1	The Basics of Estate Planning Timothy A. Nordgren BRADY, NORDGREN, MORTON & MALONE (919) 573-1415
2	Two Different Phases of Estate Planning Planning in the event of your incapacity (you are still living) Planning for your death
3	Documents Commonly Used In Planning for Incapacity Financial/Durable Power of Attorney Health Care Power of Attorney Living Will
4	Financial Powers of Attorney Authorizes another to act on your behalf with regard to property General Power of Attorney vs. Limited Power of Attorney Effective immediately vs. effective upon incapacity Must be recorded with Register of Deeds before using.
5	Health Care Power of Attorney Allows you to appoint another person to make health care decisions for you if you are incapacitated HIPAA release must be specifically stated in document Statutory form in North Carolina (lacks HIPAA release)
6	Living Will Authorizes attending physician to withhold artificial means of life support and artificial food and hydration In North Carolina contingent upon terminal and incurable condition and/or persistent vegetative state Statutory form in North Carolina
7	Estate Planning in the Event of Death
8	Four Ways to Pass on Property Beneficiary Designation Joint Ownership With Right of Survivorship Probate Trust
9	Beneficiary Designations IRAs, 401(k)s, life insurance policies, annuities, transfer on death accounts etc. Non-Probate Asset unless Estate is beneficiary Takes precedence over Last Will and Testament and Trust Review every three years at a minimum to ensure consistency with overall estate plan and to avoid unnecessary income taxes for beneficiaries
10	Types of Joint Ownership Right of Survivorship vs. Tenants in Common Real property owned by Husband and Wife as Tenants by the Entirety has right of survivorship
11	Joint Ownership with Right of Survivorship Non-Probate asset at death of first joint owner Takes precedence over Last Will and Testament or Trust Beware of unintentional disinheriting May expose asset to creditors of the other joint owner (except for tenants by the entirety property) Can trigger gift tax if add non-spouse joint owner
12	Probate Probate: refers to court supervised process of managing and/or distributing assets of a minor, incompetent or deceased person Public Process Requires payment of court fees and frequently attorney fees at hourly rates NC court fees are $4 per $1,000 of probate assets up to a maximum fee of $6,000 If a person owns probate assets at death, probate is required with or without a Will
13	The Probate Steps Executor/Admin. must be formally appointed Bond required unless waived by Will or all beneficiaries Inventory due 90 days after appointment. Publish Notice to Creditors and notify known Creditors Pay bills in order of legal priority if limited funds in estate File Annual/Final Accounting-provide cancelled checks and beneficiary receipts
14	Testate vs. Intestate Testate: when a person dies with a valid Last Will and Testament Terms of Last Will and Testament control distribution of probate assets Intestate: when a person dies without a valid Last Will and Testament Intestacy laws of state of domicile control distribution of probate assets
15	Last Will and Testament Name recipients of property Name guardian for minor children Name Executor of estate Unless a trust is created for minors, property passes to beneficiaries at age 18 Does not come into effect until death of testator
16	Why avoid probate? Public Process Probate Fees Attorney Fees Lack of Efficiency Stress/Emotional Burden
17	What is a trust? Written set of instructions directing management of property for the benefit of someone or something
18	Trust Terminology Grantor/Settlor: person who establishes trust Trustee: person or entity who manages trust property Beneficiary: person for whom trust property is being managed Corpus/Principal: property owned by the trust
19	Different Types of Trusts Revocable Trust vs. Irrevocable Trust Living Trust vs. Testamentary Trust
20	Revocable Living Trusts Used to avoid Probate at death and during lifetime. Grantor re-titles assets into the name of the Revocable Trust during lifetime Grantor is commonly the beneficiary and Trustee of the trust during lifetime Assets owned by the Trust at the time of the Grantor’s death pass outside of the probate process Similar to creating “private beneficiary designation”
21	Trusts Also Used To Control Inheritance Revocable, Irrevocable, Living or Test. Trust allows Grantor to control distributions beyond the age of 18-Age of Majority in NC Can distribute income or principal over a term of years or the lifetime of a Beneficiary Beneficiary can still receive distributions for education, health care, support etc. with approval of Trustee
22	Specialized Trust Provisions Dollar distributed for a dollar earned Achievement distributions/rewards Drug and alcohol testing Supplemental Needs of a disabled Beneficiary to avoid disqualification of benefits Generation Skipping Trusts
23	Estate Taxes Estate Taxes are separate from income taxes Estate Taxes are assessed on assets in excess of exemption amount Current Federal and North Carolina exemption amount is $2.0 Million per Decedent
24	Estate Tax Exemption 2004 and 2005: $1.5 Million 2006, 2007 and 2008: $2 Million 2009: $3.5 Million 2010: Federal Estate Tax Repealed 2011: $1 Million Future Legislation Uncertain
25	Estate Tax Trusts can be established to minimize estate taxes Husband and Wife can create trusts that will enable them to combine their exemptions and pass $4,000,000 to their beneficiaries
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27	The “I Love You” Will There is an unlimited Marital Deduction for property passing to a surviving spouse Example: Bill and Mary: Combined Taxable Estate: $4 Million Estate Taxes Due Upon Bill’s Death: $0
28	“I Love You” Will continued… Upon Mary’s Subsequent Death: Mary’s Taxable Estate: $4,000,000 Mary’s Estate Tax Exemption: -$2,000,000 Net Taxable Estate $2,000,000 Total Estate Tax Due $920,000
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30	Irrevocable Trusts May be used to remove assets from a person’s estate for estate tax, Medicaid or asset protection purposes Involve giving up control and use of assets to achieve the objectives described above May have to file separate income tax return Used commonly with Life Insurance policies to remove death benefit from the Decedent’s estate
31	Gift Tax There is no gift tax on transfers between husband and wife or on charitable gifts. Can make gifts of up to $12,000 to an unlimited number of beneficiaries each year. Medical and educational expenses paid directly to the provider are also gift tax free. For gifts in excess of those discussed above, there is a Federal lifetime gift tax exemption of $1,000,000. For North Carolina gift tax purposes, the lifetime exemption is only $100,000 and applies only to certain beneficiaries.
32	Timothy A. Nordgren BRADY, NORDGREN, MORTON & MALONE, P.L.L.C. (919) 573-1415 Email: tim@timnordgren.com Website: www.bradynordgren.com