Trying to plan your North Carolina estate? Get the answers you need to protect your family.

A list of the most frequently asked questions in response those who need help protecting their families with North Carolina estate plans.

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  • When Does a Health Care Power of Attorney Take Effect? What Are My Responsibilites?

    A Health Care Power of Attorney does not take effect until the patient's attending physician determines that the patient is no longer able to make informed health care decisions and is no longer able to clearly communicate his or her wishes to health care providers. At that time, the physician will call upon the Health Care Agent nominated in the patient's Health Care Power of Attorney to make medical and health care decisions on the patient's behalf.

    Your Role and Responsibilities as Health Care Agent

    If you are called upon to serve as Health Care Agent, you will be responsible for all decisions relating to my health care, long-term care, end-of-life care, and general well-being.

    Co-Agents

    In some instances, a Health Care Power of Attorney may nominate multiple individuals to serve jointly as co-Health Care Agents. If you are serving with a Co-Agent, then the Health Care Power of Attorney should provide specific guidance regarding how to proceed in the event that you and the other Co-Agent(s) disagree on a matter.

    Authority

    The full scope of your authority is set forth within the Health Care Power of Attorney document, but in general, authority includes:

    • Receiving medical information that I would have a right to receive;
    • Conferring with my physicians and all other health care providers;
    • Reviewing my medical charts;
    • Asking questions and receiving explanations from my health care providers;
    • Discussing treatment options with my physicians and other health care providers;
    • Consenting to medical treatments, tests, diagnostics, or similar;
    • Refusing medical treatments, including expressing my wishes regarding end-of-life care and life-sustaining treatments; and
    • Requesting consultations and second opinions.

    In some instances, you may need to consult with the patient's financial decision maker (Agent under the patient's Durable Power of Attorney and/or Trustee of my Living Trust) regarding financial feasibility of health care, long-term care, or end-of-life care.

    Responsibilities 

    By serving as Health Care Agent, you have accepted a fiduciary duty to act in accordance with the patient's wishes and best interests to the best of your ability. At times, you may need to communicate and coordinate with the patient's Agent under a Durable Power of Attorney or if the patient has a Trust, the patient's Trustee.  To reduce the risk of likelihood of family discord with family members that may not agree with your decisions you should:

    • Carefully read the Health Care Power of Attorney and all supporting guidance that the patient has provided;
    • When making decisions on the patient's behalf, regularly review the patient's Health Care Power of Attorney and all supporting guidance provided;
    • Consult with the patient's attorney as needed to understand your role and seek advice regarding carrying out the patient's wishes;
    • Keep a notebook or record of all decisions made on the patient's behalf regarding the patient's health care and living arrangements;
    • Keep copies of all medical reports or similar documents;
    • Write down the names of all persons consulted with in making a decision such as health care providers, attorney, or similar.

    Potential Questions for Health Care Providers

    Every health care scenario is different. The following list is by no means exhaustive, but hopefully, it provides you with a helpful starting point:

    • How will this care option help the patient improve or feel better?
    • What do you define as a successful outcome for this care option? What is the likely success rate?
    • Can this care option be done on a trial basis and then be re-evaluated? If so, what is the appropriate amount of time for the trial? If the trial does not appear to be successful, are you willing to stop the care at that time?
    • What will this care option mean for the patient's quality of life?
    • If I were to die, how might this affect the patient's death? (e.g., would it potentially require hospitalization instead of home care?)
    • What are the potential side effects of this care option?
    • What care option do you recommend and why?

    Get Started on Your Planning & Peace of Mind

    We can guide you through the steps of creating a comprehensive health care plan and make the process as easy as possible for you and your family. A great place to start if you're looking to learn more is to attend one of our free public seminars or request our report, Estate Planning Pitfalls: The Twelve Most Common Threats To Your Estate & Your Family’s Future. If you'd like to discuss other ways to get started, call us at (919) 443-3035 or complete our online contact form.

     

  • What Is a DNR? What is a MOST?

