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Do You Need an Estate Plan?

3.1.2014

With the new federal estate and gift tax laws, and the repeal of North Carolina's estate and gift tax system, you do not need an estate plan, right? WRONG! It is true that the now "permanent" estate tax law provides for a much higher exemption than ever before: $5,340,000 for 2014, indexed for inflation. But there are still many non-estate tax planning issues that should be addressed in this time of increased exemption levels.

Did you know that if you die a resident of North Carolina without a will, not all of your assets will pass to your spouse, but, instead, some portion of your estate will pass to your children? Or that assets that pass to children under 18 years of age must be held in a court-supervised guardianship where application must be made to the court for distributions, and when that child turns 18, he or she will receive estate assets outright? Did you know that by North Carolina statute, instructions to the court on who you want to serve as the legal guardian for your minor children must be included in your will?

With an estate plan you can address:

  • Who will inherit your assets - without an estate plan, the state picks for you, and you may end up disinheriting an intended beneficiary.
  • Who should be your fiduciaries - guardians for your minor children, the executor for your estate, trustees who can manage and distribute assets to your surviving spouse and/or children without oversight from the court system.
  • Incapacity - designate attorneys-in-fact and health care agents to make health and financial decisions if you are incapacitated.
  • Creditor protection considerations - segregate liability-generating assets from other assets through liability-limiting entities, invest in creditor-exempt assets, and protect your heirs from spendthrift behavior, spouses, and creditors through trusts.
  • Planning with life insurance and retirement accounts - do you have the proper types and amounts of life insurance coverage? Who are the proper beneficiaries of these assets?
  • Your business interest - is there an agreement among co-owners providing for buy-outs upon certain events, and do you understand what it provides? Will the buy-out be unfunded or backed up with disability or life insurance and what are the income and estate tax implications of the buy-out ?
  • Special circumstances - do you have a child with special needs, a blended family with children from prior marriages, or liabilities to a former spouse?

Of course, if you DO have a taxable estate, there are even more reasons to develop a thoughtful estate plan, not only to address the issues above, but to try to mitigate your estate tax burden. Estate planning is not just for the very wealthy.

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