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Does a Trust Eliminate the Need for a Will?

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            An effective estate plan will be multifunctional and flexible enough to adapt to unknown future events. A good way of creating a flexible estate plan is through the use of a trust. However, that begs the question: if I have a trust, do I still need a will? To understand the answer to this question, you must first understand how your property passes whether you use a will or a trust.

 

Will

            Any asset you own, whether it is real or personal property, will pass through your will, unless you have the ability to assign a beneficiary. For example, you can assign a beneficiary to a bank account, retirement account, life insurance policy etc. Whatever you do not assign a beneficiary to will pass through your last will and testament.

            If your property is passing through your will, it will be subjected to the probate process. Probate is method by which the wishes of the testator/decedent (the maker of the will) are carried out any creditors of the decedent’s estate are paid, and the property is distributed to the legal heirs. This process can be lengthy, complicated, expensive, and open to creditors. A good estate plan looks to avoid probate because of the inefficiency and liability it presents.

 

Trust

            The use of a trust is a great method to avoid probate. Any property you put into the trust will automatically pass to the beneficiary upon death. There is no lengthy process for the beneficiary to receive their inheritance. By avoiding probate, the trust also side-steps the risk of lengthy probate litigation.

            Additionally, whatever you put into the trust will pass through the terms of the trust. The terms of the trust can be as creative as you want them to be. This is an effective way of creating generational wealth because it allows you to have a proverbial hand outside the grave, controlling the property for generations long in the future. Let’s say that you may leave a certain amount of money in a trust to your children. You could put terms in the trust that instructs the trustee to invest and grow that money. The terms could also instruct the trustee to only pay out for the education of the beneficiaries or their children. That way, if your goal is that future generations have the opportunity to get a quality education, a trust will help you accomplish that goal.

 

Trust over Will?

            If you create a trust, you should plan on passing everything—that does not already have a beneficiary assign to it—through the trust. Whatever you can conveniently place into trust should be done shortly after creating the trust or obtaining the property. That way, everything of significant value passes through the terms of the trust and to the people whom you want to leave it to.

            However, the trust does not eliminate the need for a will. A will serves many functions. And, in conjunction with a trust, it can serve as a back-up document to pass assets. Let’s say that you put most everything into your trust, but you left a few assets of significant value floating out there. Or maybe you acquired property after you create the trust and you forget to put it into the trust. Your last will and testament will ensure that the property still goes to who it’s supposed to go to. In fact, many individuals who have trusts also have pour-over wills. A pour-over will ensures that any property not already in the trust goes into the trust upon death. The will thereby “pours” the property over into the trust. The property will then pass through the terms of the trust as if it had been put into the trust in the first place.

 

Conclusion

            A trust is a great way to pass property and avoid probate. However, just because you have a trust doesn’t mean you don’t need your will. If you have questions about trusts, will, probate, or any estate planning matters, the experienced attorneys at McIntyre Elder Law are ready to help.

 

Book Your Appointment Today!

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Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

What is Guardianship and When is it Necessary?

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Guardianships are sometimes necessary. What is it? When is it necessary? Find out in this short article.

 

          A guardianship is when the court adjudicates an individual incompetent and appoints another individual to act on their behalf for legal and financial, or healthcare purposes—or both. The individual bringing the petition is called the “petitioner”. The individual whom the petitioner is attempting to obtain guardianship over, is the “respondent”. If the respondent is found to be incompetent, they become known as the “ward”. If the petitioner is awarded power by the court to act on the ward’s behalf, they become known as the “guardian”. If the guardian is awarded power to act for financial and legal purposes, they are known as “guardian of the estate”. If the guardian is awarded power to act for healthcare purposes, they are known as “guardian of the person”. If they are awarded both, they are known as “general guardian”.

           To establish guardianship, there must be a hearing. The hearing is a necessary due process because part of the hearing is to determine whether or not the respondent is of sound mind. Adjudicating someone as incompetent is a deprivation of liberty because the state is saying that the individual is not competent to act for themselves—in whatever capacity the court determines. Thus, it must be proven by clear and convincing evidence that the respondent is not competent and is in need of a guardian. If the court determines that incompetency exists, they must also determine the level of incompetency in order to determine which type of guardianship is necessary.

           The second part of the hearing is to determine: 1) whether the petitioner is a fit and proper person to act as guardian; 2) whether the guardianship the petitioner is requesting is appropriate; and 3) what, if any, rights should be retained by the ward. Not every hearing proceeds as a two-part process. In fact, much of the evidence brought forth applies to each issue at once.

