By Associate Attorney Katy Currie
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 Associate Attorney Katy Currie
Estate planning can be a daunting process. Whether it is stress of making decisions that will impact loved ones when we are gone or avoiding thinking about death or incapacity, many people are hesitant to create an estate plan. The confusion and anxiety surrounding this process has led to these four common estate planning myths:
1. My estate is not big enough to require any estate planning.
There is a widespread myth that only the very wealthy need estate plans and that the average person does not have an “estate” to begin with. This is not true! When someone passes away, all of their assets become part of their estate; there is no minimum threshold of assets that make up an estate. Thus, at death, we all have an estate, it just varies in size and complexity based on the amount and types of assets you have. Oftentimes, people with fewer assets have the most issues during probate and could have really used the help of an attorney.
2. Estate Planning only deals with distributing property at my death.
Another myth is that your estate plan only deals with who will inherit your property when you pass away. This is also incorrect! A will allows you to name people who may serve important roles when you pass away. For example, a will allows you to name an executor to manage your assets and distribute them to the beneficiaries stated in your will 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. Additionally, in North Carolina, the only way to name a guardian for minor children (if both parents pass away while the children are still minors) is in a Last Will and Testament. You can also name a trustee who is the “money manager” for inheriting children until they reach a certain age.
Moreover, estate planning involves planning for incapacity through both durable and health care powers of attorney. With a durable power of attorney, you can name an agent to make business, legal, and financial decisions on your behalf if you become incapacitated. A bonus myth: If you become incapacitated, your spouse can automatically do these things for you. Unfortunately, this is not true. Without a durable power of attorney, your spouse would have to become your court appointed guardian.
With a health care power of attorney, you can name an agent to make medical decisions for you if you become incapacitated. Your health care power of attorney allows you to include specific instructions for your health care agent regarding your health care wishes. There is also an advance directive or “living will,” which includes your wishes relating to the withdrawal or withholding of life support if you are incapacitated and suffering from a medical condition where you will not likely recover.
3. If I have a will, I can avoid probate.
Having a will drafted will not always prevent your estate from having to go through probate to pass assets to your loved ones. If you pass away with a will, depending on the circumstances, your executor may have to file your will at the courthouse along with the initial probate application. Your executor then must comply with all the requirements of the probate process. This includes providing the court with an inventory of all of your assets at the time of your death, providing notice to any of your potential creditors existing at the time of death, handling creditor claims, paying creditors with estate assets, and making distributions of any remaining assets to your beneficiaries. While there are ways to avoid probate (for example, owning property joint with rights of survivorship, the surviving spouse allowance, and utilizing revocable trusts), sometimes merely having a will is not enough.
4. I do not need a will because my spouse will inherit everything.
There is no law in North Carolina that states that your surviving spouse gets 100% of your assets. The surviving spouse will remain owner of all joint property or accounts with right of survivorship. The surviving spouse gets any assets where they’ve been named as a beneficiary, like life insurance, for example. Also, every surviving spouse is entitled to a year’s allowance of $60,000 of the decedent’s cash or personal property. Thus, this oftentimes results in the surviving spouse getting everything, but not every time.
If there are any other assets, a surviving spouse does not automatically inherit everything according to the North Carolina Intestacy Statute. For example, if you do not have a will and are survived by a spouse and only one child (or grandchildren, if that one child is deceased), the surviving spouse takes ½ of your real property, the first $60,000 of your personal property, and ½ the remaining balance of your personal property while the child inherits the remainder. If there are more children, the percentage to the surviving spouse drops to 1/3. If you do not have children but are survived by a spouse and parent(s), your spouse will inherit ½ of your real property, the first $100,000 of your personal property, and ½ the remaining balance of your personal property. Your parent(s) will inherit ½ of your real estate and any personal property remaining after the spouse’s share.
Thus, without a will, you may be inadvertently leaving your assets to people who do not need them and leave your spouse in need. For example, if your children are minors, you may want your spouse to inherit your full estate to take care of your children.
If any of this concerns you, it is important to use an attorney to draft the estate plan specific for your situation. For further assistance with your estate planning needs, give Jesson & Rains a call!
By Associate Attorney Danielle Nodar
By creating a will or trust, a testator or settlor may make gifts to beneficiaries that are distributed at death. Often, the gift-giver will attach strings to these gifts in the form of certain conditions that the beneficiary must meet in order to receive the gift. Many conditions have been upheld by courts, but if a condition is considered too restrictive over certain aspects of a beneficiary’s life, the condition has been invalidated.
