By Associate Attorney Danielle Nodar
When creating an estate plan, people oftentimes consider their legacy and what they may be leaving behind for future generations. For many individuals, this legacy extends beyond their loved ones and includes considering donations to a charity they have given time or money to during their lifetime, a school or organization that has had a meaningful impact on their life, or a cause that they are passionate in supporting.
There are many methods of including a charity in one’s estate plan. One is naming a charity as a beneficiary in your will or trust. Just like any other asset that is left to an individual beneficiary, the terms of your will or trust designate how and when your assets are distributed for charitable purposes and your executor or trustee will be responsible for carrying out the distribution. When considering what to give to a charitable organization (often referred to as Section 501(c)(3) tax exempt organizations), it is important to remember that your gift can go beyond cash in a bank account, but can include assets like a stock portfolio, artwork, a car, or real estate.
When deciding how to contribute to a charity, an estate plan may also provide you with more options in determining how the donation is used. For example, if your donation is to a charity that fights a certain disease, your estate plan can specify that you want your donation to be used for research. You can also leave the donation to the charity directly and they make the overall decision as to how the funds are allocated.
In addition to the benefits to the charity, there may also be financial benefits to your estate and loved ones by including charitable giving in your estate plan. 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.
Depending on the size of the donation you are planning to make, you may also be able to create a donor advised fund (DAF), which allows you to make irrevocable charitable gifts to Section 501(c)(3) charities while taking advantage of tax benefits during your lifetime. With a DAF, most donors are immediately eligible for a tax deduction upon making the initial donation, donor contributions to the DAF are tax-deductible, and investment growth in the DAF is tax-free. You can also donate long-term appreciated securities without paying capital gains tax.
Another way to include charitable giving in your estate plan is through updating beneficiary designations of life insurance policies, annuities, IRAs, or other retirement plans. You can name a charity as a primary or contingent beneficiary and gift them all or a portion of the funds. While this option may be as simple as updating a beneficiary designation, whether or not is the best choice for charitable giving depends on a variety of factors, including what other assets an individual may have at the time of their death and the value of the asset being distributed through a beneficiary designation. For example, using charitable giving through 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.
When considering your priorities in your estate planning, dedicating a portion of your assets to charitable giving is one of the ways to support causes that are important to you, even after death. Contact Jesson & Rains for assistance with considering your options for charitable giving in your estate plan.
October is National Women’s Small Business Month. Jesson & Rains is proud to represent and work for numerous women-owned businesses. Charlotte is an exciting place for women entrepreneurs. Last year, it was named the “#1 City in America For Female-Owned Business Growth.”
According to Andrew Soergel, Senior Writer for U.S. News and World Report, “[t]he annual State of Women-Owned Businesses Report – which pools data from the Census Bureau and the Bureau of Economic Analysis in determining the financial impact of such ventures – estimates America's total number of businesses headed by women ballooned 21% between 2014 and 2019 . . . . Overall business growth clocked in at just 9% during the same period. Revenues generated by women-led companies, meanwhile, climbed 21% to nearly $2 trillion, while the jobs they created rose by 8% to 9.4 million. Both growth totals eclipse the national average for companies headed by executives of either gender.”
Our very own Jesson & Rains partner, Kelly Rains Jesson, is a board member of the National Association of Women Business Owners (NAWBO). Founded in 1975, NAWBO is “the unified voice of over 10 million women-owned businesses in the United States representing the fastest growing segment of the economy.” NAWBO propels women entrepreneurs into economic, social and political spheres of power worldwide.
Kelly will be co-hosting a complimentary estate and retirement planning seminar with Joe Roseman, Jr. Managing Partner, who will be talking about retirement, at the South County Regional Library.
Sign up today!
*Determine if a TRUST is right for YOU
*Avoid the most common mistakes retirees make with their estate plan
*Reduce future costs and taxes for your FAMILY
*Understand how to avoid letting the NURSING HOME take your house
*Discover powerful retirement and estate strategies you never knew existed
RSVP using this link.
By Attorney Edward A. Jesson
The North Carolina Constitution, and North Carolina statutes, give contractors the right to file mechanic’s liens if they are owed money for completing “improvements” on real property. Improvements are defined in a statute, but generally speaking, anyone who performs work on real property, be it renovations, grading, architectural work, or otherwise, can file a mechanic’s lien in North Carolina.
The purpose of filing a mechanic’s lien is to have the debt owed to the contractor paid by the responsible party (often, the owner of the real property). A contractor has 120 days from the “date of last furnishing” to file the lien. The “date of last furnishing” is simply the last date that the contractor (or architect, etc.) performed work on the real property. It is best to be conservative with this date as courts have ruled in the past that punch list items performed after the date of last furnishing do not push that date out further. The mechanic’s lien has to be filed with the clerk of court in the county where the real property is located and formally served (like a lawsuit) on the property owner and any other contractors that may be affected by the lien. It is important that the lien be properly drafted when it is filed—if there is a mistake and the 120-day deadline passes, you cannot simply amend a lien. Instead, the lien must be released and a new lien filed in its place.
