North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

Everyone can benefit from planning for the future, whether it involves the distribution of property, tax reduction, or the care of family members. A comprehensive estate plan that will protect you and your loved ones involves more than just a simple will and is often best accomplished by using a team of advisors. In addition to your estate planning attorney, the services of a certified public accountant, investment advisor, insurance professional and a bank trust officer may be advisable. In developing your estate plan, you should consider the following:

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            1.         What is a Life Settlement?    A life settlement is the sale of an in-force life insurance policy for an amount great than the cash surrender value of the policy and less than the face value of the policy.

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The North Carolina Legislature has revised (long overdue, in my opinion) the statutory Health Care Power of Attorney (HCPOA) and Declaration of a Desire for a Natural Death forms.  The Living Will (LW) is now called "Advanced Directive for a Natural Death."  Both forms offer more choices in terms of treatment options, etc., and allow one to designate whether or not the agent under the HCPOA can override the instructions in the LW.

Since these new forms are improvements on the old ones, I recommend that everyone execute a new HCPOA and LW, as well as a separate Authorization for Disclosure of Protected Health Care Information under HIPAA.  These are important legal documents, so it's a good idea to consult with your attorney and physician prior to signing them.  It is also important to make sure that the strict witnessing and notarization requirements are met.

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Clerks of Court, the ex officio judges of probate and guardianship matters in North Carolina Counties, can now order mediation in those cases.  Parties to the proceedings can also request that mediation be ordered.  See this memo on the Clerk Mediation Program from the North Carolina Court System website.

While I don't get involved in many contested matters, I have seen mediation work wonders.  In many court systems, mediation is mandatory for civil proceedings.  It can save time and money for the parties and help ease the crowded court dockets.

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Estate planners love acronyms, and one of the most common when referring to a particular type of trust is QTIP, which stands for Qualified Terminable Interest Property.  A QTIP trust provides a way for someone to leave property in a trust for a spouse free of tax by way of the unlimited marital deduction, but yet control where the assets go at the death of the spouse.  The QTIP assets are included in the estate of the surviving spouse for estate tax purposes even though he or she has little or no control over them.

As you can imagine, QTIP Trusts are especially favored in second marriages where there are children from the first marriage.  This article on bankrate.com discusses estate planning in second marriages, including QTIP Trusts.  However, the article fails to mention the use of Credit-Shelter (or Bypass) Trusts, which can also provide support for the surviving spouse but are used in larger estates because the assets are sheltered from estate taxes at the death of the second spouse to die.  Also, the article seems to say that the estate tax exemption is $1 million, which is erroneous.  The federal lifetime gift tax exemption is $1 million, but the estate tax exemption is $2 million.

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North Carolina residents who wish to donate their organs after their death will now have more assurance that their wishes will be respected.  For years, NC organ donors have been able to have a red heart placed of their drivers license to indicate their intent.  Effective October 1, donors' intent will be legally binding, meaning that, theoretically at least, family members cannot override the decision. 

However, I believe that the law will not always be respected when health care providers are faced with objecting family members.  After all, they can file a lawsuit if they feel strongly enough, while the donor obviously can't!

See this article on Charlotte.com

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On September 7,  the U.S. House of Representatives passed H.R. 1908, The Patent Reform Act of 2007. Section 10 of that bill prohibits patenting tax strategies. While the bill prevents future patents on tax strategies it is neutral on the validity of patents that have already been issued.

Some tax strategies have already been patented, including one dealing with funding a Grantor Retained Annuity Trust (GRAT) with stock options.  The owner of that patent actually sued someone who used the technique without obtaining permission.  Several other patents involving charitable gifting strategies have been submitted to the Patent Office - assuming the bill becomes law, those should be stopped.

This bill is good for both for taxpayers and tax professionals, preventing undue restrictions on the ability to adopt tax-saving techniques.

Click here to access the text of the bill.   The ban on tax patents appears on pages 55 through 57.

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While this posting doesn't exactly relate to North Carolina law, one of NC's neighboring states, Tennessee, has adopted legislation to allow Domestic Asset Protection Trusts (DAPTs).  Being licensed in TN as well as NC, this is of interest to me, and it may be of interest to NC residents who want to establish a DAPT, but would prefer to "stay close to home."

With the addition of TN, 10 states now allow DAPTs, but TN is the only one in the Southeast.  The TN law refers to their version of the DAPT as the "Tennessee Investment Services Trust" (TIST), hoping to avoid the negative connotation the term "Asset Protection Trust" has for some.

DAPTs, including TN's TIST, allow a grantor to contribute assets to a trust in which the grantor is also a beneficiary, while keeping those assets protected from creditors.  There are certain exceptions, of course, and all of the statutory requirements must be met for the protection to  be effective.

Tennessee has also extended their rule against perpetuities to 360 years, allowing the TIST (and other TN trusts) to last for many generations.  North Carolina's rule against perpetuities has also been repealed this year - are NC DAPTs next on the horizon?  It certainly would be a way to keep trust dollars in the state and perhaps attract investment funds from other states.

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The IRS recently announced that the total number of estate tax returns filed fell by 58 percent to about 45,000 in 2005 from about 108,000 in 2001. The total amount of assets represented by these returns also fell, although by a lesser percentage. The total gross estate (assets) on these returns fell by 14 percent to $185 billion in 2005 from $216 billion in 2001. Net estate taxes reported on these returns declined by even less, only 8 percent.  Click here for the IRS Estate Tax Facts.

With the estate tax exemption now at $2 million, I am doing fewer estate tax returns as part of my estate administration practice.  Since, strangely enough, I enjoy preparing tax returns, that's disappointing.  Death may be certain, and taxes may be certain, but death taxes are becoming a relative rarity.

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I previously blogged about former U.S. Attorney, state judge and North Carolina Republican Chairman Samuel T. Currin and attorney Rick Graves being indicated for tax fraud.  Mr. Graves was acquitted by unanimous jury verdict, but Mr. Currin plead guilty to the tax fraud charges as well as securities fraud.  Earlier this week he was sentenced to 70 months in federal prison.

Mr. Currin conspired to launder almost $1.5 million through his law firm's trust account, and failed to disclose an offshore debit card account. He also manipulated stock prices of several companies by disseminating false information, and then profited from the increased stock prices that resulted.

Chapel Hill's own John McCormick was also recently arrested in Arizona.  The former attorney, who was disbarred after his disappearance, is accused of stealing more than $1 million of his clients' money.

Finally,  former Durham D.A. Mike Nifong reported to the Durham jail to serve his one day sentence for contempt of court.

We lawyers have a hard enough time with our public image even in the absence of newsworthy cases like these.  Please rest assured that the vast majority of attorneys are law abiding, honest, and loyal to our clients.  I personally place the utmost importance on the trust of my clients, and do everything I can to maintain that trust at the highest level.  Beyond the obvious specialization in trust law, that is the reason I named my firm TrustCounsel, P.A.

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The North Carolina Long-Term Care Insurance Premium Tax Credit has been reenacted effective for the 2007 tax year through 2012.  A credit of 15% of the premium costs, up to a maximum of $350, is allowable for each policy.  The credit is restricted those under the following AGI limits:

Married filing jointly - $100,000

Head of Household - $80,000

Single - $60,000

Married filing separately - $50,000


Also, those that take a deduction as part of health care expenses on their Federal income tax return cannot take the NC LTC tax credit. 

Click "Continue Reading" for the text of the statute.

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