There are two types of conditions: conditions precedent and conditions subsequent. Conditions precedent are conditions that must be met before the gift can be distributed to the beneficiary. Some examples of conditions precedent that have been upheld include gifts that are conditioned on a beneficiary finishing college or reaching a certain age before receiving the gift. Conditions subsequent, which are conditions that must be met after the gift is distributed, are often more difficult to uphold if the assets have already been transferred to the beneficiary and too much time has passed. For example, if a beneficiary receives a gift of land with the condition that it is never used for commercial purposes, it may be difficult to enforce fifty years after the gift is received; thus, this condition is more likely to be invalidated.
Courts try to honor a testator’s or settlor’s wishes as much as possible, but a condition that encourages a beneficiary to break the law or is against public policy will be invalidated, and the gift will pass to that person as if the condition did not exist. Traditionally, gifts that have been invalidated due to public policy grounds are gifts that encourage harmful or discriminatory acts or hurt society in general.
One common condition that is often challenged are conditions related to marriage, particularly conditions that a beneficiary receive a gift only if he or she marries someone of a certain faith. Depending on how the condition is written, these requirements have been upheld by courts, but the court decisions are very specific to the facts of each case and the phrasing of each gift. If a condition is too restrictive on the beneficiary’s right to marry anyone or if it encourages the divorce of a beneficiary, it is likely to be a violation of public policy.
Whenever a condition is placed on a gift made in a will or trust, the condition must be clearly written, because if a beneficiary does not inherit due to failing to meet the condition, they may file a lawsuit to challenge the validity of a gift. A lawsuit will cause an unnecessary delay in other assets being distributed to beneficiaries, and the expense of a lawsuit will be paid out of your estate or trust. Also, when considering how to make a gift, certain conditions are easier to administer in a trust versus a will, as gifts in a will are usually distributed shortly after the decedent’s death and are subject to court scrutiny. When considering where and how to leave your assets, particularly if you want to exert some control over how the beneficiary receives the gift, it is important to consult with an experienced estate planning attorney. Please call Jesson & Rains if you are interested in more information on making gifts in your will or trust.
While You Build, We Protect®
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 Associate Attorney Danielle Nodar
In 2015, the Supreme Court's decision in Obergefell v. Hodges recognized the constitutional right to marriage extended to unions between same-sex couples. This entitled married same-sex couples to the same benefits and protections under the law as heterosexual couples. However, the Supreme Court’s recent decision overturning Roe v. Wade included a concurring opinion which hinted at the possibility that the Supreme Court may revisit the decision in Obergefell. The threat to overturn the right to same-sex marriage has sweeping consequences in areas relating to healthcare, financial decision-making, and inheritance.
The below information also applies to men and women who are in committed relationships but choose not to marry. North Carolina does not recognize common law marriage.
A person can appoint a Healthcare Power of Attorney designating an agent to receive medical information and make medical decisions on their behalf if the person becomes incapacitated. Without a Healthcare Power of Attorney appointing your preferred agent, North Carolina statutes dictate who will serve as your agent based on their degree of kinship. This hierarchy allows for most spouses to serve as agent for each other, but unmarried adults without the document must rely on a majority of their available parents and adult children to make such decisions jointly. However, if you have a Healthcare Power of Attorney naming your partner as your agent, then the document controls, regardless of whether the Supreme Court overturns the protections of same-sex marriage.
Another area of concern is who will inherit assets after death. In North Carolina, if a person dies without a Last Will and Testament, the state’s intestacy laws govern how probate property (all of the assets that a person owns in their individual name and assets that do not pass via beneficiary designations) are distributed at death. A spouse is given automatic rights and is entitled to at least a percentage of your estate. Obviously, if you are not legally married in the eyes of the law, your partner has no automatic rights, so a will is crucial to have to prevent assets from being distributed to people with whom you do not have a close relationship or to family that does not need your assets. A Last Will and Testament disposing of property will not be impacted should same-sex marriage be overturned. For more information about how property is distributed in North Carolina if you do not have a will, please see our previous blog: What Happens If You Die Without A Will in NC?
Finally, a comprehensive estate plan will allow you to provide for your spouse or partner with non-probate assets not commonly governed by the intestate succession laws, such as life insurance, retirement accounts, jointly owned property with rights of survivorship, securities with named beneficiaries, and Pay on Death or Transfer on Death accounts. By making sure that your partner is named as the beneficiary on these accounts, they will automatically be distributed to the named beneficiary regardless of marital status.
While we cannot anticipate how laws may change in the future, we can assist you with making sure you and your loved ones are protected and provided for through your estate plan. Please call Jesson & Rains for help in crafting an estate plan that works for your family.
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.
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