When is it Necessary?

           If an individual, minor or adult, is incompetent, is unable to act in a sufficient manner for themselves and has not established a general durable or healthcare power of attorney, then guardianship is likely necessary. Without a guardian, there is no one to protect the individual.

           If the individual has any sort of assets or income—including disability income—they require someone to help them manage their finances effectively. Otherwise, they risk losing their assets through scams, theft, or out wright improper management. They may also risk not having their basic needs met because the individual is unable to make consistent payments to fixed monthly bills.

           If the individual has any healthcare needs—which they will—then someone must be able to make healthcare decisions o=n their behalf. This is especially important if the individual is placed in a facility. The guardian can help protect the ward from caretaker neglect and otherwise improper treatment.

Conclusion

           A power of attorney is the best method for avoiding the headache of seeking guardianship. However, if your loved one is in need, guardianship is better than no power to act on their behalf. If you have questions about guardianship or power of attorney, the attorneys at McIntyre Elder Law can help.

Book Your Appointment Today!

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Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

How Do You Challenge a Will?

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How Do You Challenge a Will?

How Do You Challenge a Will?

 

           Let’s say that a loved one has passed, and a family member is submitting their will for probate. The only issue is you don’t think that the will is valid. Maybe your loved one was incompetent when they signed the will. Maybe the will being submitted was fraudulently induced. Something is not right, and you want to challenge it. But how do you go about doing so? What legal grounds do you need to make such a challenge?

Lingo and Procedure   

           A challenge to a will in North Carolina is called a caveat proceeding. The person bringing the caveat is called the caveator. This person must be an interested party. An interested party is any person entitled under the will or interested in the estate. Thus, any person who has property or pecuniary interest in the decedent’s estate or any person who may be materially injured by the submission of the purported will to probate, may bring a caveat. The person who submits the purported will to probate is called the propounder. The propounder must be given notice of the proceeding and will be the adverse party to the caveator.  

           Notice must also be given to the heirs, legatees, and devisees i.e. any other person who is entitled under the will or who would be entitled to the decedent’s estate through intestate succession (typically next of kin). The caveator must, typically, bring the caveat proceeding within three years of the submission of the purported will to probate. Otherwise, the claim will be barred.

           In North Carolina, a challenge to a will cannot be brought until the testator—the person making the will—has passed away.

Grounds and Burden

           To successfully challenge a will in North Carolina, the caveator must prove to a jury, by the greater weight of the evidence, that the testator lacked testamentary capacity or that the will was created as a product of undue influence.

           Testamentary capacity means that the testator was of legal age and sound mind to make a will. In North Carolina, the legal age is 18 and up. Sound mind is a more amorphous topic. In simple terms, it means that the testator was competent at the time he executed the will. The legal standard for competence is: the testator must understand the nature and situation of his property and the also understand who will inherit such property. The testator must also know the manner in which he would like to distribute his property and the effect the making of the will is going to have on his estate. Thus, they have to know what they’ve got, who’s going to get it, how it’s going to get to them, and what that means for his estate as a whole.

           Undue influence means that: the testator was subject to influence; the influencer was in a position whereby they could exert influence upon the testator, and the will is a product of such influence. It is not enough that the influencer was persuasive. After all, simply persuading someone is not illegal. The influence must be “a fraudulent influence, or such an overpowering influence as amounts to a legal wrong.” In re Mcneil, 749 S.E.2d 499, 502 (N.C. Ct. App. 2013). In other words, “it is the substitution of the mind of the person exercising the influence for the mind of the testator, causing him to make a will which he otherwise would not have made.” Id.

           To determine whether there has been undue influence, the court looks at the following factors:

           1. Old age and physical and mental weakness;

           2. That the person signing the paper is in the home of the beneficiary and subject to his constant association and supervision;

           3. That others have little or no opportunity to see him;

           4. That the will is different from and revokes a prior will;

           5. That it is made in favor of one with whom there are no ties of blood;

           6. That it disinherits the natural objects of his bounty;

           7. That the beneficiary has procured its execution.

Id. at 503.

           Not all of the factors must be proven but if enough of the factors are met, the weight of the evidence will tip the scales in the caveator’s favor.

Conclusion

           If you think that your loved one lacked testamentary capacity or their will was a product of undue influence, do not hesitate to give McIntyre Elder Law a call. Our experienced attorneys are here to answer your questions.

Book Your Appointment Today!

