You should try to provide for every contingency in your will, even if unlikely to happen.
The wills for a married couple often leave their assets to the other spouse if living, or in the alternative to, someone else if the other spouse is not living. For example, a simple will frequently leaves the testator’s estate to his or her spouse, if living, and if not living, to the children of the testator, either outright or in trust.
What happens if the spouses die under such circumstances that it cannot be determined with certainty which spouse predeceased the other? This happens most often in an automobile crash, but can occur under other circumstances, such as a plane crash, a natural disaster, or even by communicable disease or old age infirmities. Occasionally elderly couples are somewhat isolated, and the two deaths are discovered after the fact.
What if a beneficiary other than a spouse dies under similar circumstances? For example, a child could die in the same automobile accident or plane crash as the parents. In that case does the beneficiary’s share go to the child’s estate or does it pass to someone else?
What about assets such as retirement accounts or life insurance policies which are payable to beneficiaries, or bank or brokerage accounts owned by joint tenants with right of survivorship, or “payable on death” or “transfer on death” accounts?
North Carolina has adopted the Uniform Simultaneous Death Act, which contains provisions not only for simultaneous death, but also for deaths in very close proximity to each other. That Act provides that an individual who is not established by clear and convincing evidence to have survived another individual by at least 120 hours is deemed to have predeceased the other individual.
That is, if two individuals (such as spouses) die within 120 hours of each other, each will be treated as if he or she were the survivor, as to his or her own assets. If they were spouses, neither spouse would inherit from the other.
The 120-hour survivorship requirement does not apply if the “governing instrument” contains language dealing explicitly with simultaneous deaths or a common disaster, and such language is applicable under the facts of the case.
Consequently, your will or beneficiary designation, etc., can make provision to the contrary, in which case the personal provision which you have made will prevail over the presumption in the Uniform Act.
For example, the husband’s will can provide that the wife will be deemed to have survived him if they die in a common disaster, and the wife’s will can provide for the opposite; that is, in a common disaster, she will be deemed to have survived him for the purposes of her will. In that case, the wife would deemed to have survived the husband under both wills.
The will provisions alone would not control survivorship under other documents, such as a beneficiary or survivorship designation in a life insurance policy, or an IRA, a payable-on-death account or other similar instruments. In order to rebut the 120-hour presumption requirement, each “governing instrument” must contain the necessary language.
Without that language in the governing instruments, the estates of two spouses who die instantly in an automobile accident would each pass as though each spouse predeceased the other. That is, the husband’s assets would pass to the secondary beneficiaries under his will because of the presumption that the wife predeceased him, and the wife’s separate assets would pass to the secondary beneficiaries under her will, and there would be similar results for life insurance beneficiaries, IRA beneficiaries, etc. Without wills, each spouse’s estate would pass under the North Carolina Intestate Succession Act, as though the other spouse had predeceased them.
In case of multiple marriages, the secondary beneficiaries under the wills of each spouse may not mirror each other. That is, the husband’s will might leave his assets, if his wife does not survive him, to his children, and her will might leave her assets to her children by the prior marriage. The proper survivorship provisions would be very important to them, in a simultaneous death situation. Sometimes both spouses will agree to divide both estates between both families by the prior marriages, either equally or in unequal shares in the event of a common disaster.
Incidentally federal law provides that United States Bonds owned by co-owners who die under conditions where it cannot be established, either by presumption of law or otherwise, which co-owner died first, the bond would be the property of both equally, and payment or reissue will be made accordingly. Presumably the North Carolina Simultaneous Death Act would determine who was the survivor, insofar as US Bonds are concerned.
If you want to control how your assets would pass in the event of simultaneous death or near-simultaneous death, instead of defaulting to the presumptions dictated by the state, you should make sure that your will and other governing instruments are consistent with your estate plan.
If a loved one passes away, and after the funeral and other personal matters have been attended to, someone needs to determine whether an estate administration will be needed.
To make such a determination, you should gather the information and documents shown on the list of Items to Bring to Your Initial Appointment.
Whether or not you make an appointment with our office, you will need to check off the items on the list. That information will be needed to determine whether an estate administration will be needed or is not needed. If you would like, an attorney in our office can meet with you to make such determination.
