Charlotte Estate Planning Blog

Dealing with a recalcitrant trustee

Trusts are often an attractive method for North Carolina estate owners to pass on wealth outside the probate system. However, it is important that people select the right trustees when setting up a trust. Otherwise, the consequences could be significant for the intended beneficiaries. Trustees have a responsibility to manage assets in the interests of the beneficiaries, but some may be neglectful, disconnected or even corrupt.

It's important to choose the right trustees, but beneficiaries can also act to protect themselves if they find themselves dealing with an uncooperative trustee. Beneficiaries are entitled to copies of the trust documents, and they should review the terms in order to gain a greater understanding of exactly what their rights are. Many people think they know about the trusts in their benefit, but they often have not read the documents themselves. When beneficiaries and trustees have different understandings, it can lead to conflicts.

How silent trusts can help people plan for the future

Many people in North Carolina want to pass on their assets to their children, and they may see the advantages of planning early on for wealth transfer. By creating trusts earlier in life, people can not only put their estate plans in place but also reap significant tax benefits. At the same time, many people are concerned that they could actually impact their children's lives negatively by letting them know that a large trust fund will be waiting for them.

In general, trustees responsible for managing a trust have an obligation to inform the beneficiaries of the trust and how it is being administered. This is one reason why many people increasingly opt for silent trusts when planning for the future. When someone creates a silent trust, they explicitly waive the trustee's duty to inform the beneficiary. Therefore, the trust can be created and tax benefits reaped without telling the future recipient that they can expect to receive a trust fund in the future. Many people opt for silent trusts in order to encourage their children or other young beneficiaries to find their own successful path in life without planning to rely on the funds in the trust.

Educational trust considerations for multiple heirs

A parent or grandparent in North Carolina who wishes to fund the education of heirs through an estate plan will need to consider issues like equal treatment and differences in educational costs. Paying for the schooling of multiple heirs could be accomplished by setting up a single pot trust for all of the beneficiaries or separate trusts for each heir.

Pot trusts get their name because they pool the educational funds into a single pot. Unless the terms carefully specify that all beneficiaries are to receive equal funding, beneficiaries might receive substantially different distributions. This could arise when one person goes to a costly private school and another person attends a less expensive public school. Age differences in heirs might favor older beneficiaries as well. The eldest beneficiaries might deplete the funds before younger heirs have a chance to go to school.

How a professional can assist with estate administration

Taking on the job of estate administration is not something to do lightly. While it may seem like an honor if someone names you executor or if the court appoints you to oversee probate, the truth is that estate administration is a tedious and complicated assignment that requires organization and some financial skill.

The work of an estate administrator includes closing out the accounts of the deceased, protecting the estate's assets and ensuring those assets get to the right people. Making a mistake during this process can lead to severe consequences.

How to avoid these common estate-planning errors

There are several common estate planning errors that North Carolinians should be careful to avoid. One frequent mistake is failing to fill out beneficiary designation forms for the assets that require them. These may include retirement accounts and life insurance policies.

Another mistake is setting up a trust but failing to fund it correctly. How assets are placed in a trust depends on the kind of asset. Some may need to be retitled, but there may be other procedures for different assets. Estate owners should be aware that assets with joint rights of survivorship do not pass using a will or a trust.

Giving to charity through estate planning

People in Charlotte who are thinking about making a plan for their estates may be considering how they can integrate their commitment to charitable giving. Many people set goals for philanthropy during and after their lifetimes and hope to create a family commitment to charitable support. There are a number of reasons why people may want to include gifts to charity as part of their estate. For some, they may wish to reap the tax benefits of this approach while others may want to share part of their wealth with a cause they have cared about for many years.

When considering making an estate plan that includes charitable giving, it is important to select the right cause. When people choose a charity with which they've been involved in the past or which has special personal meaning, it can make the gift a more positive experience. This is true both for the donor as well as his or her loved ones. In addition, people may want to set aside specific assets to contribute to charity. Of course, cash gifts can always be an important way to pass on a legacy.

Using estate plans

North Carolina residents may point to the management of taxes as the main motive for creating an estate plan. However, there are multiple other reasons why they should consider estate planning.

An estate plan that is properly developed can help an estate avoid probate. This process can be time-consuming and expensive and will cause the details of an estate to be part of the public record. In order to maintain the privacy of their estates, individuals may include revocable trusts as part of their plans while they are still alive to prevent details of their estates from being disclosed.

Trusts are customizable, fall into two main categories

Trusts are among the most useful tools available for estate planning in North Carolina. They take many forms and can be designed to fit a particular person's situation. The specific structure of a trust determines how it controls assets, how assets are taxed and whether they're protected from creditors. The person who creates the trust is referred to as the settlor or grantor. Once the settlor transfers assets into a trust, they are managed by the trustee according to the trust's provisions.

Broadly speaking, an estate owner can create a revocable or irrevocable trust. With a revocable trust, sometimes called a living trust, the settlor keeps the right to dissolve the trust and take back possession of the assets. For tax purposes in many states, the settlor of a revocable trust remains the legal owner of the assets. Assets in a revocable trust may be open to attachment by creditors. Revocable trusts are similar to wills in that they can be used to distribute assets after the death of the settlor.

What are you asking your executor to handle on your behalf?

Putting together an estate plan may just be one of the most important things you do for your family. During your life, you control how you support and care for them. You can take certain steps to extend that care and support beyond your death.

During the estate-planning process, you will make numerous decisions for your family. Perhaps one of the most important will involve whom you choose to act as the executor of your last will and testament.

Tips for reducing estate tax

Some North Carolina residents may need to employ some strategies to reduce what their estate will owe in taxes. The current federal exemption is nearly $11.2 million, but for estates worth more than that, there are additional options.

People can give away $15,000 per year per recipient, and married couples can give away $30,000. Another option is a charitable lead trust. With a CLT, a charity will receive annuity payments over a certain number of years. When this period of time ends or the person dies, the remaining assets will go to a person's beneficiaries. A CLT can be particularly beneficial option if interest rates are low, and it also allows an income tax deduction for funding the trust. Another option is an irrevocable trust. This removes the assets from a person's estate although it is still possible to direct the management and distribution of those assets.

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