alive, which is also helpful for control purposes. The parties can agree to buy the other out when other “triggering events” happen, such as a partner’s bankruptcy or divorce. You don’t want one of these events to cause the forced sale of all or part of the business. It is important to put a plan in place to prepare for the unexpected (that frequently happen).
If you or someone you know needs assistance putting an operating agreement or shareholder agreement in place, or incorporating their business into their estate plan, please give Jesson & Rains a call! We offer flat fee packages for these formation documents. We also offer flat fee annual plans that include preparing annual meeting notices and minutes, filing annual reports with the Secretary of State’s office, and other legal services. More information can be found here.
By Associate Attorney Danielle Nodar
August is National Make-A-Will Month! While it may not be as fun as celebrating one of August’s other “holidays,” like National S’mores Day (August 10) or National Dog Day (August 26), it is a reminder of the importance of having a will in place to ensure that your loved ones are provided for at your passing.
Some of the most important components of a will are:
1) Naming Beneficiaries to Inherit Your Assets. A will allows you to specifically provide for the persons or charities of your choosing at your passing. If you pass away without a will in North Carolina, the North Carolina Intestacy Statutes will determine where your assets will go based on your next-of-kin. For any property that was owned joint with rights of survivorship, which is frequently the case with many assets owned by spouses, the asset will pass automatically to the surviving party. As will assets that have a designated beneficiary via a beneficiary designation.
However, this is not the case for any assets that are just in your name when you pass away, even if you are survived by your spouse. Under the North Carolina Intestacy Statutes, most people are surprised to learn that your spouse does not automatically inherit everything. Sometimes parents or half-siblings inherit. Thus, without a will, you may be inadvertently leaving your assets to people who do not need them, or you may be leaving assets to minor children instead of your spouse, who may need the funds to care for your children. A will also allows you to leave assets to more distant relatives, friends, or charities that would be ineligible to inherit through intestacy.
2) Naming an Executor. Your will allows you to name an Executor to manage your assets and distribute them to your beneficiaries at the time of your death. Without a will, you will not have any control over naming the person to manage your affairs at your death and a family member or friend will have to volunteer and seek the court’s approval before being allowed to serve. If someone has a higher degree of kinship than the prospective Executor, they must sign a waiver of their right to serve as Executor (i.e., creating more paperwork for your loved ones). If the person will not waive their right to serve, this may result in a person who is not as well-suited for the job serving as an Executor just because they have a higher degree of kinship than the prospective Executor.
3) Waiving the Executor’s Bond. In North Carolina, an Executor has to pay a bond based on the value of the assets unless (1) it is waived in a will or (2) all heirs sign a waiver to waive 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. Any Executor who is not a North Carolina resident must pay a bond, regardless of the waiver. By planning with a will, you can waive the requirement altogether and make sure your desired Executor is capable of serving.
4) Name a Guardian and Trustee for Minor Children. In North Carolina, the only way to name a guardian for your children if both parents pass away is to name the guardian in a will. Without a will, multiple family members may seek to be appointed a child’s guardian, which may result in fighting or someone serving that you would not have chosen yourself for that role. You can also create a testamentary trust in your will, which allows you to have more control over the age when your children inherit. With this trust, your named Trustee will manage and distribute assets for your children’s benefit until they reach the age where you designate that they can manage the funds on their own. Without a will, any person eighteen years or older can inherit any type of asset without the benefit of a Trustee’s oversight.
If you do not have a will, or your existing will does not accurately reflect your current wishes, use Make-A-Will Month to get a plan in place so that your loved ones are not left with questions or complications if you pass away. Please call Jesson & Rains if you would like to discuss how a will can be tailored to your specific needs and wishes!
By Meg Abney, Jesson & Rains PLLC Intern
If you are a professional, like a therapist, CPA, or attorney, you know exactly how your business should be run. But what happens when incapacity or death intervenes? Who will pick up where you left off?
