Probate, Inheritance, And Trusts: Advanced North Carolina Estate Planning Considerations

When it comes to determining what happens to your property, wealth, and belongings after you pass on, estate planning is the only path to impose your will. By working with an attorney to design and draft estate planning documents and tools, you can ensure that your legacy is protected and purposeful.

However, there are many estate planning concepts most North Carolinians need to become more familiar with, ranging from the probate process to the use of trusts. This article helps close that gap by answering several advanced questions about the estate planning process, including:

• What the probate process is, what assets are affected by it, and when it is required.
• What you need to know before starting the estate planning process.
• How revocable living trusts work as an alternative to probate.

What Is The North Carolina Probate Process?

Probate is what generally happens to your estate, assets, and property after you die. It is the legal court that handles the transfer of ownership of any assets still in your name and their division to various beneficiaries and creditors.

It will either empower the executor named in your will with letters of administration, or it will choose and appoint an administrator to handle it if you die without a will. Either way, this individual is given the power to transfer assets out of your (now deceased) name, which is why probate is always needed as long as you have assets still in your name.

When Is Probate Required?

Probate is, in many ways, the default. It is required for anything not subject to another form of disposition. Any time a property deed, vehicle, or other asset is in your name when you die, probate is required.

As long as the asset will still be in your name after you die, probate is required for it to be passed on to the intended beneficiary. Most real estate, for example, will need to go through probate, as will “lesser” assets such as vehicles.

What Assets Are Not Subject To Probate In North Carolina?

Often, however, not all assets and property will need to go through probate. Your bank accounts and other assets will already be spoken for, among others. If you have a 401k, for example, it will likely have a beneficiary already designated. Those will, therefore, pass straight to your intended beneficiary by contract law, by-passing probate.

Anything with automatic beneficiaries and survivorship rights will go straight to the designated beneficiary. Many financial assets, such as securities, bonds, and bank accounts, will be transferred automatically…but that does not mean they will be transferred to the person you want. If you have not updated your beneficiaries after a significant life change, such as a divorce, you might not be happy with who inherits some of your assets.

Updating as many assets as possible to avoid probate will also help spare your family and loved ones the often long and occasionally painful legal process of going through probate.

How Can Probate In North Carolina Be Avoided?

Probate, unlike death, is not inevitable, however. As mentioned, many kinds of assets can already bypass it entirely, and it is not that complicated to ensure the rest do as well. Avoiding probate when possible is good because, in addition to time and conflict, probate often comes with another blight: taxes.

Indeed, any properties that pass through the probate process are subject to the estate tax, which means a share will be going to Uncle Sam. Thus, by avoiding probate, you are also avoiding certain taxes and better preserving your legacy for future generations.

First, you can do so by making sure as many accounts and properties as possible have survivorship rights set up directly. Such automatic transfers work great for anything from insurance policies to basic bank savings accounts. However, for property and other large or complicated assets, especially non-financial ones, that will not be an option.

Instead, for those, you can set up one or more trusts. A trust is a separate legal entity to which you transfer ownership of the property or assets, relying on strict instructions and contracts to ensure it gets passed on to those you wish later. Trusts bypass probate as well since all the transactions go through the trustee.

A final method is a joint tenancy, with a right of survivorship, which is often how assets with a spouse are held. Both own a part, and the other half is transferred automatically upon the death of either to the other.

All of these methods are equally effective but generally require the help of an attorney to set up properly.

What Information Do I Need To Get Started Estate Planning?

If you have not yet started the estate planning process, chances are it is a good time to start. Once you are ready to begin the estate planning process with an attorney, however, there are several key steps to follow.

First, you should gather a list of your assets and then think about what you want to do with them. If you are working with an attorney, they will often have a worksheet designed to help you do both.

Once you have gathered all the information about where your assets are located, including all real estate, holdings, and financial assets, you can start thinking about how you would want everything to be distributed.

The most important step is to contact your attorney and begin setting up all the legal documents in question, even if you are not yet 100% sure how you want things distributed.

Do I Need To Know Who I Want To Inherit My Assets Before I Begin Planning?

While it is recommended to have some idea of where you want your assets to go when planning your estate, it is not necessary to have everything worked out in advance. The exact details can be worked out with your attorney during the planning process.

It is better to have an idea of your general goals in terms of your legacy and what you leave behind and then work with your attorney to iron out the details. They will know what specific mechanisms and legal constraints exist, as well as how to best take advantage of them when making specific decisions.

An attorney can also advise you on specific decisions, such as whether or not to discuss your legations with your beneficiaries.

Should I Tell My Beneficiaries What Assets They Will Receive After My Death?

Ultimately, whether or not you tell your beneficiaries will be a profoundly personal decision. Some people will choose to do so, while others prefer not to, as they believe that doing so might cause some division within their family.

While it is a very personal decision, it is a decision that your attorney can help you take. By sharing with them a bit more about your family dynamic, they can, in turn, share their experience and make a recommendation to help you decide. Ultimately, however, that remains a personal decision for you to make; there are no legal restrictions or obligations in play.

Legal obligations, however, are manifold for the trustees you choose to manage your trust after you die, so those need to be carefully chosen.

What Is The Role Of A Trustee In A Revocable Living Trust?

As discussed earlier, trusts are a way to transfer ownership out of your name before death to avoid assets going through probate. Revocable living trusts are among the most commonly used for estate planning. They can be changed during your lifetime but become binding after death. The trustee is the person who makes the legal and financial decisions for the management of those assets while they are in the trust.

While you will always be the settler, meaning the person who creates the trust, you can also be the trustee and even the beneficiary. You can take on all three roles. But generally, that would defeat the purpose of trusts as estate planning tools, as you will need someone else to handle it after your death, if only briefly.

How Do I Choose A Trustee For My Revocable Living Trust?

You want to pick someone you trust, that you hold in high esteem, and that you believe can manage those assets. There are also corporate trustees if you believe the assets will have a revenue stream and want somebody to manage that. Your attorney can help you choose, even recommending some, and also help you vet and approve whomever you do end up choosing.

They are, in a very real way, becoming part of the family and dealing with delicate and otherwise private family matters, so they must take that responsibility seriously. Especially considering all the different kinds of assets you can place in them.

What Assets Should Or Should Not Go Into A Revocable Trust?

While revocable living trusts make an excellent vehicle for passing on a wide variety of assets, they are not a one-size-fits-all solution to every problem. If you face creditor problems, for example, revocable living trusts will do nothing to hide or protect your assets from creditors. It simply does not have that power in its provisions to make them unreachable by creditors.

As for what can go in, anything that is transferable can be placed in the trust. From liquid cash to real estate property, passing through cars, and even business interests if the licensure conditions permit. In short, trusts can hold almost anything, but that does not mean they will be the best way to pass them down.

Sometimes, a simple will is sufficient; at other times, a trust might offer considerable advantages. Your estate planning attorney will be able to identify which is best for your situation and help you set them up accordingly.

For detailed guidance On Advanced North Carolina Estate Planning options, an initial consultation is your best place to start. Obtain the answers you need, and get started on your own planning by calling (252) 371-0127 today.