Wills & Trusts

Contrary to what you may have heard or read elsewhere, all your assets do not automatically go the State if you should pass away without a Last Will and Testament. Each State has what is called laws of Intestate Succession, which spell out a plan of distribution when you pass away intestate; that is, without a Last Will and Testament. This distribution is generally speaking, to your next of kin, so if you don’t like your next of kin, you should have a Will. If you have a sizeable estate, there may be a need for some planning to take place so as to avoid unnecessarily paying taxes. If you have children or are in a second or subsequent marriage, you may not like how the intestacy laws direct distribution of your estate. The only way to change that is to have a Will. Drafting a Will also enables you to appoint someone you know, to administer your assets upon your death, rather than leaving open the possibility that the Court will appoint a total stranger.

When one dies (or as I like to put it, is “promoted”), they are said to be testate if they have a Last Will and Testament. If they do not have a Will, they are said to be intestate and the intestacy laws of the State of residence, at the time of death, will determine who has an interest in the estate. Someone appointed in the Will to handle the administration of the estate is an Executor if male, an Executrix if female. If there is no Will, the person handling the administration of the estate is called an Administrator if male and an Administratrix if female.

When discussing Wills, I feel the discussion cannot be complete without consideration of four separate documents. These documents are the Last Will and Testament, Durable Power of Attorney, Living Will and Healthcare Power of Attorney. If you are in a non-traditional relationship, such as straight and living with your significant other, lesbian, gay, bi-sexual or trans-sexual, it is very important that you consider executing some, if not all of these four documents, in order to insure your significant other will be spared the indignity and heartache of being denied access to you in your time of need, by family members or others who are less accepting of your life-style choices. If you are married with children, the law of intestacy in North Carolina dictates that the majority of a sizeable estate shall be distributed among the children, while your spouse will receive, in very general terms, only one third of your distributable assets, even less if you have children by a prior marriage.

Last Will and Testament:

The Will is where you set out to whom you wish to leave your assets and the amounts or particular items you desire they have. By doing this, you avoid the automatic implementation of the State’s intestacy statutes. You can leave items based on the Beneficiary meeting a contingency, such as surviving you for a period of thirty days or being a certain age. You can place restrictions on the use of what you leave, by use of a trust to accomplish some specific desire of yours. An example of this is the use of a “Spendthrift Trust”, which protects the assets from creditors of the Beneficiary. In your Will, you can name a Guardian and alternate(s), for your children who have not reached the age of 18 at the time of your promotion. You can and should, name a Trustee and alternate(s), for any trust created in the Will. You can and should, name an individual and alternate(s), to act as Personal Representative of your estate. This person will be responsible for collecting your assets, paying your debts, safeguarding the value of any continuing business or other assets, and to insure the orderly transfer of your wealth to your designated beneficiary(s). You also have the opportunity to waive bond or not, and to designate, what, if anything, the Personal Representative is to be paid for their services. A bond is an insurance policy, paid for by the estate, which insures all creditors and beneficiaries receive what they are supposed to receive, from the estate. Many people feel such insurance is unnecessary, based on their decision regarding who they have appointed to administer the estate.

The fact is, you can pretty much do by virtue of your Will, just about anything you can put into words, except keep it.

Durable Power of Attorney: This is a document used to transfer authority to handle your personal financial affairs, to another person or entity. The authority can be very specific or very broad and everything in between. It can also be limited in the authority it passes as well as limited as to the time when the power of Attorney is effective to authorize another to act on your behalf. For example, you may want your Attorney in Fact to have the authority to handle your affairs immediately, because you are out of town a lot and are unavailable to handle many personal financial transactions. On the other hand, you may desire your Attorney in Fact have the authority to act on your behalf, only if you are incompetent or unable to act. In any event, the document should be recorded with the Registrar of Deeds for the County in which you reside, in order to give your Attorney in Fact, prima-facia validity, that is, so that those who deal with your attorney in fact, can legally rely on the validity of the Power of Attorney because it is recorded.