    Do Not Resuscitate (DNR) Order

    A Do Not Resuscitate (DNR) Order allows a patient  (or their Health Care Agent on their behalf) to refuse cardiopulmonary resuscitation (CPR) attempts if the patient stops breathing or the patient’s heart stops. A DNR must be obtained from a physician and is written on a special form. It is important to understand that a DNR only applies to the decision to withhold CPR and does not apply to other life-sustaining treatments. In North Carolina, this form is color-coded (large red text on bright yellow-orange paper) and should be shared with all of the patient’s health care providers and posted prominently in the patient’s place of residence, such as on the refrigerator, for Emergency Medical Services (EMS). In the absence of a DNR signed by a physician, if EMS is called, they will be legally obligated to perform CPR if the patient has stopped breathing or if the patient's heart has stopped.

    Medical Order for Scope of Treatment (MOST)

    A Medical Order for Scope of Treatment (MOST) allows a patient (or their Health Care Agent on their behalf) to set forth his or her health care and end-of-life care instructions when faced with a life-threatening medical condition. A MOST must be obtained from a physician and is written on a special form. In North Carolina, the MOST form is color-coded (bright pink paper) and should be shared with all of the patient’s health care providers and posted prominently in the patient’s place of residence. A MOST form generally provides guidance regarding whether the following treatments should or should not be administered:

    • Cardiopulmonary Resuscitation (CPR);
    • General instructions regarding scope of medical treatment and whether it should include use of mechanical breathing, intubation, and similar;
    • Antibiotics;
    • Artificial Nutrition; and
    • Artificial Hydration.

    Get Started on Your Planning & Peace of Mind

    We can guide you through the steps of creating a comprehensive health care plan and make the process as easy as possible for you and your family. A great place to start if you're looking to learn more is to attend one of our free public seminars or request our report, Estate Planning Pitfalls: The Twelve Most Common Threats To Your Estate & Your Family’s Future. If you'd like to discuss other ways to get started, call us at (919) 443-3035 or complete our online contact form.

     

  • What Is a HIPAA Authorization? Why Is It Important?

    HIPAA Confidential Patient Health RecordsThe HIPAA Privacy Rule under the Health Insurance Portability & Accountability Act went into effect in 2003 and includes strict rules prohibiting health care providers, health insurance providers and similar from sharing your health information—including prohibiting them from sharing it with your spouse or family in an emergency.

    While the law is well intended to protect our privacy, it has come with the tradeoff of creating cumbersome burdens for family members who may receive the ‘silent treatment’ from hospitals and doctors that will not speak to them.

    When you visit your doctor, you may be asked to sign a HIPAA form including naming an emergency contact. Many think that this is all that is required, but unfortunately, those forms give you a false sense of security. Those forms only apply to that specific hospital or doctor and some may expire after a certain period of time.

    For example, a while back we had a couple visit our office to update their planning. The wife had recently undergone surgery at Rex Hospital. When she had entered the hospital for her treatment, she signed the appropriate forms, including a HIPAA Authorization that Rex was authorized to communicate with her husband. Due to some complications that arose, the woman ended up being transferred from Rex Hospital to Wake Med. When her husband attempted to talk to the doctors and hospital staff at Wake Med they refused to speak with him. The forms that the woman had signed before the surgery were specifically for Rex Hospital and did not apply to Wake Med.

    In addition to issues with hospitals and doctors, HIPAA also can rear its ugly head when dealing with insurance and billing matters. If your Durable Power of Attorney or Trustee needs to contact the hospital with a question about a medical bill or if they need to change your health insurance plan, they also can get stone-walled by the HIPAA privacy rule.

    In addition to a thorough Health Care Power of Attorney and Living Will, we recommend that all adults have a standalone HIPAA Authorization that clearly authorizes your health care providers to communicate with your Health Care Agent, your Durable Power of Attorney, your Trustee, and any other family members or close friends you wish to name.

    Get Started on Your Planning & Peace of Mind

    We can guide you through the steps of creating a comprehensive health care plan and make the process as easy as possible for you and your family. A great place to start if you're looking to learn more is to attend one of our free public seminars or request our report, Estate Planning Pitfalls: The Twelve Most Common Threats To Your Estate & Your Family’s Future. If you'd like to discuss other ways to get started, call us at (919) 443-3035 or complete our online contact form.

