The What, Why and How of Estate Planning in North Carolina

estate planning in North CarolinaToday I wanted to get back to the basics and do a quick post on estate planning 101. Estate planning in North Carolina is different than in other states. Sometimes, with all the news and information that is floating around out there, people forget the basics about what estate planning is, why they need an estate plan, and how to go about getting one.

Estate Planning in North Carolina… What is it?

An estate plan is, at its core, a set of legal documents that can be used to protect you and your family in the event of your incapacity or death.

When we are talking about an estate plan, we are usually talking about the following documents:

These are the basic documents that go into many estate plans. But here at The Hart Law Firm, we don’t stop there. There are some additional documents and services that we include with our estate plans, which include:

So now that you know what an estate plan is, let’s dig into why estate planning is necessary.

Why Do You Need an Estate Plan?

I’ve written entire blog posts on why estate planning is important. And depending on the stage of life you are in, estate planning may serve a different purpose for you than it would for other people in a different demographic.

Here are just a couple of the ways that an estate planning may help you.

If You are a Parent of Minor Children

If you are a parent with minor children at home, and you don’t have an estate plan in place, you are putting your kids in serious jeopardy.

This is because not only do they run the risk of being taken into protective custody with someone they have never met and don’t know if you (and your spouse) became unable to care for them, but there are also financial and legal considerations to leaving an inheritance to a minor child.

Many parents leave their spouse as the primary beneficiary and their kids as the secondary beneficiary on their retirement plans and life insurance. But if a minor child were to receive a sizeable inheritance, there is a good chance that much of this would be eaten away by the process of having this money looked after by the courts so long as they are a minor child.

And not only that but as soon as they turned 18, the money would be deposited directly into their bank account with no supervision. I don’t know about you, but if I received a large inheritance when I turned 18 I can’t say for sure that I would still have that money today.

If You are a Business Owner

If you are a business owner, an estate plan is an absolute must. You need to develop a business succession plan to assist in transitioning the business in the event that something would happen to you.

An estate planning attorney can help with this.

A business succession plan will typically involve a buy-sell agreement to ease the transition of the business, as well as some sort of life insurance to compensate your beneficiaries for the value of your business.

You also need to plan for what would happen in the event of your incapacity. Do you know who would take over the business? Could it continue to run in the event that you are unable to run it? These are difficult questions to answer, but an estate planning attorney can help.

Are You Getting Ready to Retire?

As people get older, the likelihood that they can purchase long-term care insurance will decrease substantially. This is because the premiums will become too expensive, or you will be outright denied for coverage.

At this point, you may want to start thinking about how to safeguard your assets so that they would not be eaten up by the cost of nursing home care, should you need to be placed in a nursing home.

This is where Medicaid planning comes in. And the thing about Medicaid planning is that you need to start early. When you apply for Medicaid to assist with the cost of nursing home care, you can only have $2,000 in assets to your name.

How you get to that point requires the assistance of a lawyer to help you plan how to give away or otherwise transfer your assets out of your name and into a trust or other non-countable entity so that you can still control your assets and where they go, but they will not get spent down just so you can qualify for Medicaid.

So hopefully this brief overview gives you a better understanding of why you need an estate plan, and what could happen if you don’t plan.

How to Create an Estate Plan

Well, thankfully, this is the easiest part!

We make it easy for clients to meet with us through a no-cost wealth planning session. During that meeting, we will go over your personal situation, address any potential issues with your current plan (or lack thereof), discuss what would happen in the event of your incapacity and death, and start to plan out an alternative future with a plan in place.

If you like what you hear, and we are able to answer all of your questions, then we can start the process of creating a plan that uniquely serves the needs of your family in your personal situation. If you are happy with your current situation, then you walk away with no obligation.

It’s just that easy.

How to Get Started

To schedule your no-cost wealth planning session, you can call our office at (919) 460-5422 or fill out our online contact form.

We are currently booked out about 2-3 weeks, so the sooner you call, the sooner we can start the process of helping you to create your estate plan and protect your family and children, your business, and your wealth!