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Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

Preventing Exploitation

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Preface

Below is a sneak peek look at a larger project I am conducting regarding elder exploitation. Stay tuned for much more information and enjoy the article below.

Introduction

In 2017, a white paper was released by the U.S. Security and Exchange Commission. This paper looked at the prevalence of elder exploitation in the United States. What they found was that up to 6.6 percent of seniors in the US were subjected to financial exploitation. However, they concluded that the figure was likely much larger. In doing so, they pointed to a study by New York State. The study showed that: “The overwhelming majority of incidents of elder financial exploitation go unreported to authorities. For every documented case of elder financial exploitation, 44 went unreported.” They also concluded that elder financial abuse is the foremost emerging form of elder abuse.

Currently, in 2018, individuals over the age of 60 make up 15 to 16 percent of the population . And according to the US Census Bureau, that number is growing . Thus, we can expect the emergence of elder financial abuse to continue to grow as the does our older population.

A Vulnerable Population

What makes the Elderly a good target for financial abuse? Many individuals over the age of 60 have worked most of their lives. As such, many of them have consistently saved for their retirements, creating a significant nest egg. They have also likely acquired some assets along the way that have been paid down or paid off. Many seniors are also receiving a steady income from pension or Social Security.

Furthermore, the elderly tend to have a variety of health issues that render them somewhat dependent upon others. The most obvious of these health issues is some form of dementia. If an individual is suffering from dementia, they are in a particularly vulnerable position because it will be difficult for them to notice or report any sort of exploitation.

Somewhat less obvious is caretaker exploitation of even non-memory related health issues. A senior could require care such that they cannot live totally independently. This leaves them open the “insidious caretaker”. The insidious caretaker is a wolf in sheep’s clothing—and can very well be a relative. They may come into the caretaker relationship with good intentions and break bad when they see the opportunity to do a little elderly embezzlement.

They may just straight up steal from the senior. Or they may exert a pattern of undue influence to manipulate the senior into giving them what they want. Either way, they are in the perfect position to exploit—with, many times, none the wiser.

The more dependent a senior is upon others, the more at risk they are for financial exploitation. As they age, and their health deteriorates, so do the safeguards keeping away those who can effectively cheat seniors out of their hard-earned money.

The Tools of the Trade:

What documents are available to protect you from exploitation? Below is the list of the foundational documents you should have in place to ensure your protection.
– Will
– Living Will
– General Durable Power of Attorney
– Healthcare Power of Attorney
– Mental Health Advanced Directive

If you have any questions about how to protect you or your family from exploitation, the attorneys at McIntyre Elder Law are ready to help.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

Do I Have to Pay Tax on the Home I Inherited?

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A concern for many individuals who inherit real property is whether they are inheriting an asset or a money pit. There are a number of factors that play into whether inheriting a home is going to be worth the hassle. One of the big questions that clients frequently raise is whether their tax bill is going to increase as a result of their inheritance.

Property Taxes

Whether you inherit the property via will or otherwise, you become the new owner of the property. As such, you become liable for any state and local property taxes associated with the property. This is true even if the title to the property is still being passed through the probate estate.

In North Carolina, when a property owner dies, his or her property immediately vests in his or her heirs, regardless of whether they died with or without a will. If the property owner put the heirs name on the deed or put the home in trust, the property does not go through probate. As a result, the heir automatically gets the property and does not have to do anything further to receive title to it. However, if the decedent is passing the property through a will or he or she dies without a will, the property automatically vests in the heirs but the title to such property must pass through the probate estate.

If the property passes to you through deed or trust, you are the new owner and are liable for property taxes. The same is true if the property passes to you via will, even if the property is still in the probate process.

Gift/Inheritance Tax

As the receiver of the gift/inheritance, you will not be liable for any taxes with respect to receiving the property. The estate may be liable for federal estate tax—North Carolina currently has no inheritance tax—if the amount of the inheritance is above the estate tax threshold. Currently, the estate tax threshold is $11.18 million for an individual and double that for a couple. Thus, while this is likely to change in the future, the federal estate tax currently applies to a very small percentage of the population.

Capital Gains Tax

Capital gains tax will only apply if you sell the home subsequent to inheriting it. The amount of money you will pay tax on is determined by the difference between your tax basis and what you sell it for. In equation form it looks like this: Selling price – Basis = taxable gain (x applicable tax rate) = amount owed. So, this begs the question; what is your basis?

