If there is an organization or charity that you support financially, as a Cary trusts lawyer, I would urge you to consider setting up a charitable trust.  A charitable trust allows you to give money to an organization whose work you admire and support, but there is also an additional benefit in that you may be able to reduce your estate taxes.

One way that people use charitable trusts is to set aside assets to produce income while they are alive, with the remainder going to charity when they pass away.  This allows them to receive tax benefits while they are still living from a gift that will be made when they die.  In this scenario, both the donor and the charity will benefit.

There are two main types of charitable trusts.  They are:

• Charitable lead trust. You can use a charitable lead trust to make a series of payments to a charitable organization while you are alive.  At some point in the future the remaining assets in the trust either given back to you or transferred to someone that you select as beneficiary.  In a way, the donor is lending the assets to the charity for a period of time during which the charity can use the income produced by the assets.

• Charitable remainder trust. In this type of trust, you set up two sets of beneficiaries called income beneficiaries and remainder beneficiaries.  The income beneficiaries, typically the trust owner and/or his or her family, receive income from the assets in the trust during their lifetimes.  When the beneficiaries pass away, all remaining assets are given to the charity who is the remainder beneficiary.  This option has the added benefit of missing estate taxes entirely.

The rules for these types of trusts are very complex.  If you are interested in charitable trusts, I encourage you to seek out a qualified trusts attorney and tax advisor who can guide you through the process.

The death of a loved one, particularly if the deceased is a spouse or parent, is one of the most difficult periods in a person’s life.

At a time when the survivor is already struggling with loss and grief, the administration of the deceased’s trust can be an overwhelming and daunting task. That is why many beneficiary/trustees choose to “leave things the way they are” and ultimately take no action regarding the administration of their loved one’s estate. This is especially true if the trustee is the same person as the beneficiary.

Again, sheer overwhelm is one reason for this, but beneficiaries/trustees also hesitate to administer their loved one’s estate out of fear they will encounter expensive legal costs, endless probate, or tax situations they may not be equipped to handle. Whatever the reason, people have been known to delay for months, or even years. Unfortunately, most of these beneficiary/trustees are unaware of the legal and fiduciary responsibilities of their position.

As a trust administration lawyer in Cary, part of my job is making sure my client is thoroughly informed about what to realistically expect from the trust. Most clients appreciate that assets held in trust are much easier to administer and distribute after death than through the probate process, but they also need to know that the successor trustee is required by law to do many things before the distribution of assets can occur.

As the requirements and obligations for trust administration can vary from state to state, it is important to be conscious of the role and the responsibilities for the beneficiary/trustee in Cary.  Duties include, but are not limited to the following:

• Notifying beneficiaries
• Valuation and Liquidation of Assets
• Paying Debts and Taxes of the Trust
• Filing Tax Returns
• Distribution of Remainder of the Assets to Beneficiaries

Additionally, it is compulsory for the trustee to follow the accounting and reporting requirements of the state and courts, and to be responsible for defending the trust against all claims of creditors or excluded heirs. Although the trustee may be unacquainted with all of these duties, an experienced trust lawyer knows exactly what is involved and can prepare forms and guide the administrator through the process.

That’s why for many people, having a lawyer who handles trust administration on their side makes this difficult time go more smoothly and eases the administrative burden of having to close out a loved one’s estate.   If you are now in this position and would like further information about how our firm can help you, please feel free to give our office a call at 919-443-3035 and ask to schedule a complimentary consultation.

In some circles, “probate” almost feels like a dirty word.  There are plenty of reasons that a person may prefer to skip the probate process, when possible, but it is a fact of wills and trust administration.  The details of probate can vary somewhat from place to place.  For example, probate in California will likely be different than probate here in North Carolina.  There are such differences, in fact, that separate proceedings are necessary for an individual with estates in both states.  This means that involving a probate lawyer from Wake County is usually the best choice for those who are local.

The process of probate is used to ensure that an individual’s estate is being administered in a way that conforms  with probate laws.  This is one of the reasons that a qualified probate lawyer can make such a difference.  He or she can help family members and other heirs navigate the process and ensure that all steps are being completed properly.