     

  • Why Do I Need a Will or a Trust in North Carolina?

    In a previous FAQ, What Happens If I Die Without A Will?, I discussed North Carolina intestacy law and who would receive your property if you were to die without a will. 

    Distribution of your estate without an estate plan is probably not what you would want to happen. The following are my Top 9 Reasons Why You Probably Shouldn't Rely On the North Carolina Intestacy Statues to Carry Out Your Wishes When You Die.

    #1 If You Have Minor Children, the Intestacy Laws Do Not Provide a Means of Appointing a Guardian to Care For Your Children

    When it comes to your children, I’m sure you take precautions as to who cares for them.  You ask around for recommendations of a reputable babysitter.  You research their school districts, teachers, coaches, etc.  So why would you want to leave it to the courts to decide who cares for your children after your death?

    #2 If You Have Minor Children, I Do Not Recommend You Leave Property To Your Children Outright

    Under North Carolina law, children are not allowed to own property.  As such, if property passes to a child directly, either under a will or under the intestacy laws, the courts will appoint someone to manage the property on behalf of your child.  This process can be time consuming, frustrating and costly.  The person appointed must file an annual accounting each year reporting (to the penny) all money into and out of the children’s accounts.  While this might seem like a reasonable protection, the result is that it often binds the hands of a surviving spouse or guardian that is caring for the children, for example, making it difficult to handle such day to day responsibilities such as paying mortgage, utilities, educational expenses, etc.  It is instead recommended that you include a trust for minors in your will or have a separate trust agreement to provide for the management of the children’s property.  Such a document can be drafted to protect your children while still allowing flexibility to the surviving spouse or guardian.

    #3 Problems Frequently Arise In Blended Families

    In families with step-parents or step-children, certain family members that you do or do not want to be included may not receive the treatment you would like.  For example, if you are a step-parent that would like some of your property to pass to your step-children but you have not legally adopted the step-children, the step-children will not receive anything via intestacy.

    #4 Couples Who Don't Have Children Usually Want Their Spouse To Receive Everything

    In my experience, most married clients without children want to leave everything to their spouse.  However, under the intestacy laws, their parents would actually receive a substantial share of their possessions.

    #5 Unmarried People May Not Wish to Leave Everything To Their Parents

    Again, in many instances, unmarried persons would instead prefer to leave assets to their siblings, nieces and nephews, a friend, or a charity. Please note: North Carolina State Law does not recognize the concept of a "common law" marriage.

    #6 The Intestacy Distribution Scheme Does Not Include Charitable Gifts

    Many clients, even if it is only a small amount, like to leave a gift to charity.  The intestacy distribution scheme does not allow for such.

    #7 Heirlooms and Sentimental Possessions May Be Sold

    Often people have special family heirlooms, family vacation homes or other sentimental possessions, that they want to ensure remain in the family and are not sold upon their death.  If the property passes through intestacy, there is a greater likelihood that such property may be sold.  Having a valid will can ensure property treatment of such sentimental property.

    #8 Equal May Not Be “Fair”

    The intestacy statutes lean towards equal division of property to those within the same generation.   For example, equal division among parents if you property passes to your parents, or equal division among children if your property passes to your children.  The reality, for many, is that an equal distribution may not be a “fair” distribution.  For example, parents with adult children often use wills to leave unequal amounts to their children due to particular circumstances.  The parents may choose an unequal distribution because during lifetime they spent disproportionally more money putting one child through graduate school.  Another common reason is that one child may have stayed close to home and taken on the caretaker role as the parents aged.

    #9 Special Circumstances Will Not Be Factored In

    There are many, many reasons why intestacy will not fit most people’s wishes.  Intestacy statutes are drafted with a “one size fits all” mindset, and just like one size fits all T-shirts, the intestacy laws often end up fitting very few people properly.  The laws cannot take into account each person’s particular circumstances, so special situations will not be adequately resolved under the intestacy laws.  Such special circumstances might include the need to provide for a special needs child, a pet, a business ownership interest, a close friend, charity, and so on.

    You Can Do Better!