A “Professional Will” can help provide guidance and critical instruction for what comes next.
While not a true legal document, like a Last Will and Testament, a “Professional Will” is essentially a roadmap explaining how to terminate or continue operations at your business or practice. Unlike your Last Will and Testament, which concerns distribution of assets, a Professional Will names a trusted individual or emergency response team to handle business affairs like:
Depending on your profession, you may be obligated to provide some form of advance planning for your business or practice. In North Carolina, psychologists, LPCs, NCCs, and LMFTs are required to make advance plans for the transfer of clients and to protect the confidentiality of records and data. A Professional Will satisfies this ethical responsibility.
Even if not specifically required in your industry, all professional business owners can benefit from a Professional Will. Professionals often have an obligation to protect the interests of their clients, and a Professional Will can help avoid a breach of duty. Individuals whose clients rely on continued care or service should strongly consider a Professional Will to help prevent disruptions.
Ideally, you should create your Professional Will alongside your personal will since your Last Will and Testament supersedes all other testamentary documents. Therefore, it is best to work with an experienced attorney to ensure that there are no discrepancies between these two documents.
Please call Jesson & Rains PLLC if you have questions about whether your business could benefit from a Professional Will or want to learn more about protecting your business’s future.
By Attorney Kelly Jesson
With estate planning, like many other things, cheaper is normally not better. With online, fill-in-the blank options, the question assumes you understand it and know the answer. If you do not, you could be filling it in incorrectly. One top DIY legal document company used to have a note on its website that said “80% of people do not complete online forms correctly” (trying to get people to upgrade to a “live attorney” package). Specific words have meanings, and if you do not understand the law in your state, there can be some unintended consequences when doing it yourself. For example, you could unintentionally disinherit a child. You could accidentally leave money to someone you didn’t know was included in a class of people.
Most do-it-yourself forms leave out provisions that makes things easier and less expensive to manage, like extra powers in the Durable Power of Attorney that can help your loved ones if you are incapacitated or including the power to sell real estate in a will (saving your estate thousands of dollars). You may also accidentally leave assets in the wrong hands, such as having minors inheriting property, resulting in costly court proceedings to fix. Many companies rely on documents and laws that are not always up to date or they may not be state-specific (although advertised to be), and the remedies may be expensive and require an attorney or court proceeding to fix.
Additionally, estate planning attorneys are not just document drafters. There’s a reason why it is called “estate planning” and not “will drafting.” We counsel our clients as to their choice of guardian and executors, leaving money to kids, helping ensure that ex-spouses don’t inherit, etc. We help our clients plan for death or incapacity utilizing real estate deeds, beneficiary designations on retirement and life insurance policies, and business agreements. Did you know that your will could leave everything to one person, but if you have someone else named as a beneficiary on a policy, that trumps your will? Some surviving spouses are sad to learn that they do not inherit real estate outright due to the owners on the title. We update titles for our clients if they want to, in advance. If you wait until someone has passed, it is too late.
If something goes wrong with an online legal document, you are SOL (so out of luck). Just look at LegalZoom’s terms of service: “. . . LegalZoom cannot guarantee that all of the information on the Site or Applications is completely current. The law is different from jurisdiction to jurisdiction, and may be subject to interpretation by different courts. The law is a personal matter, and no general information or legal tool like the kind LegalZoom provides can fit every circumstance. Furthermore, the legal information contained on the Site and Applications is not legal advice and is not guaranteed to be correct, complete or up-to-date. Therefore, if you need legal advice for your specific problem, or if your specific problem is too complex to be addressed by our tools, you should consult a licensed attorney in your area.” If an attorney does something wrong that results in damages, you or your family can sue them for malpractice.
Using online forms gives the drafter / purchaser a false sense of security. While they may have saved a few thousand dollars, the true price may be far greater and paid by undeserving family members. Investing in estate planning is investing in your family’s future, and who can put a price on that? If you’re ready to get your estate plan in order, give Jesson & Rains a call.
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