Generally, a Will should be filed and probated by the Clerk of Superior Court in the county of the Decedent’s residence. The word “probate” has two common meanings concerning estates:
The first is that the probate of a will is the process by which the Probate Court determines a Will to be valid or not valid. If valid, the Court “probates” the Will, or certifies it to be the Decedent’s Will; we will refer to this meaning as “certification,” in an effort to minimize confusion. The second meaning of “probate” refers to the process by which the estate of a decedent is administered, i.e. The probate of an estate is the administration of the estate with the Court. We will refer to this meaning as “administration,” to minimize confusion.
If there are no assets or very few assets in the Decedent’s name, it may be possible to avoid a full administration of the Decedent’s estate. For example, it may be possible to have the title to a motor vehicle transferred to a new owner without having to go through a full estate administration. Likewise, many tax or medical refund checks can often be cashed without a full administration of an estate, but other procedures will need to be followed.
Please be aware that assets payable at death to a named beneficiary, or assets owned in joint names by co-owners with survivorship rights, generally are not required to go through a full administration proceeding in Probate Court. Also, real estate left to specific individuals under a Will generally goes directly to the named individuals, and does not technically go through court administration, but if title is to be transferred within two years after death, it will usually be necessary to have an Executor appointed by the Court, in order to release the real estate from potential creditors’ claims.
If you gather the information shown in the Items to Bring to Your Initial Appointment, our office will be happy to meet with you and advise you whether or not a full administration will be needed, and to discuss what you will need to do.
Whether or not a full administration is required, we recommend that the original Will be filed with the Court and certified by the Court to be a valid will. Occasionally assets are overlooked at the time of death and are discovered later, perhaps years later, in which case it is easier to transfer those later discovered assets to the proper recipients, if the will was certified to be a valid will shortly after the date of the decedent’s death, rather than waiting until later to have the will certified.
If you have a preliminary meeting with our office to evaluate what you will need to do to settle a Decedent’s Estate, you will not be required to retain our firm to represent you. You may go to another attorney or even try to administer the estate by yourself without an attorney, if you wish.
It is becoming more frequent for one spouse to be a noncitizen of the United States.
Sometimes a noncitizen is reluctant to give up his or her native citizenship, and people are often not aware of the possibility of having dual citizenship in both the native country and in the United States. Also, a noncitizen spouse may not know that it makes any difference whether he or she has United States citizenship, in which case he or she never gets around to obtaining U.S. citizenship.
When it comes to basic estate planning for most of us, it doesn’t matter whether you or your spouse are noncitizens. Both of you should have wills, durable powers of attorney for financial matters, health care powers of attorney, HIPAA Releases, and sometimes revocable trusts, just like spouses who are both U.S. citizens.
One question which you may have is whether you can leave property to someone who is not a U.S. citizen? The answer is yes – noncitizens can inherit property just the same as citizens. Consequently you can leave your assets to a noncitizen spouse, and he or she may be designated to receive joint bank accounts, retirement accounts, etc., just the same as a U.S. citizen. However, there are some tax rules that individuals with high net worth need to be aware of.
Preliminarily, most people do not need to worry about federal estate and gift tax. These taxes affect only very wealthy individuals. For a death in 2019, for example, there is no tax on the estate of a Decedent whose taxable estate is less than $11.4 million. A Decedent with a taxable estate which exceeds $11.4 million (in 2019) needs to be aware that he or she will have likely estate taxes at death, and bequests directly to their surviving spouse will not qualify for a “marital deduction” for his or her estate.
When both spouses are U.S. citizens, the first spouse to die can leave any amount of money or other assets to the surviving spouse, either outright or in a “marital trust,” completely free of estate tax. By utilizing the unlimited marital deduction, a couple can completely avoid federal estate taxes at the first spouse’s death, even if the deceased spouse is worth an extremely large amount – like $100 million, for example. Any property on which an estate tax marital deduction is claimed at the death of the first spouse does become part of the taxable estate of the surviving spouse, and when the surviving spouse dies, will be subject to the US estate tax laws at the time of his or her later death.
If the surviving spouse is a noncitizen, however, the unlimited marital deduction generally does not apply to assets passing directly to him or her, whether by direct bequest or devise, by beneficiary designation or by survivorship under joint ownership. However, assets may be qualify for the estate tax marital deduction at the first spouse’s death (a) it the surviving spouse becomes a U.S. citizen on or before the filing deadline for the Decedent’s federal estate tax return (nine months after the date of death unless a filing extension is obtained), or, in the alternative, those assets are put into a Qualified Domestic Trust (or QDOT) for the surviving spouse before that estate tax filing deadline. Because there may be unexpected delays in an application for citizenship, a QDOT should be created for the spouse and the assets transferred to the QDOT if the citizenship papers are delayed. The QDOT would qualify for the unlimited marital deduction, if created and funded in time.