Many of those who engage in estate planning do their best to avoid probate by creating a living trust.   This helps to set out their wishes in advance and allows for a trustee to follow through on those wishes when the time comes.  Those who simply have a will and those who have not planned their estates at all will have their assets go into probate.

One of the biggest concerns about probate is the fact that it is a public affair.  Because the will or estate goes through the court system, the information that arises is available to the public.  While this may not be a major concern for some people, others prefer to keep matters of money, property, and inheritance private.

Another common concern is cost.  Between court costs, executor commissions, legal fees, bonds and other expenses that come up during the probate process, it is not uncommon to see these expenses eat up to 3 to 5% or more of the estate.  For some families, these fees are negligible, but in many cases, these costs significantly affect the overall inheritance.

Finally, if you are involved with an estate that is going into probate in Wake County it is important to be aware that it can be a lengthy process.  An accounting must be done of all the assets, creditors must be contacted regarding any money owed, and assets may need to be sold off.  All of these things take time.

A good probate lawyer can help make this process smoother.  He or she will also understand the concerns of those involved and will keep clients up to date and informed on the status of their case.

At Carolina Family Estate Planning we are here to assist you with your probate and estate administration needs.  It is our goal to make navigating the complicated world of probate as easy as possible and help you carry out the wishes of your deceased loved one.   If you have specific questions or you are not sure how to get started with the probate process, please give our office a call at (919)443-3035.

As a wills lawyer in Cary, it is always gratifying to see clients who are both able and willing to use their assets to support their favorite cause or charity through a will or trust.  Even small gifts can have a large impact, and many people are taking this into consideration during their estate planning these days.  Working with a reputable wills lawyer in Cary can help you ensure that you are meeting the necessary requirements so that your gift, no matter the size, will have the most impact.

There are countless reasons to designate a charity when planning your will.  In many cases, the individual simply wants to use some of his or her estate to further a cause that is near and dear to his or her heart.  This can come in the form of a financial contribution, the transfer of real estate, or even the donation of personal items that will further the charity’s mission.

From a more pragmatic point of view, some people choose this route in part because of the tax-exempt status of most nonprofit organizations.  They know that their gift will not be subjected to “death taxes” or other laws that would decrease the overall value of what they have to give.  What we have created or earned during life is a significant source of pride, and many people derive more satisfaction from knowing that it will pass fully to their charity of choice.

Some of the most common ways to remember a charity in your will include:

• A specific sum of money
• A certain class of property, such as stocks
• A specific asset such as an automobile
• A percentage of the “residue” after other items have been distributed to beneficiaries
• The remainder after debts, expenses, and bequests have been made
• A contingent bequest (if a beneficiary does not survive you, his or her portion would go to the charity)

There are specific rules and regulations that must be followed to guarantee that your gift will make it smoothly into the hands of the intended recipient.  For example, it is helpful, if not necessary, to identify the organization by its full legal name.  There is also some typical wording that can help make your wishes clear and easy to follow, as well.  Again, an experienced wills lawyer will be able to guide and direct you in the process.

The following article originally appeared in an issue of The Daily Plan-It, a free newsletter provided courtesy of Carolina Family Estate Planning to Triangle-area financial professionals.  If you are a financial professional that would like to learn more, please click here to request a subscription.

The Tax Relief Act of 2010 is a short one. Most advisors are clear about what the law provides. This legislation jumped the gift-tax exemption from $1 million to $5 million, which means clients can now gift the greatest amount ever without paying out-of-pocket dollars on gift taxes. Before now, transferring significant assets could require complex strategies.

Time Moves Fast

Regardless of what you predict will happen after the next presidential election, the question is, why wait until then? The window to help your clients transfer wealth is now. These changes expire after the close of 2012, so the window in which to act is limited. This can be a golden opportunity, but there are some things your client needs to understand.

Work around Old Clauses from Old Laws

Certain types of clauses in older estate-planning documents can, under the new rules, have undesired consequences.

