Do You Need an Estate Plan?

I’m often asked the question: With the federal estate death tax exemption amount so high, do I really need an estate plan? The answer I give is: yes, actually you do!

Your need for an estate plan might be for reasons you have not considered. Let’s take a look:

  • Avoid taxes. The main reason a lot of folks have an estate plan is a desire to save on taxes. In 2019, one may pass $11.4 million during their life or at death without incurring any federal estate “death” tax. If you happen to be married, your spouse has the same exemption amount, and both are portable. Portability means if a spouse dies without utilizing his or her full exemption, the remainder is available to be added to the surviving spouse’s exemption. For most folks, you won’t have a federal estate “death” tax problem. However, this doesn’t give you good reasoning for neglecting to prepare an estate plan.
  • Choose who inherits your assets. This is a key reason! You decide and direct by a legal document how the assets of your estate will pass and to whom. If you aren’t concerned about that and don’t have a will prepared, don’t worry. North Carolina has one written for you! I sincerely doubt, though, you’d like how it dictates where, to whom, and in what quantities your assets pass. Lastly, please consider that your specific instructions should prevent family members from fighting over assets, which leads to discord and alienation.
  • Protect your family if you have young children. It is important and necessary to have a plan in place for the unlikely tragedy of dying young with young children. Your plan will dictate not only how they are provided for financially, but more importantly who will raise them. I’ve found it wise to consult with the potential guardian of your children and get their blessing before naming them in your document.
  • Protect your adult children from themselves. None of us like to admit this possibility, yet it happens. Perhaps they or their spouse is a spendthrift. Maybe they have a gambling problem or might have become addicted to alcohol or other drugs. It could simply be that they aren’t capable money managers. No matter the issue, you can design a plan to see to it that funds are professionally managed and distributed. The plan can help keep them financially solvent.
  • Establish protections for yourself. You can arrange for representatives to be empowered to act in your stead if you become incapacitated or incompetent. When a durable power of attorney and health care power of attorney are created, you select the individual(s) to represent you in those roles, should that become necessary. This way, you’ve already selected who will help you when you are no longer able to make legal or health care decisions on your own.
  • Avoid probate. For some, privacy is an important issue. Different types of trusts can be utilized to protect privacy by avoiding probate. Since a will becomes a public document during probate, anyone can see your plan of asset distribution. On the other hand, a trust is a private instrument and can shield that asset distribution from public eye. This is especially useful if a small, privately-held company and its resulting ownership and organizational structure is outlined in the estate plan.

Great – now you have an estate plan – or maybe you already had one. There is one last item you must do: Keep your estate plan documents up-to-date. It is critical that this is done because laws and legal rules change.

Recently, a properly executed North Carolina will written in 1997 was submitted to the Clerk of Court for probate. However, it wasn’t self-proving, meaning all the signatures had not been notarized. Therefore, at least two of the three witnesses would have to personally verify to the Clerk of Court as to their signature.

Unfortunately, two of the three witnesses had died. To meet this requirement, an individual had to be found who could attest to the deceased witnesses’ signature and appear before the Clerk of Court, or said individual could sign a notarized affidavit to that effect. Needless to say, this caused undue hardship and extra time. It could have easily been avoided with a review of the will and an update to a self-proving will.

Estate planning will always require time and effort. It is vital for the well-being of your family and your own peace of mind. Please contact your advisor to see how we can assist in this important process.

Roger A. James, Jr., JD, CTFA
Partner, Director of Trust


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