    Every day we are working with families in the Raleigh-Durham-Cary area to put together plans that preemptively address not only who gets what stuff, but how to carry on your values when you no longer can through services including:

    • Asset Protection to help protect the inheritance your heirs receive from potential divorce, lawsuits, or creditors;
    • Long-term care planning, to make sure you and your spouse can have the best life possible in your later years;
    • Children's Safeguard Planning, if you have minor children, to make sure they don't end up in Child Protective Services if something happens to you unexpectedly; and
    • Special Needs Planning, to make sure your loved ones are cared for when you no longer can provide for them.

    With Estate Planning, things can go very right... or they can go very wrong. For more information on how Carolina Family Estate Planning can help you get it right, call our office at 919-443-3035 to discuss next steps, contact us online, or reserve your seat at an upcoming seminar

  • What is the estate tax exemption?

    Estate Planning PitfallsFor 2019, the Federal estate tax exemption amount—the amount that you can pass free of federal estate taxes—is $11.4 Million.

    This tax law is set to expire on December 31, 2025 and revert to prior the prior level of $5 Million indexed for inflation. The estate tax exemption can also be changed by Congress at any time. As a result, it’s prudent for high net worth individuals to establish estate tax planning to “lock in” the currently high estate tax exemption before the rules change again.

    The applicable estate tax rate on assets in excess of the estate tax exemption is 40%. For example, if your total estate is $12.4 Million, your estate tax exemption can be used to shelter the first $11.4M from estate tax (assuming you didn’t use your exemption during lifetime—see below). The remaining $1M would be taxed at 40% resulting in a $400,000 estate tax bill.

    North Carolina repealed the state-level estate tax effective January 1, 2013.

    Estate Tax & Gift Tax Are Linked

    Keep in mind that the Estate Tax Exemption and the Lifetime Gift Tax Exemption are linked together. Any portion of your Lifetime Gift Tax Exemption used will reduce your available Estate Tax Exemption upon death. For example, if you use $2M of your lifetime gift tax exclusion during your lifetime, then upon death your estate tax exemption amount will be reduced by $2M.

    Estate Tax & Generation-Skipping Transfer Tax (GST Tax)

    When the estate tax was first created, many affluent families (e.g., the Rockefellers, Vanderbilts, etc.) began using trusts to shelter assets from estate taxes for multiple generations by setting up their estate plans such that some assets would “skip” their children and pass directly to grandchildren or younger beneficiaries.  Here’s how it would work: Grandpa realizes that then he leaves his estate to his children, it will be subject to estate tax. And then later, when Grandpa’s children die and pass the wealth down to the grandchildren, it will be subject to estate tax again (as part of the child’s estate). So Grandpa decides that he has enough wealth that he will just leave part of his estate to his children, and then for the rest of his estate he’ll “skip” his children and leave it directly to the grandchildren, thereby sheltering the money from being taxed as part of the child’s estate.

    Congress eventually got tired of these generation-skipping shenanigans and added the Generation-Skipping Transfer Tax to the law books. Essentially, if you leave assets to grandchildren or younger beneficiaries in an effort to “skip” a generation of estate taxes, there is a secondary tax that kicks in to make it as if you had paid estate tax at each generation.

    The Federal generation-skipping transfer tax (GST Tax) exemption is currently the same as the estate and gift tax exemption: $11.4 Million.

    Need to Discuss Your Tax & Asset Protection Planning?

    In our years of experience working with thousands of individuals in the Wake County area, we find that asset protection planning is particularly important if any of the following apply:

    • You own a home and have an estimated net worth of $1M or more;
    • You own vacation property;
    • You own rental property;
    • You are high income-earning professionals;
    • You are high income-earning business owners;
    • You own a business with significant value.

    Don’t leave yourself or your loved ones stuck dealing with the financial aftermath of avoidable taxes, a lawsuit, long-term care costs, or an unexpected tragedy can bring to your family. Contact Carolina Family Estate Planning today at (919) 443-3035 or fill out our online form to speak with someone about registering for a seminar or a Vision Meeting. You may also wish request a free copy Jackie Bedard’s book, Estate Planning Pitfalls: The Twelve Most Common Threats To Your Estate & Your Family’s Future.

