Frequently Asked Questions: North Carolina Estate Planning & Probate
In simple terms, Estate Planning is the process by which you execute the documents needed to ensure that your desired beneficiaries receive your assets upon your death (and also to make sure that your assets are properly taken care of prior to death, but while you are incapacitated). This can be accomplished in a variety of ways and through a combination of different documents (which documents are ultimately used depends on the circumstances involved). The most common elements of Estate Planning are documents such as Wills, Revocable Living Trusts, Financial Power of Attorneys, HealthCare Powers of Attorney, and Charitable Trusts, as well as titling/beneficiary instruments (i.e. jointly owned real estate, payable on death bank accounts, the beneficiary designations of a retirement account, etc.).
A Will does several things. First, it determines who the beneficiaries of your Estate are and therefore who gets your assets when you die. Second, it appoints the person who will administer your Estate upon your death (i.e the Executor). In addition, it can also suggest guardians for your minor children and even create Trusts for those individuals who may need them.
A Trust can describe many things, but for Estate Planning purposes the best way we describe a Trust is like this – a Trust is a private contract whereby one person (called the “Grantor”) creates an entity that will hold assets for the benefit of someone (called the “Beneficiary”). The person who administers the entity is the Trustee. The Trustee will be forced to follow the terms and conditions of this particular Trust entity as laid out in the Trust Agreement for the benefit of the beneficiary or beneficiaries.
A Revocable Living Trust is a document that is typically created to avoid probate, is private (as compared to the public nature of probate), and is generally quicker to administer than the probate process (so the beneficiaries receive the assets faster). With a Revocable Living Trust, the person who creates the Trust (the Grantor) will transfer certain assets into the Revocable Living Trust while alive (this is referred to as “funding” the Trust). If done properly, there should be no tax effect to this transfer as the tax ID of the Revocable Living Trust is the Grantor’s social security number. And while alive and competent, the Grantor, the Trustee, and the Beneficiary are all typically the same person. Then when the Grantor dies, the Trustee of this Trust will transfer the assets to the Trust beneficiaries (or to a Trust that will further stay in existence for the extended benefit and protection of the beneficiaries).
A Financial or “Traditional” Power of Attorney is a protective measure whereby a person is appointed via a document to serve as the Agent of another if and when they become incapacitated. The Agent will in essence step into the shoes of the person creating the document (this personal is called the “Principal”). The Principal can limit how much authority the Agent has and for how long the Agency will last. However, if no such Power of Attorney exists at the time of incapacity and bills need to be paid, property needs to be handled, etc., then a Guardian may have to be appointed by the Court to handle the affairs of the Principal. This is highly undesirable as appointing a Guardian is frequently a stressful and expensive public hearing, and should be avoided if at all possible.
A HealthCare Power of Attorney is a document whereby the Principal appoints an Agent to answer medical questions on his or her behalf if the Principal can no longer speak for him or herself due to physical and/or mental incapacity. In North Carolina, this document is often combined with a “Living Will” to answer questions regarding end of life decisions.
An objection to a Will is frequently known as a “Will Contest” or “Caveat Proceeding.” For a Will to be overturned, the person raising the objection must have legal standing and a proper legal argument to stop the probate of the Will. This occurs very rarely. But if you have concerns about the validity of a Will, contact an attorney immediately.
Probate is the process whereby the Court supervises the transferring of assets from the deceased to the deceased’s beneficiaries if there is a Will (or if there is no Will, then in accordance with North Carolina law). However, certain assets do not go through probate as how they are titled already dictates who they go to upon the death of the owner. Examples of assets that do not have to go through probate for this reason include:
- Property owned by husband and wife as “Tenants by the Entireties.”
- Property owned by individuals as “joint tenants with right of survivorship.”
- Retirement accounts, financial accounts, and life insurance policies with proper beneficiary designations.
- Bank accounts that are “payable on death” aka “POD,” or “transferable on death” aka “TOD.”
- Property owned by a Revocable Living Trust.
It is the job of an Executor to administer the probate process under Court supervision. This means first being appointed by the Court. Then gathering all assets and paying all creditors. Next distributing the remaining assets after creditor payment. Accounting for all assets owned by the decedent until ultimate distribution (and this must be done to the penny). And, lastly, doing the tax returns of the deceased and the tax return of the Estate (an Estate, as a separate and distinct legal entity, has its own tax return). It is always recommend that the Executor hire an attorney to assist him or her with probate, as well as to consult with a CPA and the financial advisor of the deceased. Note that the attorney's fees are generally paid by the Estate — not by the Executor, personally.
Unfortunately, the cost and time of probate in North Carolina can vary wildly. Simple estates can be closed quickly and cheaply. Complex estates can take years. There is no true or set answer on this. It is always determined on a case by case basis. However, your attorney should be able to give you a better idea of expected cost and time after you consult with him or her.
“LLC” is short for “Limited Liability Company” and is the most frequent type of business entity that we create. LLCs are both flexible and dynamic. An LLC offers similar levels of asset protection as a Corporation, but without the onerous amount of compliance that a Corporation requires. If created and administered properly, LLCs can be a wonderful tool for business owners. But please note – once a creditor exists, creating a LLC at that point to protect your assets is simply too late. You must create an LLC in advance of knowing about a creditor.