Wills & Trusts
Did you know that the North Carolina Bar Association states that over Seventy Percent (70%) of North Carolinians have failed to have a Will. What can the Will do for you and your family? The Will can protect your spouse. By distributing your property through the Will to your spouse you will ensure that you have avoided North Carolina's Intestate Statute. North Carolina's Intestate Statute would prevent your spouse from receiving all of your property. In fact, the most your spouse could receive under North Carolina's Intestate Statute would be one-half (1/2) and in most cases only one-third (1/3) of your estate.
The Will also helps you plan for your children. In a properly drafted Will, the Will can state the guardian for your children. The guardian determines where your children will live, where they will go to school, who their doctor will be and their general welfare. Failing to have a Will means that the government would decide. Would you allow just anyone to provide for your children?
In addition, the Will can protect your children by establishing a Children's Trust to hold the property for their benefit. Failing to establish a provision to provide for your children can cause the property to be lost and the welfare for your children to be harmed. What I mean by this is that the Bar Association says that most inheritances are spent by children within six (6) months to a year. The alternative, a Trust, can be established to provide for children's education, welfare, healthcare, and living expenses not only for a year but for the most important years of their lifetime.
Furthermore, a child who is handicapped receiving a lump sum of money by inheritance could lose all of those funds if a Trust is not drafted for their benefit. In addition, a Trust drafted for their benefit (i.e. Special Needs Trust) will also allow that child to continue to receive government aid and support.
The Will serves another purpose in that it allows you to establish the Executor and Trustee. These fiduciaries will determine how debts will be paid, how your property will be managed for the best interest of your family. Failing to have a Will can cause the government to select the Executor or Trustee. Would you want just anyone to come off the street and to manage your household affairs and your investment property? If we fail to have a Will then we open the door for the government to decide who that person will be.
What advantages does a Trust provide? As mentioned previously, the Trust is the appointment of a fiduciary to manage your assets for the benefit of a spouse who is elderly or a child who is handicapped or minor children who needs planning for their education and health so they are able to make decisions themselves. In addition to these, the Trust can also be a mechanism to avoid probate. Probate is a process that occurs when an individual dies and that individual's estate must be managed, the debts in the estate paid, and the remaining funds distributed to the heirs. There are several problems with probate which are as follows:
1. The cost of probate. The cost of probate includes the Clerk of Court fees, attorney fees, accountant fees, personal representative fees, appraisal fee, and many others. It is estimated that such fees average approximately Five Percent (5%) of the estate value.
2. The second problem with probate is time. Probate can take anywhere from six (6) months to two (2) years to complete. During that process assets, bank accounts, and investments can be frozen and impossible to move. This can be a tremendous disadvantage if heirs are in need of such assets or if such property should be sold for purposes of placing them in a better form of investment.
3. The third problem common with probate is that it is public in nature. Any person, broker, or competitive business owner, or disgruntled family member who desires to know what property is in the estate may simply go down to the Clerk of Court's Estate audit division and pull up the records. The accounting records required to be disclosed can even indicate the expenditures paid and taxes due. If a competitive business owner or broker or other desires to purchase a valuable piece of property or business, their ability to be able to learn that the estate may be in need of liquid or cash assets will allow them to have an unfair advantage to offer lower than fair value for the property knowing that the beneficiaries in need of the cash will likely sell.
In addition, the probate process allows interested parties or disgruntled heirs the opportunity to contest the Will. In fact, upon probate of the Will, a Will contest may be filed within two (2) years following such filing.
The advantage of the Trust in these cases can be that if it is properly funded such Trust will bypass the probate process. By bypassing the probate process negative consequences of probate costs, time, and its public nature will be avoiding in its entirety. Property will pass immediately to the heirs without question or notice to outside parties. No accountings will be required. No fees will be paid with this form of funded Trust nor will there be any requirement for approval by the Clerk of Court distributions made by the Trust.