Living Will: This is a document that memorializes your desire to avoid extraordinary medical procedures that seek to prolong your life when your death is likely to occur anyway or when you have reached that point in your life that you are no longer living, but only existing. Examples of when medical procedures might be withheld are when you are brain dead, when you are in a constant vegetative state, and when you suffer from an advanced stage of an incurable and debilitating disease. Many folks would rather their assets be preserved to pass on to future generations, rather than use them up on a hopeless quest to live forever. The flip side of the coin is that medical advances are being made every day and no one knows when a cure for your particular malady may occur, which cure could give you more time to enjoy your family and friends.

Healthcare Power of Attorney: This document allows you to designate one or more individuals that can be consulted to make healthcare decisions for you when you are in a condition that you can no longer make them for yourself. The document allows you to itemize what types of care you would like withheld and/or the types of care you want rendered to you no matter what. It also provides you the opportunity to designate how it should be determined that you no longer have the capacity to make important healthcare decisions for yourself. The document I use includes an option for Declaration of a Living Will, thereby doing away with the need for a separate document.

The NC Office of the Secretary of State maintains a registry for Healthcare Powers of Attorney, so that medical providers can access your document directly from the hospital. This is very convenient, because you’d have to carry the thing around with you in order for it to be of any use in the event of an emergency. The cost to register the document is currently $10.00 and can be accomplished by accessing the Secretary of State’s homepage, printing off a cover sheet and mailing the cover sheet, together with your Healthcare Power of Attorney and a check for $10.00 to the Secretary of State’s Office as directed on the cover sheet. You will then be issued a registry card with a number unique to you, along with return of your original document. In the event of an emergency, first responders will find the card in your wallet or purse and be able to access your Healthcare Power of Attorney from wherever they have an internet connection. The Power of Attorney has all the contact information to enable medical personnel to reach your healthcare agent(s).

TRUSTS

Trusts are not needed by everyone, but for those with specific needs regarding distribution of their assets, they can be an invaluable tool. Trusts can also be instrumental for tax-planning purposes, although the current estate tax exemption (in the neighborhood of $5,000,000.00) makes the need for sophisticated tax planning, with the corresponding expense, somewhat unnecessary for most people.

Still, there are many reasons for execution of a Trust either included in your Last Will and Testament or as a stand-alone document. Some of the more common uses of a trust are :

‘Special Needs Trust’, for the benefit of someone with severe physical or psychological difficulties who cannot manage finances on their own and/or may be eligible for public benefits.

‘Sprinkling Trust’, used to allow the Trustee to make decisions on the use of your assets for the benefit of your children or other beneficiaries, in a manner more in keeping with how you would distribute your largesse, rather than making a mathematically equivalent distribution to each of your children. With this type of Trust, one can meet the needs unique to each of the beneficiaries, so as to insure all are cared for according to their individual needs and circumstances.

‘Marital Trust’, is an arrangement designed to give the surviving spouse almost total use of the family’s economic wealth, while at the same time, minimizing, to the extent possible, the total federal estate tax payable at the deaths of both spouses.

‘Irrevocable Life Insurance Trust’ The primary goal of this trust is to assure the policy proceeds will not be subject to federal or state death taxation at the death of the insured and/or the spouse of the insured. This trust also provides for or enhances the financial security of the beneficiaries of the trust. The proceeds of the life insurance policy, when paid to the trust at the insured’s death, provide the family with a pool of cash that can be used to loan money to or make purchases from, the grantor/insured’s estate. These funds may also be useful to help defray debt or taxes.

There are a great many more types of trusts and reasons for spending some time planning how your estate, as well as your person, should be handled in the event of death or serious injury/illness. Over the last thirty plus years, I have accumulated a vast amount of experience and training regarding the proper use of these and many other documents to meet your personal needs and desires. I would be happy to speak with you at any time to review your particular situation.

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