That is, to qualify property left by a U.S. citizen to a noncitizen spouse for the estate tax marital deduction, there are two options: (1) the surviving spouse can obtain U.S. citizenship before the filing deadline, or (2) a QDOT trust can be created for the surviving spouse, and funded before the filing deadline. If the spouse receives U.S. citizenship after the QDOT has been funded, the QDOT can distribute the trust assets to the spouse. Because of the administrative and legal complexities of QDOT trusts, attorneys should encourage their clients to pursue citizenship or dual citizenship.
Also, the executor of the deceased spouse’s estate must file a federal tax return in a timely manner and must elect to qualify the property left to the surviving spouse for the deceased spouse’s estate tax marital deduction. That is, the executor must make a “QDOT election” on the federal estate tax return for the estate of the first spouse to die. Federal estate tax returns are required to be filed within nine months after a decedent’s death, unless extended.
A QDOT gives the surviving spouse a right to life income from the trust, but that spouse is not the legal owner of the trust assets. When the surviving spouse dies, however, if the QDOT has not been earlier terminated, the remaining trust assets will be included in his or her taxable estate, after which the remaining trust assets will pass to the other beneficiaries under the QDOT trust agreement, often the couple’s children.
If the QDOT were not terminated, the income from the QDOT would be distributed to the surviving spouse and would be subject to income tax on the surviving spouse’s personal income tax return. The trust would be required to file a federal fiduciary income tax return each year for the QDOT trust, and to give a Schedule K-1 showing the taxable income distributed to the surviving spouse.
Distributions of income to the surviving spouse would not be subject to estate tax on the deceased spouse’s estate, but if distributions of trust principal are made during the administration of the QDOT trust, estate tax will generally be due for the estate of the deceased U.S. spouse on those distributions. There are exceptions if the principal distribution qualifies for a “hardship exemption,” which gives some leeway for distributions to the surviving spouse or for someone whom the spouse is legally obligated to support, but is the distributions do not qualify for the hardship exemption, an amended estate tax return would have to be filed and additional estate taxes paid for any such distributions.
Estate planning is more than simply deciding who gets your assets after your death. It includes a wide range of matters, such as (1) planning for yourself and for your family in the event you become incapacitated; (2) the appointment of guardians for your minor children, if any, in the event of the deaths of both parents; (3) the protection of assets for minors, for beneficiaries who cannot manage money, are incapacitated, or otherwise need asset protection; (4) planning for family members who are nonresidents or noncitizens of the United States; and (5) planning for a myriad of other personal issues for your family, including tax planning.
Please note that the reasons listed above for estate planning are not necessarily limited to wealthy individuals. It can be important to a person of modest means to see that his or her assets are used to benefit the proper beneficiaries in a wise and appropriate manner.
We hope the following discussions are helpful:
Wills are a common estate planning tool and are usually the most basic device for planning the distribution of an estate upon death. Wills that are 100% handwritten by the Testator are called “holographic” wills and do not have to be witnessed, provided at least two witnesses attest to Court as to the Testator’s handwriting. North Carolina wills that are not entirely in the Testator’s handwriting must have two witnesses, and preferably both witnesses and the Testator will sign in the presence of a Notary Public. Unless a Will is filed with the Court and is found by the court to be valid, the purported Will has no legal significance, so any paper which purports to be a will should be filed with the Court and you should request the Court to “probate” the Will (i.e., to certify the document to be valid). By the way, a Will can be probated (i.e., certified) without having a full court administration.
Probate (Court Administration):
One meaning of “probate” is the process where a decedent’s will is presented to the Probate Court (i.e., The Office of the Clerk of Superior Court) and the Court determines whether or not the will is valid. In an effort to avoid confusion, we will refer to this process as “probate (certification).”
If the will is found to be valid, an Executor may be appointed to take control of the decedent’s assets, and to notify creditors by direct notice and/or publication of a newspaper notice to creditors. This process is also called “Probate” of the Estate, and to avoid confusion we will sometimes refer to this process as “probate (administration).” The Estate pays valid claims and the remaining assets are distributed to the beneficiaries pursuant to the terms of the will. When these things have been done properly, the Probate Court will close the estate file.