For instance, let’s say your client and his/her spouse have a $4 million estate owned equally. The client’s Will, prepared referencing the prior 2001 Act, might call for “an amount up to the federal estate-tax exemption” to be transferred to a Trust for the benefit of children, with the balance passing to the spouse. The exemption in 2001 was $675,000, so if your client died that year with a $2 million estate, the former amount went to the Trust, and $1.3 million went to the spouse. It’s different now that the estate tax exemption has jumped to $5 million. If your client dies tomorrow with a $2 million estate, the same wording would deliver all of that money to the Trust. The spouse could get nothing. The lesson here is this: Revisit those old plans now!

What About Dynasty Trusts?

The new rules also make certain types of Trusts more attractive—like the so-called Dynasty Trust (allowed in more than half of U.S. states and the District of Columbia), which can shelter assets from estate taxes for generations. The sudden ability to move as much as $5 million into such a powerful strategy is a very unique opportunity you should share with clients.

Watch Out for State Tax Issues

Not all states follow the same new rules. Have your client’s estate planning attorney analyze how the new rules would apply to their assets. Right now could be one of the best opportunities for you to help clients make significant wealth gifts under a very generous (but short) window. Remember, you have 13 months and counting. I hope this article has helped you and your clients. As always, please call our office for any guidance you need.

The following article originally appeared in an issue of Planning Partners Press, a free newsletter provided courtesy of Carolina Family Estate Planning to Triangle-area financial professionals.  If you are a financial professional that would like to learn more, please click here to request a subscription.

Do you have a client with large income this year? The current low-interest rate environment is creating an opportunity for clients with charitable desires to “have their cake and eat it too” with Charitable Lead Annuity Trusts (CLAT).

In a CLAT, the client makes a transfer to a trust, the trustee then makes annual payments to a charity for a fixed number of years. After those years are up, what ever is left in the trust can go to the client’s family.

If the trust is set up as a Grantor CLAT, the client can take a charitable contribution deduction for a portion of the amount transferred to the trust. The deductible amount is the present value of the annual payments to charity. The current (November 2011) interest rate for the present value calculation is 1.4%. The CLAT is a grantor trust, so the client will be paying the income tax on any trust income in during the charitable distribution term with no reimbursement from the trust.

What does this mean in real-life terms? A Grantor CLAT with 15 annual payments of 4% of the amount transferred will result in a charitable deduction of 53.78% of the amount transferred.

A client could receive a $53,780.00 charitable deduction for $100,000.00 transferred to a trust with a $4,000.00 annual distribution to charity for 15 years. And at the end of the 15 years whatever is left in the trust can either come back to the client or go to the client’s children.

So, if the trustee can get 4% or better per year annual growth on the trust, $100,000.00, or more, will come back to the children. And the value of that gift to the children (for gift tax purposes) is $46,220. So this also presents an opportunity to leverage gifting to children.

If the annual charity payments go to a donor advised fund, the trust does not have to be locked into one charity. The client can use the donor advised fund to direct payments to different charities, when the client sees fit.

As the client’s trusted advisor, you could have an opportunity to partner with a local Community Foundation that has a donor advised fund. This could be a “win” for the client, the advisor, the local Community Foundation, and the communities where you all live and work.

This is a brief overview of the Grantor CLAT. If you have a client who might benefit from this strategy, you should get them together with a knowledgeable estate planning attorney who can confirm the numbers we have presented here, and who can help your client determine if it fits their particular situation.

The following article originally appeared in an issue of The Daily Plan-It, a free newsletter provided courtesy of Carolina Family Estate Planning to Triangle-area financial professionals.  If you are a financial professional that would like to learn more, please click here to request a subscription.

Hawaii recently embraced Asset Protection Trusts, which can help professionals in high-risk jobs protect assets from lawsuits and predatory creditors.

Asset Protection Trusts can also be used to help elderly clients qualify for Medicaid to cover the enormous costs of long-term care.

Hawaiian lawmakers introduced this Trust last year. Initially, the cost of designing such a Trust discouraged many potential clients. But after going back to the drawing board, a revised (and far less expensive) version of the Trust debuted after the legislature heard complaints by estate advisers.

Can My Client Afford This?

Probably. This less expensive version of the Trust is both a Dynasty Trust that lets someone preserve assets over decades and beyond, and an Asset Protection Trust. It is very flexible, so we can really do a lot with it.

Hawaiian lawmakers lifted a 1 percent tax on the amount of money used to create the Trust, and on any additional funds that went into it.