Estate Planning 101: The Basics of Estate Planning in North Carolina

estate planning in North CarolinaIt’s amazing how many people don’t understand what estate planning in North Carolina is, or the many benefits and peace-of-mind that a carefully thought out estate plan can bring to you and your family. Having a complete and thorough estate plan in place is an amazing gift to your family and children.

Unfortunately, most people think that estate planning in North Carolina is simply drafting up some legal documents, such as a will or a trust, throwing those documents in a drawer or file cabinet, and checking “estate planning” off the list of things that they have to do.

Nevermind that those documents you just finished up are stale from the moment you signed them.

In this article, our goal is to help you understanding the estate planning process in North Carolina. Although our law firm is located in the Town of Cary within Wake County, the basic tenets of estate planning are the same regardless of where you live in North Carolina.

What is Estate Planning in North Carolina?
Estate planning is the process of making a plan that distributes your estate to the people and organizations that you want to receive those assets after you die or become incapacitated. In other words, putting together a set of written instructions that dictates who will receive the assets in your estate after you die, what they will receive, and when they will receive them.  An effective estate plan is one of the most important gifts you can give to your loved ones when you are no longer here to take care of them on your own, and it’s legacy will last long after your time on our planet has ended.
Does Everyone Need an Estate Plan?
That really depends on your personal circumstances. Many estate planning lawyers would say that yes, everyone needs an estate plan. But that isn’t always true. However, everyone has an estate. And the more money and assets you have, the more likely you are to need an estate plan. We do recommend that anyone who has minor children make sure to put together a protection plan.
What is an Estate?
Your estate is composed of everything you own, including your car, home, bank accounts, furniture and all of your personal property (i.e. jewelry, tools, camping gear, etc.). Your estate will also include your retirement accounts and life insurance.
Who Should Do Estate Planning?
We find that the people who most benefit from planning with our firm fall into one of more of three types of people:

  • They own a house
  • They have minor children
  • They have cash investments (non-retirement) of more than $100,000

If you fall into one of the three categories above, you should give careful consideration to having your estate plan done.

What if I die without an estate plan?
If you die without any estate planning documents in place, then your assets will pass to your heirs through North Carolina’s intestacy laws. If you are married, then your children would stay with your spouse. If you are a single parent, then your children would be placed in the care of child protective services until a court decided who would become their legal guardian. If you left money to your minor children through your life insurance policy, the probate court would monitor the spending of those funds and appoint a guardian to manage your children’s money.
What if I become incapacitated without an estate plan?
If you become incapacitated without any estate planning documents in place, nobody will be able to access any of your financial assets, manage any of your property, or make any health care decisions for you without a court order. Your family will probably have to hire lawyers and file a costly court proceeding called a guardianship to get court approval to manage your affairs, including applying for disability benefits if appropriate. Becoming incapacitated without a plan in place is often worse than passing away without a plan.

We Believe that Estate Planning is more than just dividing up “Stuff”

Many people forget that there is much more to estate planning than just dividing up your estate. When you meet with a North Carolina estate planning lawyer to design a plan, here are just a few of the topics you will discuss:

  • Legacy Planning. Deciding how to pass along your intellectual property, including your values, stories, ethics, etc. Be aware that many lawyers ignore this very important part of the estate planning process.
  • Disability Planning. Reviewing what would (or should) happen if you become disabled or incapacitated.
  • Guardians for your Children. Who will serve as both temporary and permanent guardians for your children in the event of your death or incapacity.
  • Inheritance Protection. How to protect your children’s inheritance from their own creditors or divorce.
  • Insurance Planning. Determine the proper amount of insurance you will need to provide for your family if you die, become temporarily disabled, or have an extended illness or injury.
  • Probate and Tax Planning. Mapping out a strategy to minimize taxes, court costs, and legal fees when the time comes to implement your plan.

And this is the tip of the iceberg. It’s no wonder you need an estate planning lawyer to help you navigate it all and make these decisions!

Who Do We Help?

One of the biggest mistakes we hear from people all the time is that they think estate planning is only for old people or people with millions of dollars.

This is simply not true.

One of the largest groups of at risk people is young families. These are people who are young and feel invincible, but they also have minor children at home who they are responsible for. If you fall into this group, it is imperative that you take a look at our free report entitled “The Hidden Danger Facing Your Children“.