     

  • What happens if a person dies without a will in North Carolina?

    North Carolina last will and testament documentWhen someone dies without a valid will, the legal term is that they died intestate. Any property that was owned joint tenants with rights of survivorship, which is frequently the case with marital assets, will pass to the surviving spouse without the need for a court process. Any assets that the deceased owned individually go through a process called estate administration (people frequently call this probate, although probate technically is the process of proving the validity of a will).

    For intestate estates, during estate administration, the court will appoint an administrator (similar to an executor) to handle the process, which includes paying the deceased’s debts, funeral expenses, court and administrative fees before distributing the deceased's assets to his or her heirs. The order in which debts must be paid and the distribution to heirs is determined by the North Carolina intestate succession laws. We’ve provided a summary of the distribution rules below, or you can review the statutes themselves here.

    North Carolina Intestate Succession Laws

    Under the North Carolina statutes, if you are survived by:

    1. No spouse or children, with parent(s) living: Your entire estate will pass to and be divided equally among your parents. If only one parent is still living, then everything will pass to the living parent.

    2. Your spouse and parents, but no children: Your spouse will receive the first $50,000.00 of personal property, one-half (1/2) of the remaining personal property and one-half (1/2) of all real estate.  Your parent(s) will receive one-half (1/2) of the remaining personal property and one-half (1/2) of all real estate.

    3. Your spouse only, no children or parents living: Your spouse will receive all property which could pass under a will.

    4. Your spouse and one child: Your spouse will receive the first $30,000.00 of personal property, one-half (1/2) of the remaining personal property and one-half (1/2) all real estate.  Your child will receive one-half (1/2) of the remaining personal property and one-half (1/2) of all real estate.

    5. Your spouse and two or more children: Your spouse will receive the first $30,000.00 of personal property, one-third (1/3) of the remaining personal property and one-third (1/3) of all real estate.  Your children will evenly split the remaining two-thirds (2/3) of personal property and real estate.

    6. One or more children, no spouse surviving. All of your property and possessions will be divided evenly among your children.

    7. Neither spouse, nor children, nor parents surviving. The intestacy laws provide additional rules for distributing your assets to more remote relatives.   In the event that you have no other legal heirs (i.e., blood relatives), your assets will pass to the State of North Carolina (this is referred to as “escheat“).

    At first glace, these results might seem acceptable, but for many, there are a host of problems, especially if there are minor children, step-parents or step-children involved.   See Problems With Intestacy.

    Read Our Guide, Understanding Estate Administration to Learn More

    Request our guide, Understanding Estate Administration, to learn more about the estate administration process in North Carolina. 

    If you are dealing with an intestate estate in North Carolina, or if you want to make sure your own estate is protected with a valid will or trust, please call us at (919)443-3035, or contact us online. We'll help you identify your next steps, and we will point you in the direction of resources that can help.

  • What Is a Will?

    Estate Planning PitfallsIn North Carolina, a Will, or more formally known as a Last Will and Testament, is a legal document through which you can:

    • Express your final arrangements wishes such as a preference for burial or cremation.
    • Nominate an executor to manage your final affairs after your death and carry out the terms of your Will.
    • Provide instructions for who you want to receive your assets, property, and possessions and the terms of how you want them to receive the assets. This may include instructions for who will receive your home or other real estate, your automobile, furniture and household possessions, bank accounts, and similar.
    • Provide instructions for who you want to receive sentimental items or family heirlooms such as heirloom furniture, jewelry, or artwork.
    • If you have minor children, you may also nominate a guardian to raise your child if you should die before your child becomes an adult.
    •  

    More sophisticated wills may also:

    • Include one or more testamentary trusts—basically “rule books” setting forth the terms of how you want certain assets managed for your heirs. This can be useful if you have young or irresponsible beneficiaries. It can also be used to protect your heirs' inheritance from future potential lawsuits, creditors, or divorce.
    • If you have a loved one with special needs or that is disabled, your will may include a supplemental needs trust to ensure that any potential inheritance does not disqualify your beneficiary from important government benefits that they may depend on.

    We're Here to Help!

