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!
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