Click Here for Your Free Report

It is tremendously important that young families put a plan in place to protect their children. If something were to happen to either or both of you, this free report will explain what could happen to your children.

But this is just one subgroup of all the other people who will need estate planning, including:

  • People nearing retirement
  • People in blended families
  • People with enough assets that planning for estate taxes becomes an issue
  • LGBT families
  • Single adults
  • Newly married couples

Honestly? Everyone needs an estate plan. If you are reading this, YOU need an estate plan.

The Consequences of Failing to Plan

There is still a large segment of the population that desperately needs to put an estate plan in place, but for whatever reason, they refuse to spend the time or money to call an estate planning lawyer.  Here’s a quick rundown on what will happen to you and your heirs if you should die or become incapacitated without a proper plan in place.

If you die without a will in North Carolina

Every state has a default plan for people who fail to do their own estate planning. They are called “intestate laws”. If someone dies without a will, they are said to have died intestate. We put together an entire blog post on what would happen if you die without a Will. Here’s a quick summary.

After you passed, someone would step forward and file a probate case for your estate. They would let the court know that you died without a will. (Probate cases without a will are more expensive to file, FYI.) The court would then appoint a personal representative (also know as an executor) of the estate, who would likely be required to post a bond.

The personal representative would begin the process of trying to find out what you owned, who your heirs were, and how everything should be distributed according to the intestate laws of North Carolina.

Here in North Carolina, how your property is distributed depends on whether you were married, for how long you were married, and how many heirs (i.e. children or grandchildren) you have. If you have a spouse but no children, your spouse gets everything. If you have children, but no spouse, then your children get everything. And if you leave behind a spouse AND children, then they will split up the probate property. The more children you have, the smaller the share for your surviving spouse.

If you left money behind that is required to be distributed to your minor children, either through intestate laws or by naming them as beneficiaries on your retirement accounts or life insurance, then the court would oversee those assets until your children turned 18. The court would appoint a guardian to manage those funds on your children’s behalf.

Finally, if you left behind minor children without an estate plan that named emergency guardians, and their other parent was not able to care for them, then your kids would be taken into protective custody until a suitable guardian has been named.

Because you didn’t plan, you would not have any input into who this person would be.

If you are disabled without an estate plan

Many people think that estate planning is only for planning what would happen when you die. The fact is, it can be much harder for your family if you become incapacitated without a plan in place.

For example, say that you own a joint house and joint bank accounts with your spouse. If you become incapacitated with no estate planning, you cannot sign off on any transactions that involve your house of your bank accounts. That means your spouse can’t cash that joint tax refund they just received, and they can’t sell or take out a second mortgage on the house, even if they needed those funds to care for your disability. In addition, applying for much-needed disability benefits would be problematic without having the legal authority take any action on your behalf.

This is because you can only transfer titled property or apply for government benefits with a signature or a court order. When you become incapacitated, your spouse can’t get your signature, so he or she is forced to file an expensive, public, and time-consuming guardianship proceeding to get the court’s permission to manage those assets or apply for benefits on your behalf.

What are the benefits to proper estate planning?

The clear benefit of proper estate planning is that you can control your estate and make decisions about what will happen to your loved ones after you die or become incapacitated. You can name both temporary and permanent guardians for your children. You can provide your spouse with a mechanism to sell or mortgage the marital home if they needs the money to pay for your care.

Here are some other benefits to estate planning:

  • Your assets remain private and out of the public eye
  • You are forced to get your financial house in order and organize all of your relevant financial information into one single file so that your family will have access to it when they need it
  • You will enjoy immediate “peace of mind”, knowing that you have made all the important decisions about how your loved ones will be taken care of if something were to happen to you
  • Your assets are protected from your children until they are old enough and mature enough to manage their inheritance on their own
  • You can name a guardian for your pets, thus providing them with a loving home so that they don’t end up at the pound or animal shelter
  • You may appoint someone you know and trust to make health care decisions for you if you become incapacitated and are unable to make your health-related decisions on your own

What are the Elements of an Effective NC Estate Plan?

Now that you know what an estate plan is, whether you should prepare an estate plan, and what happens if you die or become incapacitated without an estate plan in place, let’s discuss what a typical estate plan looks like.