They lifted a rule that said only 25 percent of one’s net worth could go into it. And, they did away with a restriction that said a Trust could only hold cash or marketable securities.

Many states allow Dynasty Trusts, but the same can’t be said of Asset Protection Trusts. Only about a dozen other states already allow Asset Protection Trusts, which have attracted a lot of interest since Alaska enacted the first asset protection law in 1997.

What Can Go in This Trust?

Liquid assets work best, but other kinds can go in, too. For example, closely held business interests, private equity and even real estate can work.

These Trusts have been criticized in the past as a way to let wealthy people shield themselves unfairly. But there is a trend to accepting the trusts now. That will only speed up if a few big states come on board in the next few years.

Use an Asset Protection Attorney

Despite the growth, an element of uncertainty remains around these Trusts. State laws haven’t been tested through court challenges. So, someone who assumes that a Trust will be ironclad may discover, when laws evolve through litigation, that creditors who have gotten judgments in other states are able to reach the assets after all.

Your clients should talk to an estate planning attorney who fully understands how to draft such a complex Trust.

As always, I hope this article has helped you and your clients. If you have a specific case or concern you’d like to discuss, please call our office.

The following article originally appeared in an issue of The Daily Plan-It, a free newsletter provided courtesy of Carolina Family Estate Planning to Triangle-area financial professionals.  If you are a financial professional that would like to learn more, please click here to request a subscription.

It happens in even the most privileged of families. An aging parent is suffering from failing health. Unfortunately, no planning for incapacitation was ever put in place by the parent to name someone to look after his or her best interests.

A French judge recently ruled that L’Oreal heiress Liliane Bettencourt, 88, be placed under the guardianship of her daughter and two grandsons (tinyurl.com/6cr3f3d). A medical report declared that Bettencourt suffers from Alzheimer’s disease.

Although these events are taking place in France and I don’t presume to know the French laws regarding guardianship and estate planning, for the sake of discussion, let’s examine how this could have been handled under US law.

Family Feud

The court-appointed guardians are relatives, so this should be a peaceful transition of power, right? Not in this family — and maybe not in your client’s family. The reality is that Bettencourt and her daughter are estranged. They’ve had a series of lawsuits over the matriarch’s spending.

Their fight for control over the family fortune has the daughter claiming that Mrs. Bettencourt is mentally unfit to manage her money. The aging matriarch is thought to have given a celebrity photographer about 1 billion Euros worth of gifts over two decades. There are also claims of illegal donations to President Nicolas Sarkozy’s 2007 campaign.

This Could Have Been Avoided

Whether Bettencourt is fit to manage her spending isn’t really the key talking point here for advisors with clients who need a planning strategy.

A Living Trust would have allowed Bettencourt to name a Trustee — or at the very least, tell a court her first choice for a Guardian or Trustee in the event of her incapacitation.

Instead, the judge named her daughter — probably the last person Bettencourt wanted to manage her life and finances — and her grandsons.

Keep the Private from Going Public

If Bettencourt had simply created a Living Trust, then this sensitive battle within her family over her spending would likely have never been heard in a public venue.

In the absence of proper estate planning, which includes provisions for incapacitation, a court will name someone as a Guardian or Trustee. You can help clients avoid this by asking a few questions and referring them to an estate planning attorney.

Have your clients decided who they want to manage their affairs in the event they become incapacitated? Do they have any relatives who might accuse them of being unfit? Who do they really trust?

I hope this article has helped you and your clients. As always, if you have a specific question or case, please contact our office.

By Jackie Bedard, Carolina Family Estate Planning, Cary, NC

Trusts lawyers are seeing a growing number of online websites offering Do-It-Yourself legal documents and estate-planning software.

Surprisingly, most attorneys will tell you that there are some everyday forms where this approach makes good sense. In fact, many law firms offer a selection of standard legal forms available for their clients’ use at no charge. However, when it comes to wills and trusts, a poorly executed document can cause more harm than doing nothing at all.

It’s important to realize that estate planning is a complex area of law, based on statutes that vary state by state and often change from one year to the next. Wills in this state have procedures and requirements that must be followed, and a wills lawyer in North Carolina knows what those stipulations are.