Probate Avoidance (or Avoiding Court-Supervised Administration of an Estate)
Since probate (administration) is a matter of public record, the family can maintain some privacy, while saving some court fees by avoiding probate (administration). That can be avoided in several ways: by joint ownership of assets or by naming beneficiaries in ownership documents, which will pass outside probate. Revocable trusts also hold assets in the name of the trustee, and the trust’s assets do not pass through court probate (administration).
Consequently, many individuals seek to avoid probate (administration), or at least to minimize the process, by a combination of joint accounts with survivorship, by naming beneficiaries for transfer on death of bank and brokerage accounts, and by naming beneficiaries for other assets, including life insurance and retirement accounts. Real estate can pass by survivorship to a joint tenant with survivorship rights, or to a surviving spouse under a “tenancy by the entirety” (a form of joint ownership applicable only to husbands and wives).
Irrevocable Trusts may be used as estate planning tools, often for the distribution of assets for the benefit of family members who are minors or developmentally-disabled beneficiaries, and sometimes to prevent wasteful spending by a spendthrift child, or to protect assets for a family member who is in a shaky marriage or who is in a high-risk job or profession. Also, certain types of trusts can provide for management of assets and the disposition of assets to protect family wealth for several generations and are typically called generation-skipping trusts (GST) or “Dynasty” Trusts.
This article cross-references you to other related topics, such as the following:
Who gets your assets if you die without a will? This is not as simple as one might think. North Carolina has laws which deal with the disposition of the estates of decedents who die without wills, called the North Carolina Intestate Succession Act, some provisions of which might surprise you and likely would not be what you would want. Also, please be aware that some assets pass by beneficiary designation or by survivorship to individuals and do not pass under the Intestate Succession Act.
Do you need a Durable Power of Attorney, a legal document which authorizes someone to act for you and to sign legal papers on your behalf if you are incapacitated?
Do you need a Health Care Power of Attorney and Advance Directive,to authorize someone to make health care decisions for you, which may include decisions whether or not to resort to extraordinary means to prolong your life if you are terminally and incurably ill, and to allow you to die a natural death in those circumstances?
Should you have a Revocable Living Trust to avoid the need for court probate at your death, i.e. court supervision, to insure that any assets belonging to you at the time of your death are used to pay your debts, funeral and administration expenses, etc., or can you rely on family members or other trusted individuals to administer your assets without court supervision? A revocable trust is not a matter of public record and affords your loved ones with some privacy concerning the assets which you own on the date of death and to whom those assets have been left.
Would it be appropriate to create Irrevocable Trusts for the benefit of others, either during your lifetime or after your death?
If you are a business owner or partner in a business or LLC, should you consider having a Business Succession Plan for the transfer of your business interest upon your retirement, death or disability?
Would your family benefit from tax planning? With the federal estate tax exemption equivalent at $11 million and increasing each year, the need for estate tax planning is not very important to many of us. But there are other tax issues, such as income tax considerations, which could benefit a family of moderate wealth, such as step-up in the cost basis of assets upon death.
This article cannot include all the estate planning possibilities and alternatives, but it is intended to give an overview of the issues involved.
A Power of Attorney is a legal document in which a person (the “Principal”) gives someone else (the “Agent”) the power to act on behalf of the Principal as set forth in the Power of Attorney, perhaps doing things such as writing and signing checks, or even signing deeds or tax returns. Those documents can also include the authority to do many other things, and not just basic functions.
If the Principal becomes incapacitated, the Agent’s authority under an ordinary power of attorney is revoked as a matter of law, but if the Power of Attorney is “Durable,” i.e. it expresses the Principal’s intent that it shall remain in effect if the Principal becomes incapacitated, it will not be revoked if the Principal becomes incompetent.
Until January 1, 2018, North Carolina law required a Durable Power of Attorney to be recorded in the office of the Register of Deeds, but that is no longer a legal requirement for documents executed after that date, except in the case of real estate transactions, in which case powers of attorney must be recorded.
Depending on the language in the document, Durable Powers of Attorney can be effective immediately, even if the Principal is capable of acting for himself or herself, or they can be “springing,” i.e. the Power of Attorney becomes active only upon the occurrence of a future event, such as when the Principal becomes legally incompetent.
