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.

I hear the same excuse over and over….

I don’t have an “estate.”

I have more debt than assets.

The only thing I have is my home.

As you may have guessed, these are excuses that people make for not preparing an estate plan. These people are sadly misinformed. They think estate planning is only about money. Estate planning does take care of financial issues, but the way I see it, the most important reason for doing an estate plan is for the benefit of the people that you leave behind.

Estate planning is essential for senior citizens who are concerned about the well-being of their loved ones. No matter what your level of wealth happens to be, there are decisions that will have to be made if you become incapacitated or when you pass on.  If you don’t leave detailed instructions for the type of medical care you want or what to do with your things, you will be putting those you love most in the position of being a mind-reader. They will have to do their best to figure out what you would have wanted and then deal with the consequences such as unhappy family members who disagree with them. Do you really want to cause this type of stress for them at a time when they are already upset and mourning?  I doubt it.

I realize thinking about these things is not easy or fun, but approaching it in an organized manner may help. Here’s a list of things to consider when planning your estate:

1. Talk to close family members and let them know how you would like to handle the dispersal of your assets and sentimental items. Also, talk to them about the type of medical care you would like to receive should you become incapacitated. Chances are, if everyone knows your plans ahead of time, there will be fewer arguments and a lot less stress.
2. Prepare a list of all of your assets including your home, your financial accounts, insurance policies and any personal possessions.
3. Make a list of everyone that you would like to be a beneficiary of your estate. You may also want to include organizations that are meaningful to you, such as charities, churches, schools or universities or civic organizations.
4. Plan for how you would like your pets cared for if something should happen to you.
5. Make a list of passwords, PIN numbers and other codes that someone might need and store them in a secure place (be sure someone know how to access).
6. Think about who you would like to put in charge of your medical care and who you would like to oversee the dispersal of your assets. You can appoint different people for these critical jobs.
7. Consult with an experienced estate planning attorney who can offer advice about how to arrange your estate so that the person you put in charge of your financial and medical decisions will have the fewest complications.

These steps alone will go a long way in reducing the stress that your loved ones will experience. Isn’t their well-being enough reason to do an estate plan?

If you answered “yes,” then be sure to give our office a call at (919)443-3035 and ask to schedule a Peace of Mind Planning Session.

Individuals engaged in estate planning often get panicky when they hear the word “probate.”  When the term hasn’t been fully explained by a probate lawyer (and sometimes even when it has), it conjures visions of long waits, loss of inheritance, and many other hassles for heirs of an estate.

To calm these fears (and to avoid working with an attorney), many people consider the idea of adding one or more of their children to their bank accounts.  Generally speaking, each “joint tenant” of an account has complete access to the money, but when one dies, the entire amount becomes the property of the other joint tenant(s).

This may seem like a logical way to directly transfer money to heirs without going through the probate process, but a skilled probate attorney in Cary needs to keep clients informed of potential pitfalls of this approach:

• As it has already been mentioned, all joint tenants have access to the funds in the account.  This means that either party can withdraw money at any time.  If the child added to the account is not entirely trustworthy, this can be a devastating reality when the money is used inappropriately.
• Any money received by the child may be considered a gift, which means that it is subject to a variety of gift tax laws.  A Cary estate gift tax attorney will be able to keep you up-to-date on current laws and regulations in our area.
• Creditors for both parties can have access to this account.  That means that if one joint tenant dies (even the one who is not in debt), the other’s creditors can go after the money they jointly held.  Keep in mind that this means that if the child has had credit problems, those creditors may have access to the parent’s money.  This could include not just creditors, but lawsuits and divorce as well.
• Money left in the event of the parent’s death will only be accessible to the other joint tenant(s).  If one child has been responsible for the majority of a parent’s elder care and therefore is on the account, he or she will likely have no legal responsibility to share those funds with other siblings.  Again, trustworthiness is an important issue.  And even if the child wishes to share the funds with his or her siblings, there may be gift tax consequences to doing so.

If you are considering adding a loved one to a bank account as a means to avoid probate, it’s important to at least talk to a Cary probate attorney about your options. You may find that simply giving your loved one power of attorney over the account or holding your assets in trust may be more preferable based on your circumstances.

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.

What if Santa and Mrs. Claus decided to do an estate plan? Although they would doubtless be great clients, the actual plan could be challenging.

What is the size of the Claus estate? It is extremely hard to calculate, even for Mr. and Mrs. Claus. Their accountant merely shrugs when asked. Unless estate taxes are totally repealed forever, Santa has a tax problem. Santa’s toy making business is prospering. He has enough inventory to supply every child on earth with at least one toy each year. There are now over 6 billion people on earth, and if just half of those are children, and if Santa spends just $20 on each child, he is spending 60 billion dollars per year on Christmas gifts alone. Apparently this formal gifting program is not reducing the size of his estate nor his tax liabilities sufficiently since he’s continued to do this since the 4th century.

