Orsbon & Fenninger, LLP

Estate Planning and Estate Administration

704-900-3883 Phone
888-314-8134 Toll-Free

Charlotte Estate Planning Blog

How to properly pass on an IRA

North Carolina residents who have an IRA may designate a beneficiary to the account or otherwise include it in an estate plan. How it is accounted for generally depends on who it is going to. It could go to a spouse, which may be beneficial because he or she can simply put the money into his or her own account. Giving the money to a spouse may also be beneficial because that person can delay withdrawals until age 70 1/2.

However, those who don't have spouses significantly younger than age 70 1/2 may be better off transferring the account to a child or grandchild. This is because future generations may benefit from being able to stretch tax benefits throughout their entire lifetime. It is important to note that the "stretch IRA" may not be around in the future because not many people know about it.

Risk mitigation for trustees

As an increasing number of North Carolina residents are establishing new estate plans, trusts are becoming more complex. Today's trusts contain many more assets, including entire businesses. As new trusts evolve, more litigation is occurring to test these plans. It is important that trustees understand their roles and the potential risks of litigation so that they can protect themselves.

Grantors should think carefully before they choose their trustees. They should think about whether the people they are considering will have the time and knowledge required to manage the trusts. If their trusts will include businesses as part of their portfolios, the grantors should make certain that succession plans are also in place.

How to pick the right successor trustee

A living trust can provide many benefits to North Carolina residents. Part of creating such a trust is naming a trustee. While this may seem like an easy thing to do, it does require some thought and planning. In many cases, the person who creates a trust will be the trustee. If the settlor is married, both spouses may be named co-trustees.

It may be beneficial to name a successor trustee in the event that both spouses pass away. Typically, this person will be a child or a friend. It may also be a fiduciary or a financial institution. Naming a child as a successor trustee may be ideal because a son or daughter may best understand a parent's wishes. If desired, multiple children may be named to act as successor trustees.

Educational trusts and estate planning

Parents and grandparents living in North Carolina are often concerned about the cost of higher education. These individuals often seek out ways to begin saving and investing early so that their children and grandchildren will be able to pursue their educational goals and not graduate with burdensome debt.

One savings option that is commonly used is a 529 plan, an educational investment account that offers attractive tax benefits to the contributor. While these plans can be a wise move for many middle and working-class families, there are some drawbacks. The first is that there are limits to the contributions that can be made to these accounts. Secondly, the funds can only be withdrawn for educational purposes, which may not always meet the needs of the beneficiaries.

The uses of a funeral trust

People in North Carolina who are creating an estate plan might want to consider a funeral trust. If a person has enough money to pay for long-term care and funeral expenses, a funeral trust might not be necessary. A person may also opt instead to have a life insurance policy to cover funeral expenses. However, a funeral trust can be a way for a person to make arrangements that will prevent the family from having to make difficult decisions while they are grieving. It may also be a good tool for people who have not yet put their wishes for a funeral and burial in writing.

A funeral trust may be revocable or irrevocable. The advantage of a revocable trust is that it can be changed or cancelled by its creator. However, an irrevocable funeral trust offers protections that a revocable trust does not. For example, the funds in an IFT might be considered eligible expenses when a person needs to spend down assets in order to access Medicaid services. This means that the money in the funeral trust would be exempt from the requirement that it be spent.

Avoiding estate taxes on life insurance

With good planning, North Carolina residents may be able to deal with life insurance policies in a manner that minimizes estate tax consequences. Proper planning can help in this regard.

People purchase life insurance in order to offer financial protection for their loved ones in case they die unexpectedly. If they leave their benefits to their spouses, the proceeds will pass outside of their estates and without federal taxes. If they leave their proceeds to their children or to a non-spouse beneficiary, the proceeds will in most cases be considered to be part of their estates and subject to tax under certain circumstances.

Creating trusts in blended families

North Carolina couples who are creating an estate plan and who have children from previous marriages might be concerned about making sure that children are treated equally. For example, one woman married a man who had two daughters. In the original version of the estate plan, a trust was set up. The man owned two properties, and according to the terms of the trust, the home that the two daughters had grown up in went to them. His spouse would receive the other property. All other assets would go to the surviving spouse, and on the death of both spouses, all assets would be split 50/50.

However, several years later, the couple bought a new home and had a son. The couple decided to revisit the trust. The man's concern was that on the death of both of them, in addition to getting one-third of his father's part of the trust, the son would get the entire portion of his mother's trust. The mother felt this was fair, but the father did not.

Using a trust in an estate plan

People in North Carolina who are creating an estate plan might think that a trust is just for wealthy families. That is not accurate, as they can be used in a number of ways. For example, a special needs trust allows a disabled loved one who is receiving government benefits to be supported while continuing to get those benefits. A spendthrift trust will manage assets for an irresponsible beneficiary while a charitable trust donates money to charity.

One of the simplest types of trusts to create is a Totten trust. An example of a Totten trust is a bank account with a beneficiary, and establishing it may be as easy as completing paperwork that names that beneficiary. A bypass trust can be used to help reduce estate tax liability for married couples.

Planning well for your exit from your small business

Small business owners know that it takes an incredible amount of time, effort and planning to start and sustain a business operation of any kind. You may have put an enormous effort into starting your company, but you should also plan how you want to dissolve or leave it one day. Whether you wish to eventually close, retire or sell, it is wise to plan today for a problem-free future. 

Business succession planning is an important step for every North Carolina business owner, yet many do not think about including this as part of their complete estate plan. Having these plans in place will not only help you in the future, it can be beneficial in the event of your expected passing or sudden exit from the business.

Tips for making beneficiary designations

Some North Carolina residents may have filled out beneficiary designations for their retirement account along with a lot of other new hire paperwork. They may not have carefully considered their choices, or it could be time to make changes to those designations. There are other assets, such as taxable brokerage accounts, that also are passed on with beneficiary designations. A person should take a number of things into account in choosing beneficiaries.

There should be contingent beneficiaries in addition to the primary beneficiary, and it is also possible to name multiple beneficiaries and divide the asset between them. For retirement accounts, a spouse may be the best choice as a beneficiary because there are special benefits such as the ability to roll the proceeds into an IRA. Whatever the choices, it is important that they work as part of the larger estate plan. Beneficiary designations override instructions in a trust or will.