    Feeling overwhelmed trying to sort out your options? Many of our clients have told us that they felt overwhelmed when they first began planning, but with our help, we helped them make sense of the options and design a plan to fit their goals. We've empowered thousands of Wake County-area residents to take control of their future with their estate planning and long-term care planning solutions. Download our free report, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family's Future, or call us at 919-443-3035 to get started.

  • What Is a Revocable Living Trust?

    Estate Planning PitfallsBefore we discuss what a Revocable Living Trust is, let’s start with discussing with a Trust is.

    What is a Trust?

    Think of a Trust like a “rule book” that you create. The rule book is attached to a box in which you’ve placed certain items. Within the rule book, you have set forth instructions about how you want the items in the box managed, including who has access to use the items in the box. Within the rule book, you also appointed a referee to enforce the instructions contained in the rule book.

    In legal terms, a trust is a legal entity set up by a “Trustmaker” (sometimes referred to as a grantor or settlor). Within the trust document, the Trustmaker designates a “Trustee” to hold and manage assets on behalf of certain “Beneficiaries” specified within the trust document. 

    What is a Revocable Living Trust?

    A Revocable Living Trust is used to describe a Trust that has certain characteristics—the most obvious being that it’s revocable—meaning that the person that established the trust and change their mind at any time and undo the trust completely.

    Other Common Characteristics of a Revocable Living Trust

    While each Revocable Living Trust may have different “rules”, here are some common provisions of a Revocable Living Trust:

    • You, as the Trustmaker, also appoint yourself as the initial Trustee of the trust so that you can continue to manage and control the trust assets;
    • As the Trustmaker, you have the power to change, modify, or terminate the trust at any time in the future.
    • As the Trustmaker, you can add new assets to the trust at any time or you can take assets out of the trust at any time.
    • A revocable living trust does not require any separate tax filings.
    • You name back-up Trustees to serve in the event that you become incapacitated or die.
    • The revocable living trust specifies what should happen to the trust assets upon your death (this is why many people think of a revocable living trust as a substitute for a Last Will and Testament).

    Other things that can be accomplished through a revocable living trust include:

    • Provide instructions for how your assets should be managed if you should become incapacitated—including providing that the Trustee can use your assets to provide not only for you but also for your spouse or children.
    • Providing instructions for the handling and distribution of sentimental items and family heirlooms.
    • Leave assets to a surviving spouse protected in the event that the surviving spouse gets sued or needs long-term care.
    • Leave assets to a surviving spouse protected in the event that the surviving spouse gets remarried or divorced.
    • Leave assets to children or other beneficiaries protected from future lawsuits, creditors, or divorce.
    • Include provisions to fund educational expenses for your children or grandchildren.
    • Include substance abuse protections in case a beneficiary is afflicted with a substance abuse problem.
    • Appoint a trustee to manage assets on behalf of young or financially irresponsible beneficiaries.
    • Include Pet Trust provisions for the care and upkeep of your “furry family members.”
    • Provide rewards or incentives for certain behavior such as educational achievements, starting or purchasing a business, buying a first home, or similar.
    • Foundational estate tax planning for married couples to ensure that as a couple they pass as much wealth to their beneficiaries free of estate taxes.

    Want to Learn More About Wills & Trusts?

    Feeling overwhelmed trying to sort out your options? Many of our clients have told us that they felt overwhelmed when they first began planning, but with our help, we helped them make sense of the options and design a plan to fit their goals. We've empowered thousands of Wake County-area residents to take control of their future with their estate planning and long-term care planning solutions.

    To get started, register for one of our upcoming seminars, download our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family’s Future, or call us at 919-443-3035.

  • Do I Need a Will or a Revocable Living Trust?

    One of the most common questions we receive is the question of wills vs. trusts and which is “better.” Frankly, if time or money were no object, we’d say that a revocable living trust is a better, more flexible, and more robust tool. However, ultimately, the right tool for your estate plan will depend upon your overall planning goals.

    Many people are led to believe that revocable living trusts are only needed if you’re worried about avoiding probate or if your estate is above a certain size, but revocable living trusts can be used to accomplish many other planning goals.