The contractor then has 180 days (again, from the date of last furnishing) to “enforce” the lien. To enforce a lien, you file a lawsuit and ask the court declare that your lien is valid and confirm the debt amount. Oftentimes, a lien enforcement lawsuit will also include other claims, such as a claim for breach of contract. If the contractor is successful, he/she can then request that the court order what is essentially a foreclosure sale on the property to satisfy the debt. If there are other liens attached to the property, like a mortgage, the contractor will have to get in line. The existence of other liens is something to take into account when evaluating the benefits of moving forwards with a lien enforcement action.
In reality, most lien situations are resolved prior to a foreclosure sale, because (1) property owners don’t want their property sold and (2) attorney’s fees may be awarded in the lien enforcement lawsuit. North Carolina’s mechanic’s lien statute contains an attorney’s fee provision that awards attorney’s fees to the prevailing party. That is very rarely the case in the United States (normally, parties are responsible for their respective fees, regardless of whether they win or lose), so it can be a powerful negotiating tool.
If a contractor loses, they may have to pay the other side’s attorney’s fees, which can often total more than the debt owed itself, so it is important to seek the advice of a construction lawyer when evaluating whether you should file a mechanic’s lien.
There are many other factors to consider when getting ready to file a lien, and there are other types of liens that can be filed by subcontractors and others involved in the construction process. Should you have an issue with collecting money from a client or have had a lien filed against your property, please give us a call to help with your issue.
By Attorney Kelly Rains Jesson and Associate Attorney Danielle Nodar
Forming a corporation in the state of North Carolina is pretty easy to do yourself, but that may get business owners into trouble. Numerous corporations exist without any bylaws and without issuing any shares (especially those who do-it-themselves). Failing to complete all the steps can have negative consequences.
A corporation is owned by its shareholders. Shortly after a business is incorporated, it should issue shares to the owner(s). If there are no shares issued, there are no shareholders, and thus no owners. Why do so many business owners fail to complete this step? Probably for two reasons: (1) they don’t know this is the way it works and (2) in order to incorporate, all the Secretary of State’s office requires is that Articles of Incorporation be filed with its office. It does not require proof of bylaws or shares.
Shareholders do not manage the business just because they are shareholders. The Board of Directors manages the business. For small, family businesses, the shareholders and the directors are often the same people. However, these are still two distinct roles. Most business owners that have not issued themselves shares are simply acting like directors of the corporation.
To incorporate, the incorporator (could be a future director, shareholder, or third party, like an attorney) files Articles of Incorporation. North Carolina law states that if no directors are named in the Articles of Incorporation, the incorporator shall hold a “meeting” (can be informal) to name the initial directors. “The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation.” N.C.G.S. § 55-2-06 (emphasis added). The law states that there SHALL be bylaws, not that there MAY be bylaws. The bylaws govern the management and affairs of the corporation. The bylaws state how shares will be issued, how directors will be named/replaced, and how the company is managed.
So why should you care?
First, the liability protection corporation owners enjoy is at risk if you do not follow the corporate formalities required by North Carolina law. You risk having a creditor ask a court to “pierce the corporate veil,” making you personally liable for debts and judgments of the corporation. When a court “pierces the corporate veil,” it determines that the corporation and owner are basically the same, with the corporation serving as merely a shell for the owner to act. If this finding occurs, your personal assets can be used to satisfy corporate debts, which defeats one of main purposes of owning a corporation in the first place.
Second, you will probably not be able to obtain an SBA loan if you do not have bylaws. These loans are backed by government guarantees. The government wants to make sure it is not lending to an entity that has not been set up properly. The SBA wants to make sure the bylaws do not contain provisions that make the loan risky.
Finally, another reason why we talk to our clients about shares and bylaws is for estate planning purposes. When a person passes away, they leave their property to beneficiaries. Shares of corporations are personal property. If a business owner has not issued himself or herself shares of the corporation, what is there to pass to their beneficiaries?
Further, as we explained above, corporations are managed by the board of directors and not the shareholders. Therefore, even if a shareholder owner passes their shares to their beneficiaries, that does not mean that the beneficiary now suddenly starts managing the company as a new director. If you are the sole director of your corporation, who will take over management when you pass away or are sick? The bylaws of a corporation will govern what happens when a director passes away or otherwise becomes unable to act.
We can do some pretty creative estate planning with owners of corporations. We can help them restrict management or ownership of shares to family members. We can ensure that their shares stay out of probate through using trusts, saving their families money.
For assistance with drafting bylaws, issuing shares, and implementing an estate plan, give Jesson & Rains a call!
As the summer comes to an end and we start switching gears, there are some important things to remember for your college student. With the chaos that accompanies getting them back to their college campus, it can be easy to forget about your child's healthcare documents.
It is important to consider asking them to execute healthcare documents naming you agent. Once your child is 18 years old, you may not be able to make medical decisions for them or access medical documents. If you have a child returning to college this Fall, consider giving Jesson & Rains a call to consider your options. It is never too soon to start thinking about being prepared for all possibilities, and you can have peace of mind knowing that you are prepared.
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