North Carolina Estate Planning for Young Families… What you need to know

estate planning for young familiesLike most people, I didn’t give estate planning much thought until my Wife and I got married and started to pop out some babies. And I’m a lawyer! Shame on me… But in North Carolina, estate planning for young families is a hot topic right now because of all the people moving to the area.

But in all seriousness, how do you know if you should have an estate plan? Many lawyers will say that everyone needs an estate plan, but that is not necessarily the case. In my experience, I’ve found that you really need to fall into one of the following three types of people to make estate planning valuable to you.

You must have children, you must have money, or you must own a home. If you don’t have any of these things, then you may not need a full-blown estate plan. Some simple documents (as outlined at the bottom of this article) will probably do the trick for you.

But let’s assume you do have kids, money or a home. Then what do you need to know about estate planning in Cary, North Carolina?

In this brief article, we are going to go over the basics of estate planning for young families specifically, what you need to do to protect your children, some basic information about wills and the probate process, a little more information about trusts, why you probably don’t need to worry about estate taxes, and finally, the 5 documents that you absolutely, positively, must have in place, even if you don’t have a full-blown estate plan.

Sound good? Let’s get started.

North Carolina Estate Planning for Young Families

I like to think of estate planning as a set of instructions that you will leave behind for your loved ones to follow in the event you are no longer able to manage your own affairs, either because you are incapacitated or have died.

Estate planning is especially important for families with young children. Consider for example what would happen to your kids if you and your spouse went out on a date night and never came home. What would your babysitter do if they couldn’t reach you?

Have you left them instructions on who to call?

Do you have instructions in your wallet/purse, in your car, or on your phone for the police?

Do you know who will take care of your children on an emergency basis? What about their long-term guardians?

Nobody likes to think about these things, but they are very real considerations for every young family to think about.

If you don’t make decisions about what you would want to happen to your children, then they could be taken into foster care through child protective services. Your family would have to go through a long and potentially expensive guardianship process, and a judge that you don’t know, who has never met you, would decide where your children would live.

You don’t want that, do you?

Your First Priority… The Children

estate planning for kidsSo your first priority has to be your children. Many lawyers believe that they can just add some guardianship provisions to a will and you are all set. But estate planning for young families carries with it some special considerations.

I believe that some boilerplate guardianship clauses are not nearly enough protection for my clients. I want my clients to be able to rest easy knowing that their children will be properly cared for with the people THEY have chosen to be the emergency guardians.

How do we do this? By drafting up some temporary guardianship paperwork that will instruct the police, were something to happen to you, with whom your children should be placed in the temporary custody and care of.

This paperwork is sent to the temporary guardians we have chosen, along with care instructions and medical releases so that they have everything they need to keep your children safe in the unlikely event that something terrible were to happen to you.

In addition, we provide our clients with the phone numbers of all temporary guardians in laminated cards that they can place in their wallets and purses. Copies of all this information is of course placed in a conspicuous spot at your home for the babysitter to have immediate access to she he or she need it.

What You need to Know About NC Wills and Probate

Probate is the process by which a court (in North Carolina the Clerk of Court is the “judge” for this process) overseas the division of your assets and insures that all your creditors are paid.

Some states are probate “friendly” while other states are not. North Carolina is somewhere in between. If you have little in the form of assets and do not own a home, the probate process would be relatively painless if something were to happen to you.

For that reason, the default estate plan for many people with very minimal assets and no real estate is called a “will-based” plan.

Your will would be submitted to the court, and the Clerk would oversee the administration of your estate. Your will would name a personal representative or executor who would report back to the court on the status of any required payments or transfers.

There is a cost, in both time and money, to probate an estate in North Carolina. This cost typically increases the more complicated and valuable your estate is. In addition, the probate process is public, so the whole world can see what you own and the people you owe money to.

There are a number of ways to avoid the probate process. I discussed some of these in this video discussing transfer on death designations, but be careful, these techniques may or may not be appropriate for your situation.

Does Your Estate Plan Need a Trust?

This leads me to a discussion of one of the best vehicles for estate planning for young families, the trust. A trust is nothing more than a contract between a grantor and a trustee to manage property for the benefit of a beneficiary.

The most commonly used trust is a revocable living trust. With this trust, you (or your spouse, or both of you jointly) will play all three roles. You are the grantor, the trustee, and the beneficiary.

If something were to happen to either one or both of you, then the trust provides for instructions on what is to happen with the money in the trust. By doing this, you can keep all of your trust assets out of the probate process.

This is also a great way to provide for your children if something should happen to you. Make note that you should NEVER leave money or property to your minor children outside of a trust. If you do, then the court would be forced to appoint a guardian to manage those funds and provide reports and accounting back to the court. As you can imagine, this is expensive and does not always fulfill your wishes.

If you are interested in learning more about trusts and whether they may be appropriate for your situation, you can contact our office at (919) 460-5422 to conduct a wealth planning session and learn about all of your options.

Why Estate Taxes are Largely Irrelevant to Most Cary Families

As of 2016, there is a Federal Estate tax exemption of $5.45 million. That means that the first $5.45 million of your assets will pass to your heirs estate tax-free. In addition, there is no estate tax in North Carolina.

For those reasons, many young families do not need to concern themselves with planning for estate taxes.

5 Documents You MUST Have in Place ASAP, Even if You Don’t Do Anything Else

If you have read through this article and realize that you probably don’t need a full-blown estate plan, that’s fine. But chances are that you will need a combination of some of the following documents regardless.

  1. Temporary (Emergency) Guardian Paperwork – This is a set of documents that will give legal authority to an emergency guardian for your children. When doing estate planning for young families, this becomes the single most important information we provide. We typically also recommend that you include a set of care instructions for your children, as well as laminated contact cards to carry in your wallet. The entire point of this paperwork is to make sure your children are properly cared for by a guardian of your choosing until the permanent guardian you selected can take custody of them, thereby avoiding having them taken into protective custody if something were to happen to both you and your spouse.
  2. Durable Power of Attorney – This is a document that appoints someone to make financial decisions on your behalf and becomes effective immediately. It will remain in effect, even if you become incompetent (i.e. think coma), but will expire when you die.
  3. Health Care Power of Attorney – This is a document that appoints someone to make your health decisions in the event that you are incapable of making your own health-related decisions. You can authorize organ donation and spell out when it will become effective – typically when a physician deems you are unable to make decisions on your own.
  4. Living Will – Also called an “advanced directive”, this is a document that spells out what you want to happen to you in the event that you are being kept alive on life support. You can decide whether you want your health care power of attorney to make these decisions or whether you would prefer that your living will override your health care power of attorney.
  5. HIPAA Authorization (for both you and your children) – This authorizes your health care provider to disclose your protected health information to anyone that you specify. It is important that you have a HIPAA authorization for both you and your spouse, as well as for your children so that their health care providers can share information with your selected guardians.

If you have questions about any of this information, or would just like to schedule a legacy planning session with an estate planning attorney at our office, please feel free to give us a call at (919) 460-5422 to set something up.