Another consideration for Santa’s estate plan will be caring for the hundreds of elves that work in his shops and are apparently totally dependent on his largess for survival. There are no known relatives to serve as guardians in the event of Santa and Mrs. Claus’s joint demise. And even if relatives can be tracked down, it is doubtful that they will have the wherewithal to care for so many dependents. We might want to consider starting a charitable organization that establishes homes, jobs, and caretakers for these magical little people.

Santa has also invested a lot of time, money, and love in his wild animal preserve. Besides the normal elk, caribou, and polar bears, Santa has successfully bred a unique species of flying reindeer and at least one with a light-emitting snout. It’s likely that several world zoos will be clamoring to add these animals to their collection, but it would be advisable for Santa and Mrs. Claus to make some of these decisions ahead of time, and use these charitable opportunities for further estate tax planning.

Obviously, death isn’t the only concern for the Clauses. If Santa were to be disabled by a collision with an aircraft, a fall from his sleigh on a fast take-off, or a gunshot wound from someone who mistakes him as a burglar, the business could be in trouble. Mrs. Claus has had her hands full taking care of the elves, and hasn’t had a lot of direct involvement with the toy making. It might be wise to pick some key elf employees from executive management who can be trained to take over. Perhaps an ESOP is appropriate, or a pre-negotiated buy-sell agreement. Due to his advanced age (approximately 1600), and the fact that he is overweight and smokes, life insurance is also unlikely – but should not be ruled out because of his overall good health and vitality.

One other issue to be considered is citizenship. Although we think of Santa as an American icon, he was actually born as Nicholas of Myra in Anatolia – which is now southwestern Turkey. Rumor has it that he met Mrs. Claus while watching the annual tree lighting at Rockefeller Center in New York. If Mrs. Claus is a U.S. Citizen, proper tax planning will require her to at least prepare a Qualified Domestic Trust.

Obviously, planning for Santa and Mrs. Claus will be a daunting task requiring our best efforts. Like Santa, our firm wishes you a “Merry Christmas to All”, Happy Holidays, and a Happy and Prosperous New Year.

This article was original featured in our newsletter last year. Don’t receive our newsletter?  If you’re a Triangle area resident, sign up here.

At Carolina Family Estate Planning, we just love creating Priceless Conversations™. During the holidays, you can create your own special memories by asking friends and family the interview style questions below and then recording them on CD.

1. As a child, what were your three favorite holidays or seasons of the year?  What made them special?
2. Describe how your family celebrated Thanksgiving, Christmas, Hanukah or other similar holidays.  What were your family’s traditions?
3. What special foods were part of your family gatherings?  Who prepared those foods?  Do you still prepare them today?
4. What family traditions would you like to carry or see carried forward?
5. Was there an unique or unusual event or tradition that your family celebrated? How did that celebration get started?
6. If you celebrate birthdays, what was the most memorable birthday you can recall and what made it special?

If you have lost a loved one and are now attempting to close out their estate, we are sorry for your loss and we understand how frustrating the process can be.

The steps to take after the loss a loved one can be overwhelming, but requesting a death certificate is a great place to get started.  You will need a death certificate to complete many of the administrative tasks that you will face in the weeks to come, so it only makes sense to order a copy of this as soon as possible.

While the exact process to order a death certificate can vary from county to county, there are basic guidelines that you can follow to make the request for a death certificate as quick and easy as possible.

Let’s take a look at these guidelines:

I typically recommend ordering 8-10 copies of your loved one’s death certificate. As mentioned above you will need them for many tasks over the next few weeks, so it’s best to have them on hand. The easiest way is to order them through the funeral home, as there is generally a lag time when you order straight from the county recorder’s office.

Make sure to have the following information readily available when filling out the request:

• Full name of the deceased
• The date of death
• The place of death
• The deceased’s date of birth
• The purpose of your request
• Your driver’s license number
• Provide a self-addressed stamped envelope along with your request
• Typing or printing the information is helpful

If you are still not sure how to properly obtain a death certificate for your loved one, or you need to know whether or not you should obtain one based on your responsibilities, contact our Wake County attorney at the Carolina Family Estate Planning  by calling 919-443-3035.

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.

This article was original featured in our newsletter last year. Don’t receive our newsletter?  If you’re a Triangle area resident, sign up here.

The holidays are finally upon us!  I hope that in the weeks to come you are able to spend time with family and friends that you don’t get to see regularly through the year.  That is, of course, the beauty of the season.

While I don’t want to detract from, or put a negative spin on the festivities, now is a great time to remind you of how vital estate planning is to ensure the happiness of your family for years to come.