Typically, when you buy property the basis is whatever you pay for the property (see IRC § 1012 “cost basis”). However, when you inherit property you get a “stepped-up basis” (see IRC §1015). Your basis in inherited property is the FMV at the decedent’s date of death—this is typically much higher than the decedent’s original basis; hence the term “stepped-up”. Since capital gains tax applies to the difference between basis and selling price, the higher the basis the better.

Let’s look at an example: A bought a property in the ‘50s for $50,000. A’s basis in the property is $50,000. A dies in 2019 when the property value is $100,000, and leaves the property in his will to B. B receives the home with a basis equal to its fair market value at the date of A’s death ($100,000). B already has a home, so she decides to sell it to an extremely motivate buyer who pays $50,000 over its fair market value, for a grand total of $150,000. B’s taxable amount is the difference between her $100k stepped-up basis and the $150k selling price; so, $50k. To figure the amount of tax owed, B applies the applicable capital gains rate to the $50k taxable amount.

If B were to have sold the home for a value less than or equal to her stepped-up basis, she would owe no tax. Furthermore, if B made the home her primary residence after she inherited it and then sold it thereafter, she may not owe any tax at all.

Per IRC § 121, an individual can exclude up to $250,000 of the sale of their primary residence. Thus, if the gain (the difference between the basis and the selling price) is less than or equal to the $250,000 exclusion rate, then no tax will be owed.

Lastly, if B held the inherited home as an investment (i.e. did not make it her primary residence) she could defer any capital gains tax by rolling the proceeds from the sale of the home into a “like-kind” asset within 180 day of receiving such proceeds (see §1031). A “like-kind” asset must be a sufficient similar investment (e.g. property) within the United States. Note, that the like-kind asset must be identified within 45 days of the sale.

Conclusion

You should stay informed to be sure that your inheritance is a benefit and not a detriment. If you have any questions regarding inheritance taxes or any other estate matters, call McIntyre Elder Law at (704) 998- 5800.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

How to Put Property into a Trust

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So, you went to your lawyer and had her draft you a shiny new trust. What now? Now you need to put your assets into the trust. This is also known as funding the trust. So, how do you do that? Well, the answer, similar to any other answer you’ll get from a lawyer, is: it depends.

The manner in which you out a particular asset into a trust depends on the nature of that asset. Below are some of the more common assets along with a description of how they are placed in trust.

Real Property

Every piece of real property has some sort of deed associated with it. The type of deed depends upon how the property is owned. Most people own property outright. In that case, you would simply convey the property to the trust by executing a deed from you to the trust (in the name of the trust). If you do not own the property outright, you may deed whatever interest you hold to the trust; however, if you want to place all ownership interest in trust, you will need the signature of the other owners.

To convey the property to the trust, you can use a simple quitclaim deed. A general warranty deed is a deed that conveys property with a promise that there are no blemishes on the title of the property. These deeds are typically used in the sale of real property. Conversely, a quitclaim deed is a deed that conveys property with no guarantee as to the state of the property’s title. Since you already own the property and are using it to fund a trust, whether revocable or irrevocable, it is not necessary to use a general warranty deed.

One consideration that must be made when conveying property to a trust is whether it is encumbered by a mortgage. Most mortgages have a “due on sale” clause. This is a provision whereby if the property is transferred, the full amount of the loan will become immediately due and payable. However, not all transfers trigger the due on sale clause. One such transfer is a conveyance to a trust where the borrower is and remains a beneficiary. It is important to note that the borrower does not need to be the only beneficiary.

Investments

If you have stocks and bonds, then you have a transfer agent. This is the person who keeps track of the securities that you own. You need to request the permission of the transfer agent to transfer your securities into a trust. This can be done by filling out a securities assignment form. Note that if the securities are publicly traded, the stockholder’s signature will need to be guaranteed by a commercial bank—similar to a notarization.

Tangible Personal Property

Tangible personal property is personal property of a physical nature. E.g. vehicles, art, jewelry etc.

Pieces of personal property such as art and jewelry can be easily put into trust. You simply must draft an “assignment of personal property” document to the trust. Such document must name the trust and must specifically describe the item you wish to transfer. It must also be notarized.

Anything that has a title associated with it can also be easily transferred into the trust. For example, cars, tractors, RVs, and mobile homes (that have not been transferred to real property) all have titles. To put these items in trust you simple re-titled the property in the name of the trust.

Conclusions

There are very few things that cannot be put into trust. If you have questions about trust funding, the attorney at McIntyre Elder Law are happy to assist you.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

The Most Important Part of Estate Planning No One Talks About

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