Charlotte Estate Planning Blog

Some North Carolina residents who are creating an estate plan might want some of their assets to go to charity. However, people often use a will or a trust to pass those assets, and this can be a mistake.

The error is because of the types of assets that are passed using a will or trust versus a beneficiary designation. As an example, a person might have three main assets worth $1 million each: an IRA, a home and an after-tax savings account. The person might want to leave $100,000 of the estate to charity and the rest to the children. This could be accomplished by naming the children on the beneficiary designation for the IRA and leaving the home and $900,000 of the after-tax savings to the children and the remainder to the charity.

The death of legendary singer Aretha Franklin has shined a new spotlight for many North Carolina fans on the complications that can ensue from dying without a will. When the 76-year-old star passed away in August after battling pancreatic cancer, she had no will or other estate documents, which could have a significant impact on how her heirs deal with the estate. Her niece has applied to be the executor of the estate while her four sons have declared themselves interested parties before the probate court.

Franklin's estate is estimated to be valued at approximately $80 million. Her lawyer told media that he had advised her to create trusts and other key estate documents in order to reduce estate tax liabilities and ease the transition for her heirs. However, the singer never followed through. If trusts and other instruments had been in place to transfer Franklin's estate outside the probate courts, the details of her legacy would have greater privacy and her beneficiaries greater protection from taxes and fees.

Many people in North Carolina are among the half of all baby boomers and 70 percent of all Americans who do not have an estate plan. All adults need an estate plan regardless of their age or income level.

Estate plans do not have to be complicated documents, but they may be. Some people may want to use the estate plan to leave a gift for charity. In a will, a person can also name a legal guardian for minor children. Some people also may want to include provisions for pets such as who will care for them and where to find the money to do so. Some people include something called a "legacy letter" with the estate plan. This talks about what the person is passing on to loved ones and why. It may also try to convey a sense of the person's values to the next generation.

Many people in North Carolina use trusts as estate planning tools. These types of accounts can provide significant benefits in terms of estate tax planning and give funders a measure of control over how their assets can be used in the future. In order to ensure the security of these accounts, trust creators should understand the associated insurance limits provided by the Federal Deposit Insurance Corporation (FDIC).

The amount of federal insurance coverage hinges on whether the trust is revocable or irrevocable. A revocable trust names beneficiaries who will receive the trust after the owner dies. In the meantime, however, the owner has the right to change or cancel the trust. After the owner's death, this type of trust becomes irrevocable. On the other hand, an irrevocable trust cannot be canceled or changed, and the owner gives up all rights to alter the trust upon its creation.