The death of a loved one is always a difficult time, which no amount of planning or preparation can truly control or diminish. However, a well-prepared estate plan can reduce some of the burden and stress associated with the transfer of assets after the death of a family member. A thorough estate plan also anticipates and provides for unexpected lifetime events that can diminish assets or prevent one's ability to make important decisions, such as incapacity, serious illness, long-term nursing home care, or guardianship of minor children to name but a few.
What is Estate Planning?
Before defining the term estate planning, it can be helpful to put it into the proper context. When a loved one dies, it is always a difficult and emotional time for those he or she left behind. It is important to reflect on why you are thinking about your estate plan to begin with. Generally, it is because you want to provide and care for the people who are important to you and to make any legal consequences of your passing as easy and as efficient as possible for them. An experienced attorney can listen to what you want to accomplish, help you to analyze your estate and to create and implement an estate plan that provides for your wishes, and guide you through any additional planning or considerations that may be important to consider.
So, what is an Estate Plan?
Estate planning generally refers to the practice of deciding where and how you want your property, assets, debts, etc. to be distributed when you die. This process involves analyzing your entire estate, anticipating and planning for lifetime events that may impact your estate, and drafting the appropriate legal documents to make sure that your assets are distributed according to your wishes and in the most efficient manner possible to provide for your loved ones. There are other factors to consider, however.
Although many people tend to think of an estate plan as simply a Last Will and Testament, it is important to recognize that an estate plan that only dictates where your property should go is not a complete plan because it does not anticipate and provide for other factors that could negatively impact or complicate your life and your estate upon your death. For example, an estate plan can name a guardian for your children if you should die before they reach adulthood. Estate plans typically include provisions granting various Powers of Attorney allowing you to decide who will make financial or medical decisions for you if you should become incapacitated. It is also important to consider various alternatives to using a will to determine how your estate will pass, such as a Living Trust or other will alternative. In some cases, it is possible to reduce or even eliminate estate taxes by using alternatives to a simple will.
What is a Last Will and Testament?
A will is an instrument of conveyance that takes effect upon the death of the decedent (decedent is the legal term for the deceased person whose estate is to be distributed). That is, a will is a document that determines how and to whom your estate is conveyed at your death. Until your death, you can change the terms of your will or revoke it entirely, and the beneficiaries you name in your will (the people or entities that receive portions of your estate) do not acquire any rights to your property until the time of your death.
Who can make a will?
According to North Carolina law, “Any person of sound mind, and 18 years of age or over, may make a will.” N.C.G.S. 31-1
Can I decide who will take care of my children if I die?
Yes. Your will can include a provision that recommends the appointment of a guardian for minor children. If one parent is still alive and has custody, that parent automatically remains the guardian of the child or children, even if the deceased parent’s will named a guardian. If each parent names a different guardian in their wills, the will of the last surviving parent controls. Similarly, if both parents die at the same time, the will with the most recent date of execution controls.
What is a Living Will?
A living will is essentially a declaration of a desire for a natural death. A living will gives your physician permission to discontinue or withhold life support if certain conditions are met. The attending physician must diagnose, and one additional independent physician must confirm, that you have an incurable or irreversible condition that will result in death within a relatively short time; or that you are unconscious, and to a high degree of medical certainty will never regain consciousness; or that you suffer from advanced dementia or any other condition that results in the irreversible, substantial loss of cognitive ability. N.C.G.S. 90-321.
What is a Power of Attorney?
There are 2 kinds of powers of attorney – a durable power of attorney and a health care power of attorney. Respectively, they allow you to designate someone to act on your behalf in all business matters and to make health care decisions for you in the event you should become incapacitated or otherwise unable to do so yourself. In this way, you can ensure your mortgage is paid, your banking is handled etc, and in the case of health care powers of attorney, that someone whom you trust is authorized to discuss your health concerns and make decisions for you. Power of attorney can become effective immediately, or you can designate a particular set of circumstances that must occur before it becomes effective. You can revoke power of attorney at any time you are legally competent to do so.
What is an Advance Medical Directive?
This is a fancy term for a document wherein you make difficult medical decisions for your own care ahead of time, while you are of sound mind, so that in the event you become incapacitated or otherwise unable to make those decisions yourself, you will already have done so. This includes decisions such as whether you want to receive life-maintaining feeding or hydration, ventilation, whether you consent to various types of treatments, etc. It is a very responsible and useful way to spare your loved ones from making those difficult decisions on your behalf.
What happens if I die without a Will?
A person who leaves property that is not disposed of by a valid will is considered to have died “intestate”. Complete intestacy refers to a person who leaves no valid will at all. Partial intestacy refers to a person who leaves some property that is not disposed of by his or her otherwise valid will. In either case, North Carolina law controls how your estate will be distributed via the law of “intestate succession”. It is important to consider how your property will pass by intestate succession, even if you do not own much property. Some of your beneficiaries may have a greater need than others, and you want to be sure your property is distributed the way you would wish.
Intestate Succession Examples
Intestate Succession is a fairly dense and complicated area of the law, so I provide these examples only to illustrate a few examples of how the State distributes your estate when you have not done so yourself.
For example, suppose you want your entire estate to pass to your spouse.
Example 1) You are survived by your spouse and one of your parents (you have no children).
Your Father (deceased) ----------------------------------- Your Mother
You (deceased) ------------------- Your Spouse
In the above example, your spouse only takes a one-half undivided interest in real estate and the first $100,000 plus one-half of the balance of the remaining personal property. Your mother takes the rest.
Example 2) You are survived by your spouse and one grandchild (the son of your deceased daughter).
You (deceased) -------------------------------------- Your Spouse
Your Daughter (deceased)
In the above example, your spouse only takes a one-half interest in real estate and the first $60,000 plus one-half of the balance of the remaining personal property, because you are survived by your one grandchild.
For children and grandchildren, North Carolina uses a distribution method called “per capita at each generation” when all takers are not of the same generation. For example:
Example 3) You are survived by one son and two grandchildren (children of your other son who is deceased).
You (deceased) --------------------------------------------------- Your Spouse (deceased)
Son #1 Son #2 (deceased)
Grandchild #1 Grandchild #2
In the above example, your surviving son takes a one-half interest in your estate, and your grandchildren each take a one-fourth interest in your estate. Because Son #2 is deceased, his share, which would have been a one-half interest in your estate, is divided equally among his living children. Because there are two of them, each takes half of a one-half share, which is one-fourth. Had Son #2 been survived by three children, each would have taken a one-sixth share (Son #2’s one-half share divided by three).