Charlotte Estate Planning Blog

Financial preparations for the future

Some people in North Carolina and other states across the United States will reach a point where they are incapacitated and unable to provide care for themselves without some kind of assistance. As people age, Alzheimer's and other health conditions can impact their daily lives, making it difficult for them to make financial decisions. Any kind of accident could result in someone being incapacitated as well, which can happen at any age.

It's important to prepare ahead of time for financial emergencies or decisions that might need to be made. Without a financial plan in place, the court could make decisions regarding a person's belongings and any money that he or she possesses. These decisions might not be in line with what the person had planned for the future. A medical directive is a document that details what should happen if someone is unable to make medical decisions or is facing a situation where a do-not-resuscitate order should be utilized. A durable power of attorney should also be considered as this is a person who will handle all of the financial and health care decisions of the person who is incapacitated.

How to manage assets for special needs individuals

If the parent of a special needs child in North Carolina plans to leave that child an inheritance, it should be done in a strategic manner. Simply leaving the money directly to the child could result in that person losing his or her access to Medicaid and other types of government benefits. One way to protect assets while retaining some type of control over the money is to create a first-party special needs trust.

Once the trust is created, the trustee is the only person who is authorized to handle the money. The person with the special needs would have no authority to revoke the trust without first petitioning the probate court. If there is any money left in the trust when the beneficiary passes on, it must be returned to the government. Alternatively, a parent could setup a third-party special needs trust.

Organizing estate plans

North Carolina residents can take certain steps to make sure that their estate plans are in order. Taking these steps can remove much of the burden endured by surviving loved ones who may have to handle their relatives' estates.

It is important to conduct an inventory of all the assets one may own before creating an estate planning checklist. Individuals should note their real estate, bank accounts, retirement accounts, inheritances they have received, investment accounts and any business ownership they have.

What happens in the probate process

People in North Carolina who have been appointed executors of a loved one's estate as well as those who have lost loved ones might wonder what the probate process is like and how long it will take. Although this can vary a great deal based on the complexity of the estate and any legal challenges, there is a basic structure that many estates will follow.

Several things happen in the first six months. First, the will must be presented as part of a petition for probate, and all heirs and beneficiaries must be identified. There will be a court hearing, and several documents might need to be issued including letters of testamentary and letters of administration. A probate bond may be issued, and creditors will be notified.

Is your estate plan incomplete without a prenup?

You never expected it to happen, but you are on the cusp of your second marriage. This time, you feel like you have found the one, and you are ready to start this new chapter in your life. Entering a second marriage is not something you intend to do with blinders on. If your first marriage ended badly, you may feel it is dangerous to throw caution to the wind.

However, the thought of a prenuptial agreement to protect your interests if something goes wrong leaves a bad taste in your mouth. While you may be like many who fear that signing a prenuptial agreement may jinx your relationship, there are some factors to consider regarding the use of a prenup in your estate plan, especially if you have children from a previous marriage and live in North Carolina.

Tax law may not harm charitable giving

The passage of the tax reform bill in December 2017 has left some North Carolina residents confused about what it might mean for their estate plans. People may be concerned about charitable giving and the estate tax exemption increase and be unsure of what the changes might mean for them.

The Tax Cuts and Jobs Act of 2017 made several important changes. The federal estate tax exemption was roughly doubled for individuals and married couples. Since 99.8 percent of people who die do not leave estates worth more than the exemption, the change will have little impact for most people.

How to tell if an estate plan isn't complete

Ideally, residents of North Carolina will review their estate plans on a regular basis. Failing to do so could mean that it is missing key components such as an advanced medical directive or a will. It could also mean that the plan doesn't have updated beneficiary designations or that assets are distributed outright instead of in a trust. Ultimately, this may mean that a plan is executed against a person's true wishes.

Those who have life insurance policies should make sure that they have not lapsed. It is also worthwhile to see that the policy as written will meet a person's needs today. If not, it should be updated or otherwise improved. Individuals should be sure to spell out who will obtain ownership of any personal items left behind. Items may include an engagement ring or any other objects that have monetary or sentimental value.

Using trusts for adult children

Many North Carolina residents may want to avoid the estate planning mistake of bequeathing their assets directly to their children. Adult children who lack financial maturity could end up squandering direct inheritances.

Parents who want their assets to last for generations should consider having that wealth professionally managed. Even if their adult children are aware of their financial ineptness and seek the counsel of a financial advisor, they might choose a poor money manager.

Possible benefits of avoiding probate

When North Carolina residents die, their assets may need to go through probate. However, there are strategies that a person may employ to skip this process. This may allow an estate to transfer assets in a timely manner, which may provide clarity to beneficiaries as to what they will receive and when. Avoiding probate may also save an estate money.

Those who are keen to protect their privacy may want to transfer assets to a trust or have them titled to a beneficiary. While the terms of a trust are not made public, details of a probate hearing are generally available for everyone to see. It should be noted that some people prefer the public nature of probate as it reduces the odds that an executor or other parties will engage in nefarious dealings.

Do I need to change my will before my divorce?

You signed your will and created a revocable living trust. You established your advance directive plan, including your living will and power of attorney. Most likely, you named your spouse as the primary beneficiary and proxy on these documents as well as on any life insurance, investments or pay-on-death accounts.

With everything in place, you may not have considered how a divorce would affect your estate plan. Whether you have already settled your divorce or you are just taking the first steps, understanding the importance of a thorough review of your estate planning documents is critical.

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