    Wills vs. Trusts

     

     

     

     

     

     

     

     

     

     

     

     

     

    Wills vs. Trusts

    While it’s not a perfect analogy, the wills vs. trusts conversation is similar to a teeter-totter. Generally, Wills tend to be easier to set up and therefore they cost less, but they also usually offer significantly less protection than a trust may. Revocable living trusts may take more time and expense to set up, but they are used to save time, money, and hassle in the future, often while also providing more robust protection for your heirs.

    The Vision Method

    That’s why we begin the estate planning process with our uniquely designed Vision Meeting. During this meeting, we’ll guide you through an in-depth discussion of your planning goals—including the use of our unique Vision Explorer tool to help uncover potential planning goals that you weren’t aware were even possible. At the conclusion of the Vision Meeting, we’ll discuss potential planning options to meet your most important planning objectives.

    Want to Learn More About Wills & Trusts?

    Feeling overwhelmed trying to sort out your options? Many of our clients have told us that they felt overwhelmed when they first began planning, but with our help, we helped them make sense of the options and design a plan to fit their goals. We've empowered thousands of Wake County-area residents to take control of their future with their estate planning and long-term care planning solutions.

    To get started, register for one of our upcoming seminars, download our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family’s Future, or call us at 919-443-3035.

  • What Are Some of the Benefits of a Revocable Living Trust?

    Estate Planning PitfallsMany people believe trusts are only for the wealthy, but revocable living trusts are about more than just the size of your estate.  Revocable living trusts serve many uses and are an effective tool for reducing lifetime expenses, preserving wealth and protecting your family and assets.

    Here are some of the reasons you may wish to consider including a revocable living trust in your estate plan:

    Privacy

    A will is subject to the probate process and is, therefore, a matter of public record.  Anyone with prying eyes can learn the details of the size and recipients of your estate.  By comparison, a trust is a private document that is not subject to probate, so you don’t have to worry about nosy people snooping in your family’s personal affairs.

    A revocable living trust can also protect your privacy in the event that you come incapacitated in the future by avoiding a guardianship proceeding (see below).

    Simplicity

    Spending a little time with your attorney now can save your family time and aggravation after your death.  The probate process can be expensive, time-consuming and an administrative headache.  A trust, on the other hand, can be a cost-effective solution that saves your family from unnecessary aggravation in their time of grieving.

    Avoid a Time Consuming and Expensive Guardianship Proceeding

    An adult guardianship proceeding is a legal process to determine if you are no longer able to manage your own affairs. If the court rules that you are incompetent, the court will appoint a guardian to manage your affairs--usually a relative. Many refer to the guardianship process as "living probate" because just like probate, it is time-consuming, stressful, and expensive. A well-drafted revocable living trust can avoid the need for a guardianship proceeding by providing clear instructions regarding who has the power to decide if you are no longer fit to manage finance, who you want to step in as successor trustee to manage things on your behalf, and provide the successor trustee with instructions about what to do. This 

    If something happens to you and you don't have the right planning in place, your family’s access to funds for necessary living expenses could be limited.  A properly drafted trust can ensure that the funds will be available when your family needs them.

    Protection From Divorce

    With today's high divorce rates, divorce protection has become an important component of modern estate planning. A revocable living trust can be designed such that anything you leave to your surviving spouse or children is protected in the event that they go through a divorce in the future. While we can't cite a specific study to prove it, we can tell you that anecdotally, when someone dies, it is quite common for at least one of their adult children to go through a divorce with the year or so following the person's death. The reasons vary. For some, death is a reminder that life is too short to spend it being unhappy. For others, the inheritance gave the adult child the financial security needed to be comfortable pursuing a divorce. And in other instances, the son-in-law or daughter-in-law was hoping to take a piece of the pie by divorce.

    Protection From Lawsuits, Bankruptcy, and Creditors

    Similarly, if a trust is carefully drafted it can offer your family protection from losing the trust assets to bankruptcy, creditors or in a lawsuit.  So for example, say your surviving spouse or child causes a fatal car accident and is subsequently sued—their inheritance that you left to them in trust, can be set up in such a way that it would be protected from the lawsuit.

