Charlotte Estate Planning Blog

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.

Surviving spouses often require additional estate planning

When a spouse dies in North Carolina, most of the focus goes to the estate planning that was accomplished by the recently deceased. This, of course, is appropriate. However, the surviving spouse should also complete an in-depth analysis regarding the efficacy of their estate planning in light of the changed circumstances. This chore is often neglected to the detriment of all concerned.

After the death of a married estate owner, the assets of the surviving partner usually change to some degree. Property or funds may be inherited, or property that was jointly owned becomes solely owned. Couples often do estate planning together and then leave things alone. Particularly in the case of combined families, decisions regarding inheritances may change in the wake of a partner's death. For example, when a surviving spouse becomes the sole heir of an estate, wills must reflect the wishes if the deceased's children should be future heirs. If all assets pass to the next of kin, stepchildren may be left out in the cold contrary to the original intent of the parties.

Using beneficiary designations for charitable donations

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.

How the probate process can affect an estate plan

When people in Charlotte think about estate planning, they may consider where they want their belongings to go after they die. However, in many cases, they may not fully consider how their choices affect their loved ones, particularly when it comes to dealing with probate and estate administration.

While dying without a will may lead to confusion among the family and the imposition of state intestacy laws in probate court, even a well-written will goes through the probate process. When people think about probate, they may be especially concerned about the costs involved, such as attorney, accounting and representative fees. However, non-probate transfers involve professional assistance and related fees as well. While the potential of excessive costs and fees can be a strong spur to make an estate plan, it may not make the difference between will transfers or living trusts.

Star Aretha Franklin dies without a will

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.

A succession plan is good for your small business

North Carolina small business owners know how difficult it is to start a business and make it successful. It takes careful planning and strategy to start a profitable company, but it is also important to plan for the future of your business as well. You can do this by drafting a smart, thoughtful business succession plan.

If you are a business owner, you would be wise to have plans in place regarding the future of your company. You may be years away from retirement or moving on to something else, but having a plan in place can provide security and peace of mind. Many business owners find it useful to seek help regarding the right succession plan for their unique situation.

Steps to creating an estate plan

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.

Tax law changes for trusts and estates

North Carolina residents who are planning for the future may be interested to learn about the ways in which recent tax reforms affect trusts and estates. The Tax Cuts and Jobs Act, which passed in December 2017, has a number of implications for estate planning. In the first place, the law created a $10,000 limit for deductions on state and local income taxes. While there has been some confusion about whether this applies to individuals only, it does pertain to income for trusts and estates beginning in the 2018 tax year.

In addition, trusts and estates with business income from a sole proprietorship, partnership or S corporation qualify under the Internal Revenue Code's Section 199A for a new 20 percent tax deduction. It may be possible to apportion the deduction between the trust itself and its beneficiaries.

Trust accounts and FDIC insurance limits

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.

Tax code changes impact life insurance trusts

There are an estimated 1,800 estates that will be subject to federal estate taxes after the passage of the Tax Cuts and Jobs Act. The legislation increased the federal estate tax exemption to $11.2 million and $22.4 million for married couples. North Carolina residents could benefit from reviewing their estate plan in the aftermath of such a change to the tax code. It may be especially beneficial for those who have irrevocable life insurance trusts (ILITs).

These trusts are designed to help avoid estate, capital gains and income tax liability when money is transferred from a grantor to a beneficiary. However, with the increased exemption, this type of trust may no longer be needed. There are certain steps that a grantor can take when the ILIT becomes obsolete. For example, it may be possible to surrender the policy for a predetermined amount of money.

Email Us For a Response
Orsbon & Fenninger, LLP - Estate Planning

Talk With Us: Schedule A Consultation

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Office Location

Orsbon & Fenninger, LLP
4201 Congress St.
Suite 110
Charlotte, NC 28209

Toll Free: 888-314-8134
Phone: 704-900-3883
Fax: 704-556-9601
Map & Directions

Office Hours: Monday : 8:30am–5pm Tuesday : 8:30am–5pm Wednesday : 8:30am–5pm Thursday : 8:30am–5pm Friday : 8:30am–5pm