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

In North Carolina it is not uncommon for persons to handle administration of a decedent's estate without hiring a lawyer or an accountant.  Because of the complexity of the law and the likelihood that certain requirements or opportunities will be overlooked, I certainly don't recommend going it alone.  This post is not intended to be a do-it-yourself guide, but simply an overview of the basic process.  Complying with income tax requirements is the most complex part of the majority of estates.

A deceased individual's tax year ends as of the date of death.  Thus, all of the items of income and deduction prior to that date are reported on Form 1040.  The tax year for the estate begins on the date of death, and generally ends on the last day of the month 11 months later.  A separate tax id number for the estate is necessary and must be obtained from the IRS.  The tax id number is provided to all financial institutions in which the decedent owned an account for income reporting purposes, and is used for the estate checking account.

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IR 2010-012:

WASHINGTON — People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card. [Emphasis added.]

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For years, there has only been North Carolina estate tax due if federal estate tax was due.  Now, however, that the federal estate tax is gone (for now, anyway), what's the status of the NC estate tax?

N.C.G.S. Section 105-32.2 provides, in pertinent part, as follows:

"The amount of the estate tax imposed by this section is the amount of the state death tax credit that, as of December 31, 2001, would have been allowed under section 2011 of the Code against the federal taxable estate. The tax may not exceed the amount of federal estate tax due under the Code."  [Emphasis added.]

Regardless of how the first sentence above is interpreted, since zero federal estate tax is due for individuals dying in 2010, the second sentence clearly mandates a zero NC estate tax as well. 

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I'm at the University of Miami School of Law's Heckerling Institute on Estate Planning this week.  Our first speaker, Lou Mezzullo, stated that he thinks Congress will not act this year on restricting planning with Grantor Retained Annuity Trusts (GRATs) and Family Limited Partnerships (FLPs) and Family Limited Liability Companies (FLLCs).  Too many other things of importance to tackle.

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This posting is courtesy of attorney Marc Soss of Florida:

The aging demographics of the United States coupled with the Pension and Recovery Act of 2006 (the "PPA”) and Deficit Reduction Act of 2007 (“DRA”) have provided an excellent planning opportunity to create tax efficient vehicles to solve a clients’ long-term care planning needs. Beginning on January 1, 2010, a tax-free planning option will become available for individuals who desire to provide for long-term medical care by utilizing an existing annuity or life insurance contract purchased after 1996. While not a new concept (it dates back to 1997), the 2010 tax-free planning opportunity may be beneficial to an individual with a larger than needed life insurance policy death benefit, unaffordable monthly or annual premiums, an under-performing or matured deferred annuity contract, or the desire to incorporate long-term medical care into his or her estate plan. 

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The Dow Jones Newswire quotes Rep. Charles Rangel, Chair of the House Ways and Means Committee, as saying that he does not favor retroactive estate tax legislation (to January 1, 2010). The same article quotes Rangel's Senate counterpart, Sen. Max Baucus, Chairman of the Senate Finance Committee, as saying he wants retroactivity.  What's an estate planner to do?  I'm advising my clients to plan for both sets of laws - estate tax and the modified carryover basis rules.

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From The New York Times to my bully pulpit:

This article helps explain why revising old estate plans is more important than ever, given this bizarre (tax-wise) year of 2010. 

And for heaven's sake, if you don't have an estate plan, what are you waiting for?  Today is the first day of the rest of your life, but tomorrow may be the last day of the life you had.  Be a grownup and get a plan! 

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Carolina Donor Service will answer all your questions about organ donation in North Carolina.  Also, don't forget that in a Health Care Power of Attorney you can give your agent the power to donate your organs.

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This is from Steve Akers' recent presentation, Estate Planning in Light of One-Year 'Repeal' of Estate and GST Tax in 2010:

"the Administration proposes to dramatically change the rules regarding valuation discounts (emphasis added). If there is an estate and gift tax reform package adopted next year, it could include that provision. If there is no legislation, there are indications that the IRS will issue regulations under §2704 that would place significant restrictions on valuation discounts on entities that are valued on the basis of their liquidation value (such as family limited partnerships holding marketable securities or other assets other than operating businesses.) Therefore, to have a chance to take advantage of the lower 35% rates in 2010 and to avoid the coming restrictions on valuation discounts, clients should consider make desired gifts and sales as early in the year as possible (Emphasis added).