Understanding Family Dynamics

This year, as you sit around your holiday table, I want you to imagine those smiling, happy faces engaged in an ugly, destructive battle over your estate when you are gone.   While we all secretly hope this would never happen, sadly I’ve found it to be a natural response when a loved one passes away.

For many families because of a lack of clarity and planning, family cohesion becomes a distant memory upon the parents’ death.

But this can be avoided!  You have quite a bit of power when it comes to keeping peace in the family even years after you’re gone.

Easy Ways to Make a Change

The first step in doing this is to make absolutely sure you address specific issues that could arise during the distribution of your estate.  This is important because boilerplate wills and trusts give only the legal parameters for your successor trustee or executor to follow.  So, for example, your plan might give directions about how the family home is to be distributed.  But, what if two of your heirs want to purchase the home?  What if one of your children wants to keep the home in the family, but can’t afford to purchase it outright?  These are the type of issues that arise every day—and are rarely addressed in a typical estate plan.

Therefore, to avoid such hurt feelings or hostilities between relatives that might require a court’s intervention, you should analyze whether standard provisions in the family’s estate plan address your intentions as to the distribution of your assets.

Here are a few things that I recommend to avoid such problems:

1. Be specific about who will inherit your assets – especially the family home.

Without specific instructions about how assets will be distributed, it will be up to the trustee to decide who gets what.  Not only does this mean that someone else will be making decisions that you should have made, but it is a tremendous responsibility that he or she may not be prepared to properly (and peacefully! ) deal with.

It‘s also a good idea to speak openly to your children or other potential heirs to discuss several scenarios that may arise following your death.  Then once you know what you would like to do and what would bring the most peace to your family, I’d advise you to incorporate those provisions are in your estate plan.

2. Clearly address how the value of your assets will be determined.

Fights and arguments can quickly break out among family members when someone believes that an appraised value of an asset does not reflect the fair market value.  If you don’t adequately address how the trustee should arrive at a selling price, unhappy siblings or relatives may hire their own attorneys and force the trustee to spend your assets unnecessarily to have the court review the process.  Wouldn’t you much rather see your hard-earned assets go to your loved ones instead of to the court and to attorneys?   Resorting to court involvement is likely to be the final straw in already strained family relations.  It will be very difficult, if not impossible, to mend family ties once things escalate beyond this point.

Fortunately, this is easily avoided by specifying whether certain assets are to be sold with the proceeds being split, or kept in the family by giving each heir an option of first right of refusal to purchase the asset.  Again, discuss this openly and honestly with your heirs and don’t leave it to the person you chose as trustee to handle such a hot bed issue.

3. Think through the consequences before naming two siblings as co-trustees or executors.

I’ve found that many parents choose two of their children to act as co-trustees to avoid conflict or hurt feelings.  Yet in most cases, the result is actually the opposite.  This is because if they fail to agree during trust administration and come to an impasse, there will need to be court intervention.  Again, this can result in high lawyer fees and a long-term (and possibly permanent) family feud.

Preserving Family Peace Now and Forever

So, this year as you look around the holiday table, think about these issues and ask yourself honestly if you can see the disastrous scenarios I have described.  If so, lay out a very specific path for your trustee to allow him or her to follow your wishes.  That way, your family will continue to share the holiday season peacefully and lovingly for many years to come.

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.

For once, it seems that the IRS did something to be helpful for families that want to preserve wealth.

The Internal Revenue Service issued guidance back in August on the treatment of basis for certain estates of decedents who died in 2010.

This guidance assists executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply.

The estate tax was automatically repealed for most of 2010, but lawmakers reinstated it in December to be retroactive back to January 2010, thus setting the estate tax at a rate of 35 percent with an exemption of $5 million per individual and $10 million for married couples.

If you had a wealthy client die last year and the executor wants to opt out of the estate tax for 2010, then there’s still time to act.

File by January 17, 2012

Form 8939, which can be downloaded from http://www.irs.gov/pub/irs-pdf/f8939.pdf, is the basis allocation form required to be filed by executors opting out of the estate tax. It is due by Jan. 17, 2012.

The instructions for filling out the form can be found at http://www.irs.gov/pub/irs-pdf/i8939.pdf.

Under the guidance issued, an executor must file Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, to opt out of the estate tax and have the new carryover basis rules apply.

Background Information

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010.

However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010.

This recent law allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. This choice is to be made by filing Form 8939.

A Kinder, Gentler IRS?

And so, this recent move by our federal government to actually be helpful to taxpayers may have some advisors scratching their heads.

But to a degree it makes sense, given the IRS’s shift in recent years from being a hard-line enforcer to a “let’s-find-a-mutually-beneficial-solution” agency.

The IRS used to focus its efforts on making taxpayers be compliant. But when it reorganized in 1998, its mission changed. Today, the IRS calls taxpayers “customers” and it deleted references to enforcement of the tax laws from its mission statement in favor of a customer service ethic.

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 contact our office.