    Control 

    No one knows your family better than you.  A trust can give you more control over how your assets are distributed to family members.  This can be especially important for younger or less financially responsible children.  For some, receiving a large inheritance brings the temptation to spend it on luxury items or brings the risk of long-lost family and “friends” asking for handouts.  Statistics show that regardless of a child’s age or the size of the inheritance, most inheritances are spent within 18 to 36 months of their receipt.  A trust allows you to appoint a responsible trustee to manage the assets of the trust and ensure that assets are not frivolously wasted.  A trust also gives you the power to control the timing of distributions and the circumstances under which distributions will be permitted.

    Continuity

    Especially for estates that include real estate, business interests or stock portfolios, a trust can provide continuity of the management of the asset without disruption or risk of sale in the probate process.

    Taxes 

    For married couples with larger estates, revocable living trusts have the additional benefit of permitting planning to reduce or eliminate potential estate tax liability by maximizing both spouses estate tax exemptions (i.e., the amount that you can pass to your family free of estate tax). When estimating the value of your estate, it is important to remember that real estate, bank accounts, stock portfolios, life insurance policies, retirement accounts, business interests, and all personal property are included in determining the value of your estate for tax purposes.  When you factor in items such as large insurance policies, the size of your estate may be larger than you realize.

    Ease of Creation, Use, and Amendment

    Revocable living trusts are easy to set up and can easily be updated from time to time.  Living trusts are also legal in all states, making them highly portable if you move to another state.

    Reduced Likelihood of Attack

    Due to their private nature and the law, living trusts are less likely to be challenged in court than a will. If they are challenged, the lawsuit may be less likely to succeed since many decisions are made in the trustees "discretion" (which is why it's important to choose the right trustee). 

    Asset Management

    For family members that are less astute at managing finances, a trust allows you to appoint a trustee to manage the assets on behalf of your family.  This can also be useful for managing assets located in a state different from the state in which your family resides, such as real estate or business interests located out of state.

    Remarriage Protection

    For married couples, a revocable living trust can be designed such that upon first spouse's death, the assets are protected in the event that the surviving spouse should remarry. This not only can help protect the surviving spouse (especially if that remarriage ultimately ends in divorce) and it can protect your children and beneficiaries by requiring that when your surviving spouse dies the assets must pass to your children and beneficiaries and don't accidentally end up with the new husband or wife.

    Blended Families & Subsequent Marriages

    Those in blended families and second or third marriages can face unique planning challenges. If you have children from a prior marriage or relationship, a revocable living trust can be designed to ensure that your current spouse will be provided for adequately through regular distributions, but that the trustee will preserve the remaining assets so that they pass to your children rather than your spouse’s family.  The revocable living trust can also be designed such that certain assets or property bypasses your surviving spouse and goes directly to your children--this is a popular planning structure when there is a family vacation home or similar that you want to keep in the bloodline.

    Taking Care of Yourself

    By setting up a trust during your lifetime, you can also arrange for your own well-being if you become incapacitated or incapable of managing your affairs.  This allows you to stay in control of who will decide when and if you are incapacitated, who will then manage your assets, and instructions from you as to how you want your assets to be managed.

    Eliminating the Need For Multiple Probate Proceedings

    If you own real estate is more than one state, then upon your death, a probate proceeding would need to be initiated in each state, which can be time consuming and expensive.  If the property is instead placed in a revocable living trust, out-of-state probates will not be required.  Similarly, even for property located in North Carolina, if the property is located in different counties, then during the probate process, additional filings will be required in each county in which property was located (these are known as “ancillary proceedings”).  Again, if the property is instead owned by your revocable living trust, this can reduce the need for such ancillary proceedings.

    Want to Learn More About Wills & Trusts?

    Feeling overwhelmed trying to sort out your options? Many of our clients have told us that they felt overwhelmed when they first began planning, but with our help, we helped them make sense of the options and design a plan to fit their goals. We've empowered thousands of Wake County-area residents to take control of their future with their estate planning and long-term care planning solutions.

    To get started, register for one of our upcoming seminars, download our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family’s Future, or call us at 919-443-3035.