Foundational Document #1 – Your Will

When most people think of an estate plan, they think, “I need a will”. This may resonate with you. But a will only one component of an effective estate plan.

What is a Will?
A will is a document that provides a set of written instructions to the Probate Court for how you want your property divided.
Can a Will help me avoid probate?
No. If you have a will in place, you will not avoid the probate process. Any assets that are titled in your sole name must go through the probate process before they can be passed on to your heirs. The will is just the written instructions that tell the probate judge how to divide up your assets.

Some states are probate friendly, while others are not. North Carolina is middle of the road. The probate process in North Carolina can be expensive, time-consuming, and a matter of public record.

Because assets that are is titled in your sole name will have to pass through the probate process, this can become complicated if you don’t have a proper estate plan in place. Some of the assets that may flow through probate include: real estate, bank accounts, cars, etc. Some assets can avoid going through probate, including:

  • Jointly owned property or bank accounts (think Joint tenancy accounts);
  • Bank accounts with a beneficiary designation (payable on death or terminates on death); and,
  • Retirement accounts and life insurance that names a beneficiary

However, if you forget to name a beneficiary, or if you name a minor as a beneficiary (as many people do for life insurance and retirement assets), then some of these assets may still end up in probate. Furthermore, if you name a minor as beneficiary, then the court is likely to insist on a guardianship to manage those funds until the minor child turns 18.

A Revocable Living Trust

A revocable living trust is a tremendous estate planning tool for individuals and families that want to avoid probate, while at the same time maintaining control of their assets and keeping their affairs private.

A trust is basically a contract between a trustee and a grantor to manage property for a beneficiary. While you are alive, you play all three roles. If something happens to you (either you die or become incapacitated), the trust will have a set of instructions for who should step in to manage your estate as a “successor trustee”.

One of the main benefits of a trust-based estate plan is that your assets will remain in your trust long after you die or become disabled. Your assets will either stay in your trust or be distributed into one or more new trusts for the benefit of your heirs.

In addition, if you have a spouse, they can step in and take control of your assets without having to request permission from the court. Not only will this save them time, but it can also save your family thousands of dollars.

Other Legal Documents You May Need

I put together another detailed article on North Carolina estate planning. You may want to review it here. It contains a list of 5 additional documents that every estate plan needs.

Is Estate Planning Expensive?

Whether or not you consider estate planning expensive depends on your perspective. Certainly, spending several thousands of dollars to hire a lawyer and put together an estate plan may seem expensive. But if you compare that cost to the peace of mind you will immediately obtain after you sign those documents, as well as the amount of money your family will save in legal fees if they have to probate your estate or file a guardianship for you, then the cost of planning quickly turns into a bargain.

For example, if your assets that have to go through probate, and you have a modest, $300,000 estate, then you are looking at costs of roughly 5%, or $15,000 to probate that estate. If you have minor children, the cost to set up a guardianship through the courts will further drive up the legal fees.

And imagine what would happen if you became incapacitated and your spouse could not access your assets – what would this cost your family? Your spouse would have to hire a lawyer to file a guardianship at a tremendous expense, not to mention that your spouse may be prevented from selling any assets (such as the marital home) without a court order.

If your spouse could not afford to keep the marital home or needed equity from the home to pay for your care, then this becomes a big problem… which is quickly alleviated by doing some basic estate planning.

When is the best time to plan your estate?

The best time to plan your estate is today. Nobody thinks that they are ever going to die or become incapacitated, but unfortunately, we will all die someday. If you have children or a spouse and you haven’t prepared your estate plan, you are quite literally, playing with fire.

Leaving your heirs without an estate plan in place could have a devastating effect on your family. On the flip side, by leaving your loved ones with a well thought out and organized estate plan, you are leaving them with an amazing gift that can set your spouse and your children up for years to come.

If you have questions, you may fill out our contact form or simply call our office at (919) 460-5422. We work with young families in the Triangle Region of North Carolina, including Wake, Orange, and Durham Counties. Our office is conveniently located in Cary, North Carolina, an easy drive to Raleigh, Chapel Hill, Durham, and RTP.