INTRODUCTION
The following will not answer all your questions, but will acquaint you with some of the important facts involved in planning your estate.
WHAT IS PROBATE?
Writing does not eliminate probate. However, planning your estate involves deciding what you want to have pass under your Will through probate and what should pass to beneficiaries in other ways outside of probate.
WHAT PROPERTY WILL PASS UNDER MY WILL?
All property which is in your name alone will be disposed of by your will: a bank account, stock, real estate, automobiles, household items and similar items. If you own an undivided interest in property with another, your undivided interest will pass under your will, but not if the property which you own with another is joint with rights of survivorship.
WHICH ASSETS WILL NOT PASS UNDER MY WILL?
Property in joint names with rights of survivorship will pass to the surviving joint owner. For instance, homes owned by a married couple usually go to the survivor. Joint bank accounts generally have a right of survivorship.
Life insurance will go to the named beneficiary.
Pension, retirement or other employee benefits will go to the named beneficiaries.
U.S. Savings Bonds which are in joint names will go to the survivor. Those payable on death to a named beneficiary will go to the named beneficiary.
However, if the named beneficiary in any of the above examples is: your estate, or your executors and administrators, then this property will pass under your will.
WHAT ARE CONSIDERATIONS IN DECIDING HOW TO PROPERTY?
Your first step should be to think carefully about your goals and how the terms of your will can accomplish your goals.
With property which will pass under your will, it is not necessary that you name or describe each item. Your assets can be described by groups, categories or in any other way which adequately describes your property. It is also possible to leave all of your property or certain categories of it, to more than one beneficiary by providing that each beneficiary is to receive a fraction or percentage of all or any category of property.
If you would like for a particular beneficiary to receive a specific amount of money, such a provision should be clearly expressed in your will. However, because your estate may increase or decrease substantially between the time you sign your will and the time of your death, you may wish to consider whether or not the amount of money should be limited by a percentage of your estate. For example, assume your estate is worth $50,000.00 and you wish to leave a beneficiary $500.00. Five Hundred Dollars is 1% of your estate. If your estate should shrink to $25,000.00 by the time of your death, the of money may be more than you would have intended under the circumstances. If, however, your bequest is made in terms of the lesser of $500.00 or 1% of your estate, then the bequest would shrink proportionately with the total assets.
WHAT ABOUT PERSONAL AND HOUSEHOLD EFFECTS?
In dealing with your personal effects, household goods, etc., (which includes furniture, appliances, silverware, china, wearing apparel, automobiles, etc.) we frequently recommend leaving all of such property to a surviving spouse and alternatively to children, grandchildren, etc., rather than specifying in your will that such and such item goes to so and so, etc. You can always write up a memorandum to keep with your will which specifies who you want to receive particular items within the group that you have named in your will. Although such a memorandum is not legally binding, it is usually persuasive for your family members. It gives you the advantage of being able to change it any time without amending your will and avoids the necessity of obtaining a receipt from each beneficiary. (There may also be additional tax consequences of these specific bequests.)
WHAT ABOUT MY DEBTS?
All your debts that come due will be paid from the assets of your estate. However, if you own land subject to a mortgage, unless you provide otherwise in your will, the person to whom you leave the land, takes the land subject to the mortgage. The executor will not pay off the mortgage. If this is not what you desire, you may direct the executor to pay the mortgage out of the other estate assets.
WHO HANDLES MY ESTATE?
The “executor†handles your estate, which means that this person does everything necessary to carry out the intentions of your will, complete your business affairs, and satisfy court requirements. More specifically, the executor will collect your assets, pay your debts, compute and pay any taxes that are due and distribute the remainder of your property to the beneficiaries named in your will. This usually takes six months to a year.
In your will, you will name the executor and usually an alternate executor. Many people name their surviving spouses and alternatively, adult children, but it can be any competent adult. The alternates are named in the event that by the time you die, the primary executor cannot or will not for some reason serve. You can also, if you wish, name more than one person to serve as co executors, or name a bank as a corporate executor.
It is not necessary that your executor, if an individual, be a resident of North Carolina. However, this is generally a good idea for practical reasons. It can be inconvenient for the out-of state executor to spend a lot of time in North Carolina and to make repeated trips to take care of details. Also, the out-of-state executor will be unfamiliar with the necessary services offered locally. There may also be an expense to your estate to post a bond for this out-of-state executor.
WHAT ABOUT GUARDIANS FOR MY CHILDREN?
Your will is the best place to name who will physically take care of minor children, should you die before your children are grown and on their own (legally at age 18). You should pick one or more persons you would trust with your children, and equally important, people who are willing to take on the tremendous responsibility of taking care of your children. Whatever you do, contact these people and get their permission before you name them in your will.
WHAT ABOUT THE MONEY FOR MY CHILDREN?
Should both parents die before minor children are grown, there can be severe money problems for the children and the guardians. Money going directly to a child from your estate will be supervised by the court until the child reaches the age of 18. It is a burden on the guardian to be responsible for your children, and also accountable to the court for all expenditures from your children’s money. Then, at age 18, your children will get all their money, no strings attached. * The financially immature child often squanders the inheritance, leaving the child with no money and no real long-term benefit. You should have some type of trust to address these problems. We will discuss this in more detail when we meet if you have minor children.