The North Carolina General Statutes provide a statutory Short-Form Power of Attorney which may be used, instead of a form listing detailed descriptions of each specific power. If you have an old statutory Short-Form Power of Attorney executed before January 1, 2018, it must be recorded at the Register of Deeds office to be actively used. After January 1, 2018, you should not sign a durable power of attorney which uses the old statutory short-form language, because the laws have been changed.
Both the old and the new Statutory Short-Form Powers of Attorney are limited in the scope of authority granted to the Agent to act on behalf of the Principal and we recommend that you have a longer, more detailed document which grants specific authority to perform certain types of transactions on your behalf, that are not specifically covered in the short-form documents. A document which says something like “I authorize my Agent to do anything which I could do if I were present and acting for myself” does not grant the broad authority for which it seems to be intended, because certain powers must be explicitly specified, in order to be effective. The authority of the Agent to act on behalf of the Principal should be clear and unambiguous.
Consequently, we recommend that you not rely on the statutory Short-Form Power of Attorney, on the mistaken assumption that the document will be comprehensive and will cover all of your needs. To the contrary, we recommend that you consult with an attorney and have a power of attorney drafted which meets all your specific needs.
Health Care Power of Attorney and Advance Directives:
North Carolina also authorizes Health Care Powers of Attorney to be executed, authorizing someone to make medical decisions for you, if you are unable to make or communicate your own medical decisions.
We recommend that everyone have a Health Care Power of Attorney, which frequently designates a primary agent and also back-up agents, in case the primary agent cannot be reached or cannot make a decision for you.
The official form of Health Care Power of Attorney as set out in the North Carolina General Statutes is very thorough and comprehensive, and it contains some blank spaces, in which you may add to, limit or explain your Health Care Agent’s powers in further detail if you wish to do so. That is, the official form can be modified to express your personal wishes, such as religious beliefs, whether or not you want to be an organ donor, to express your funeral and burial wishes, or your desire to be cremated, if applicable.
A Health Care Power of Attorney must be signed in the presence of two witnesses and must be notarized. The witnesses may not be your natural heirs (such as your spouse or children) or people who are beneficiaries under your Will, or employees of your doctor or a hospital or other health facility, such as a retirement or a nursing home, where you are a resident.
Another document which you may want to have is an Advance Directive or “Living Will,” which expresses your desire not to have the dying process prolonged if you are, in the opinion of your doctor, terminally ill and likely to die soon, or if you have completely lost your mental capacity, or are unconscious and unlikely to regain consciousness.
A Living Will can allow your doctor to make a decision not to put you on life support without input from your family, but if you want family or friends to be included in that decision, you can also require the doctor to get permission from your Health Care Agent.
A Living Will does not give anyone permission to cause your death sooner than if you died of natural causes, even if you are very ill and in pain. That is against the law. A living will simply authorizes your health care providers not to put you on life support simply to slow down the dying process. If you are in pain, your health care providers are allowed to give pain killers, but nothing to speed up your death.
Having a medical provider to assist in causing the death of a patient is known as “Euthanasia” or physician-assisted suicide. Euthanasia or physician-assisted suicide is currently allowed in the states of Washington and Oregon, but not in North Carolina or in any other states.
Currently not even Washington and Oregon will honor an advance directive which gives a person the legal authority to make a decision for someone else, to initiate physician-assisted suicide. Outside the United States, Euthanasia is permitted in the Netherlands. A patient, even in Washington, Oregon or the Netherlands, must make his/her decision to authorize Euthanasia at the time it is to be performed, and no advance directive would be valid to give an agent the authority to make that decision for the patient, if the patient was not competent and capable of communicating his/her decision at that time.
To move on to another legal document, please be aware that the HIPAA laws are intended to protect the health care privacy of patients from people who are not authorized by the patient to have that information. Usually when a competent patient is admitted to a medical facility, he or she can give permission for the hospital to share his or her medical information with specific individuals. However, in case you are not able to give permission at the time of your admission, it is a good idea for you to have signed an Authorization to Share Confidential Health Information ahead of time, which can be used if necessary, when you are later admitted to a hospital or other health care facility.
It is suggested that you get an attorney to assist you in drafting Durable Powers of Attorney, Health Care Powers of Attorney, Advanced Directive (Living Will), and HIPAA Authorization to Release Confidential Health Care Information.