- By Jesson & Rains Associate Attorney, Danielle Nodar
The beginning of a new year lends itself to reflecting on the year that has passed and setting goals for the future. Come January, we are bombarded with information about New Year’s resolutions and implementing plans to help us transform our resolutions from lofty dreams to our reality. From health goals relating to diet and fitness, financial goals such as saving for retirement or paying off longstanding debt, even decluttering our homes--there is no shortage of information about what we can do to improve our present and plan for our future.
However, one area of planning that many people seem to put off is creating an estate plan. Estate planning involves meeting with an attorney to discuss things like your assets and debts and how they could impact your estate plan; how you want your property distributed at your passing; who will administer the probate of your estate; who will handle your financial affairs and medical decisions if your become incapacitated and are no longer able to make those decisions on your own; and other important decisions that could make a lasting impact on your loved ones.
Even if you have an estate plan in place, you should meet with your estate planning attorney every three to five years to review any life changes or changes in the law. Some reasons to update an estate plan are:
If you have had any major life changes or just want to ensure that your estate plan is in order, make it a goal for 2019 to plan for your future and the future of your loved ones with estate planning. We can help you to ensure that your property is distributed how and to whom you want it to be distributed and to ensure that you are leaving your family unburdened.
- By Jesson & Rains Associate Attorney, Danielle Nodar
Anthony Bourdain, acclaimed chef, television host, and travel writer, encouraged people to explore the world and continues to do so after his death. When Bourdain’s will was probated in New York, it was revealed that he left most of his estate to his eleven-year-old daughter. However, according to The New York Times’ Page Six, Bourdain bequeathed his frequent flier miles to his estranged wife. Bourdain stated in his will that she should “dispose of [them] in accordance with what [she] believes to have been my wishes.”
Considering Bourdain’s jet set career as the host of CNN’s Parts Unknown, this gift is likely a substantial amount of frequent flier miles. While most of us have not racked up a similarly significant amount of miles, Bourdain’s estate plan still calls into question what kind of property we can leave to our loved ones and how.
Every airline and credit card company has a different policy for their points or rewards programs. When a customer signs up for a loyalty program, they are entering into a contract and must abide by the company’s terms and conditions. Some programs specifically indicate that rewards points are not property of the rewards member. In these cases, the rewards points are neither assignable during lifetime nor inheritable at death. Other loyalty programs may allow rewards points or accrued miles to transfer to a person through a will or divorce decree. However, even in these cases, it is sometimes up to the discretion of the airline whether to honor a transfer of miles.
If you are interested in leaving a loved one your accrued airline miles or rewards points after your death, you should read the terms and conditions to determine (1) if you they are transferable and (2) if they are, how to transfer them properly.
“Travel isn’t always pretty. It isn’t always comfortable. Sometimes it hurts, it even breaks your heart. But that’s okay. The journey changes you; it should change you. It leaves marks on your memory, on your consciousness, on your heart, and on your body. You take something with you. Hopefully, you leave something good behind.”
― from “No Reservations: Around the World on an Empty Stomach”
Generally, if you have a will, you can name anyone you want to and the court will respect your decision, but there are a couple of obvious prohibitions and then a few not so obvious restrictions.
Your executor must be:
If you pass away without naming someone in a will, the clerk of court will appoint someone in the following order (as long as they qualify with the above requirements):
(1) A surviving spouse;
(2) A beneficiary in a will;
(3) Any heir;
(4) Any next of kin
(5) Any creditor of the decedent;
(6) Any person of good character residing in the county who applies therefore; and
(7) Any other person of good character.
There are a few other important notes to keep in mind. The clerk of court has to discretion to turn down anyone it finds “unsuitable.” If you pass away without a will, your executor will have to get a surety bond and pay a bond premium in order to serve unless all other heirs sign a form waiving that requirement. Getting a bond involves passing a credit check. Depending on the county, some clerks of court will require bonds for all out-of-state executors, even if all heirs sign waivers, and sometimes even if the decedent had a will and waived the bond requirement! This is why it is important to meet with licensed attorney and set up your estate plan to ensure that the person who you want to handle your affairs when you pass away will be appointed.
Retirement accounts can be one of the largest assets that someone passes on to a loved one. However, these assets are treated differently if they are tax-deferred. If you leave a standard 401K to a beneficiary, they will pay income tax when they withdraw the money.
A surviving spouse will be required to take Required Minimum Distributions (RMDs) once they turn 70.5 years old. For non-spouse heirs, the beneficiary will have to take RMDs every year if the original account owner passes away after reaching age 70.5. But if the original account owner was under the age of 70.5 when they died, the RMDs will be based on the beneficiary's age instead. This is called a “stretch out” because the RMDs are stretched out over the beneficiary’s life, based on the beneficiary’s life expectancy as dictated by the IRS.
Not all plan administrators will allow a beneficiary to stretch out the payments. It may be worthwhile for the beneficiary to rollover the inherited 401K to their own IRA because, if you do not stretch out RMDs, the RMDs might be taxed at a higher income tax bracket!
Additionally, because 401Ks are distributed according to life expectancies, sometimes they are not the best asset to pass along to multiple beneficiaries through a trust. The IRS will force RMDs based on the life expectancy of the oldest beneficiary.
Finally, deferred tax assets should not be left in a supplemental needs trust for the benefit of a disabled beneficiary. If the trustee accumulates the RMDs instead of distributing them to the beneficiary (which oftentimes is necessary to keep the beneficiary qualified for government benefits), the IRS will tax the RMDs at the trust income tax rate, which can be as high as 37%!
As you can see, estate planning is so much more than simply drafting a will. Please contact Jesson & Rains if you would like to consult with a professional.
The start of a new year always has people reflecting on things they would like to change about their lives and setting goals for the future. Every five years or so, you should meet with your estate planning attorney to review any life changes or changes in the law. You should be on the lookout for the following:
We are often asked by potential clients why they should have a will drafted if they do not have a lot of assets or if they intend for their spouse to inherit everything. Below are the top five reasons:
1. To ensure the proper people inherit your property. If you do not have a will, depending on your particular circumstances, your spouse may not inherit everything under North Carolina intestacy laws. Step-children will not inherit under the law.
2. 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 or additional attorney’s fees). 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.
3. To waive bond for the executor. This is very important, because we 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 all sign a document waiving the requirement (again, more paperwork for your loved ones). Without a will, if there are minors or incompetent heirs, they cannot consent, and the bond will be required. Without a will, if the prospective executor is not a North Carolina resident, the court will require a bond, regardless of waivers.
A surety bond company will pay the bond to the court, and all the executor has to do is pay a premium out of the estate. However, the executor has to qualify by filling out an application and having a credit check completed. We have seen cases where the executor did not qualify due to their financial situation. We have seen cases where there were minor heirs who could not consent to waive the bond and the executor was out of state. All of this could be avoided by a will.
4. 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. It can result in costs almost three times as high as a simple probate. With a will, however, you can stipulate that you are giving your executor the power to do certain acts without getting the court’s permission. Again, this is saving your loved ones a lot of time and their potential inheritance.
5. 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. Unless
you are stricken with a terminal illness, the only way to name a guardian for your children in North Carolina is to do so in a will.
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