Since the estate tax is sure to return, I am advising clients for whom a family limited liability company makes sense to form it now, and if possible use their $1 million lifetime gift tax exemption now to take advantage of discounting before it is legislated away.

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I just put this Estate Planning Alert on my firm's website homepage, but thought it would also be appropriate for this blog:

As of January 1, 2010, there is no more federal estate tax. The estate tax has been replaced with a complex modified carryover basis regime. In 2011, the estate tax is scheduled to return, with a $1,000,000 exemption and 55% rate (plus an additional 16% for North Carolina residents). Due to these changing laws, it is imperative that everyone with an estate of $1 million or more do proper planning to ensure that income and estate taxes will be minimized. Be aware that the face value of life insurance is included in calculating one's estate, so even many young couples have estates in excess of $1 million. Do not let your family pay tax unnecessarily.  Consult an estate planning specialist today.

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This is a basic outline of initial procedures and considerations in an incompetency and guardianship proceeding in North Carolina.  Such proceedings are necessary when an adult can no longer care for or make decisions for himself or herself and there are no feasible alternatives in place.

Petition for Adjudication of Incompetence is filed with the Clerk of Court.

• Anyone can file the petition.
• Must be served on the respondent.
• The Clerk appoints a local attorney as guardian ad litem (GAL) for the respondent.
  The GAL represents the respondent, investigates and reports to the Clerk about the respondent’s condition.
• The respondent may retain his or her own counsel, in which case the Clerk may then dismiss the GAL.
• Any party can request a multi-disciplinary evaluation.
   

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The following is a guest post by Chris Birk of SuretyBonds.com, which also publishes the Surety Bond Insider:

If your list of New Year’s resolutions seems thin, look no further than your estate plan — and make sure you’ve included a waiver of bond for the executor.

Probate bonds can prove a costly headache. Without a will that explicitly waives the need for a probate bond, courts have no choice but to mandate their purchase unless the heirs formally agree that a bond is unnecessary. And even then the court may still deem a probate bond necessary to ensure the estate and its assets are protected and debts are paid.

The absence of a bond waiver ensures that the executor is likely to spend time and money negotiating a financial and legal hurdle in a process that already has its fair share.

Surety companies will also examine the financial and credit history of the executor before issuing a bond. Make no mistake — there’s an underwriting process for these bonds, just like any other risk-management mechanism. There are cases where an executor has failed to qualify for a bond, triggering a new series of legal maneuvers involving the surety company.

The cost of a probate bond depends on the value of the estate and its unsecured debts. For estates valued at more than $1 million, bond premiums could easily run about $2,000 per year depending upon the location.

While the estate can pay for bond costs, think of it more as a reimbursement — you can’t access the estate funds until probate is complete. And sureties won’t issue bonds with an I.O.U. In addition to upfront costs, executors (and administrators) are on the hook for renewals and premiums each year.

These costs and potential aggravations can slow the probate process. They’re also a recipe for confusion and, in many instances, unnecessary expense.

With the new year underway, now is a great time to revisit your estate plan and thoughtfully consider including a bond waiver.

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From its inception, the 2001 tax act was scheduled to repeal the federal estate tax and generation skipping transfer tax (GSTT) for one year beginning January 1, 2010. This should come as no surprise. What is surprising, however, is the fact that the 2001 tax act has now played out and repeal, at least temporarily - and unless reinstated retroactively - is upon us. This post is from today's Advisor's Forum Wealth Counselor  and explores how we got here (which may be instructive as to what will happen in the future) as well as some of the planning implications of no federal estate tax or GSTT for at least some part of 2010.

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It's 2010! As of January 1st, the federal estate tax is no more and it may mean that you should revise your estate plan and related documents. Anyone with total assets over $1 million (including face value of life insurance, retirement, home equity, etc.) should make make sure there estate plan is up to date. Click "Continue Reading" to find out what the change involves, what happens next year, and what steps you might want to take now to ensure your wishes are carried out.

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