For example, all states require your will to be signed in the presence of at least two witnesses and they must sign in your presence and in the presence of each other. Something as seemingly trivial as improper witnessing procedure can result in the whole document being deemed null and void.

Wills and trusts aren’t merely about the distribution of the deceased’s funds either.  Children are the most valuable “asset” of an estate, yet a recent survey found that nearly 3 out of 4 couples with minor children had made no provisions for legal guardianship of their children should an event claim both parents’ lives at the same time. This may be an unusual circumstance, but it is by no means a rare one.  An experienced wills and trusts lawyer will prepare the proper documentation needed to insure the wishes of the parents are carried out that your DIY estate plan may miss.

Another danger inherent in DIY wills is that they give a person a false sense of security. An individual may think that his or her affairs are all in order when, in actuality, something of importance may have been left out or an area of the form filled out improperly. Remember, there is no one-size-fits-all document that covers every situation. Online document mills are prohibited by law from dispensing legal advice, therefore they can not advise you of the forms you really need to protect your family and assets, nor will they represent you in court should it become necessary.

Sadly, DIY wills and trusts that are intended to save a few bucks can easily result in estate losses of tens of thousands of dollars.  If you have a DIY will or trust, the most important thing you should do is have it reviewed by an experienced Cary wills and trusts attorney.  Here at Carolina Family Estate Planning, we will review your current estate planning documents so you can have the peace of mind knowing your family will be protected if the unthinkable happens.

Just call 919-443-3035 and ask about our Upcoming Workshops.

By Jackie Bedard, Carolina Family Estate Planning, Cary, NC

As an estate planning attorney in Cary, I commonly see people who understand the importance of the initial estate planning but then forget that they need to keep their wills and trusts up-to-date. These documents aren’t something that should just be done once and then tucked into a drawer never to be looked at again. Actually, there are several times during the course of your life that you need to dig out your wills and trusts and make changes.

• Marriage – Obviously, when you get married, you will have a new spouse to consider when it comes to things like inheritance, living wills, and powers of attorney.
• Divorce – If you don’t relish the thought of your ex receiving your estate, you may want to meet up with your estate planning attorney to make some changes.
• Children – The addition of a child should trigger a need to reevaluate your will and other documents. Estate planning is often thought of as a way to care for your children after your death, and that can only be done if you keep your documents current with the birth of each child. Similarly, as your children get older, you should consider whether you need to update any of the provisions you made for them in your original plan.
• Purchases – If you acquire new assets, whether in the form of real estate or something else of value, you will want to call your estate planning attorney to be sure it is covered in your will.
• Health – You may find that certain health conditions cause you to reconsider the wishes outlined in your living will. This ensures that your loved ones and healthcare providers are apprised of your decisions.
• Insurance – Over the course of your insurance policy’s life, you may find that you want to change the terms, such as the type of coverage you have or the beneficiaries of your policy. When changes like this occur, it is important to have an estate planning attorney reflect that in your legal documents.
• Your “Helpers” — You are not the only one that will experience changes in your life–your “helpers” (i.e., your executors, trustees, agents, etc.) will also experience life changes. Review your list of various helpers and consider whether your list needs updating.
• Moving — If you move within state, consider whether you need to update any of your emergency helpers, such as emergency guardians if you have minor children. If you move to a different state, have you your plan reviewed by an attorney in your new state of residence to determine whether any changes need to be made to accommodate differences in state law.
• Opening New Accounts — Any time you open a new account, it’s important to make sure that accounts are titled properly and beneficiary designation forms are properly completed.  Over time your accounts may change–you change banks, take out more insurance, or open new retirement accounts after a job change.  It’s important to make sure that these new accounts fit in properly with the rest of your planning.

An estate planning attorney will be current on federal, state, county, and city laws and will be able to guide you as you keep your wills and trusts up-to-date. This protects you and your beneficiaries and can actually keep your will from being invalidated after your death.

So if it’s been awhile since you’ve updated your estate plan, I invite you to give our office a call and schedule a complimentary Peace of Mind Planning Session to have your documents reviewed ($750 value). Simply call 919-443-3035 to get started. We are only able to offer a limited number of these sessions each month, so be sure to call today to reserve your spot!