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

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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Thanksgiving is less than a week away, but many people currently have turkeys of a different kind - poorly drafted Wills.

If your Will is missing one or more of these features, it's time for an update:

• Waiver of bond for the executor
• At least one successor executor (in case the first named executor can't serve)
• Trust provisions for minor beneficiaries
• Comprehensive powers for the executor and/or incorporation of statutory powers
• Contingent beneficiaries (in case the primary beneficiaries are deceased)
• Self-proving affidavit (witnessed and notarized)

Having these provisions can save a lot of time, money and aggravation in the administration of your estate.  And these are just the simplest, most obvious things.  Any number of other provisions may be advisable depending on your situation.

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Last Thursday's Wall Street Journal's website featured an article on online estate planning programs: Before It's Too Late: A Test of Online Wills.  As you might imagine, I'm not a big fan of do-it-yourself estate planning, particularly for those who have substantial assets.  Creating a Will and other documents yourself with the help of software may be better than nothing, but it can create a sense of false security, as it did for the author of the article, Jane Hodges. 

In the articles, Hodges says: However, in crafting our revocable trust, the program presented a pop-up note indicating that people with more than $1 million in assets might need an attorney due to changing inheritance tax laws that take effect in 2011. (Our joint assets exceed this amount mainly due to hefty life insurance policies and the value of our home, which we don't own outright.) [Emphasis added.]

In this case Hodges did not see an attorney and thus failed to address a huge potential issue - estate taxes.  If the federal estate exemption returns to $1 million in 2011 as scheduled, assets over $1 million, including proceeds of life insurance policies, will be taxed at 55% for federal purposes, not to mention any state estate taxes.  Saving a couple of thousand dollars on legal fees could cost her beneficiaries hundreds of thousands of dollars in extra taxes.  Plus there are a whole host of other issues that can be addressed by an experienced estate planning attorney that websites ignore. Caveat emptor!

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Last week was National Estate Planning Awareness Week - I'm sure most of us didn't know that, but awareness about the necessity of estate planning is pitifully low, so anything that can be done to help folks realize that it's important to plan for the future is good.

Here's an article from USA Today - 5 myths about wills, and what you should do.  However, I disagree with one thing in the article - that Do-It-Yourself software and websites are fine for basic wills.  The problem is that many people think they need only a basic will, but in reality their situation is not so simple.  I don't even recommend using a non-specialist for your estate planning.  I have seen many poorly drafted "simple wills" that end up complicating probate and costings thousands of dollars in attorney and court fees more than a properly prepared will would have.

Go see an attorney who specializes in estate planning.  Your family and property are too valuable to rely anyone but an expert.

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This article from WSJ online on the effect on changing estate tax exemptions on what's left for the surviving spouse describes just one reason why.

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This article discusses when it might be appropriate to include your parents or grandparents in your will or living trust - generally when you are providing support for them.  In most cases, funds should be held in trust for the elder relatives, to protect the assets and preserve Medicaid eligibility.

Note: The article is written by a Canadian lawyer, so it contains a reference to Canadian governmental benefits.  Otherwise it is applicable to U.S. residents.

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Beginning January 1, 2010, it will be unlawful for North Carolina attorneys to prepare a Will or Codicil naming the attorney as a beneficiary unless the attorney is within five degrees of kinship of the testator, a present or former spouse of the testator, or a parent, sibling or child of a spouse or former spouse of the testator.  If the law is violated the bequest or devise is void.  Inclusion in the Will or Codicil as an Executor or Trustee is permissible.

Drafting such a Will is also viewed as unethical by the North Carolina State Bar, which means that an attorney can be disciplined or disbarred for doing so.

If an attorney does draft a Will or Codicil in which he or she is a beneficiary of an allowable family member, he or she must attach an affidavit to the Will stating that he or she is in compliance with the law.  N.C.G.S. Section 31-4.1.

Also, on every Will or Codicil prepared after December 31, 2009, an attorney must add a statement with his or her name and business address, stating that he or she prepared the Will. N.C.G.S. Section 31-4.2.

Session Law 2009-182

Interestingly, the new law does not mention living trusts, so those desiring to do so could easily skirt the law by preparing a revocable living trust rather than a will.  You can tell we don't have any estate planning experts in the North Carolina General Assembly!

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Beginning October 1, 2009, when a lawsuit is filed to contest a Will (Caveat), the probate administration will no longer be fully suspended until the caveat is resolved.  Only certain actions, such as distributions to beneficiaries and payment of personal represenative's commissions, will be prohibited.

Session Law 2009-131, amending N.C.G.S. Section 31-36.

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See what the finance wizards at Kiplinger have to say with this fun quiz about saving money.

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That's a question we hear frequently from callers to the office.  While we like to be able to answer that question quickly and easily, that's not possible.  My favorite lawyer's answer applies: "well, it depends."  Depends on what, you ask?  Here are some of the factors that impact the fee for a Will:

• Are you married? 
  
  • Will your spouse be doing planning as well?
  • Are you in a second marriage with children from a prior marriage?
• Are you separated but not divorced? 
  
  • Do you have a settlement agreement?
• Do you have a prenuptial agreement?
  
  • What are your obligations, if any, upon your death?
• Do you have minor children?
• Do you have any elderly or disabled family member you wish to provide for?
• What's the total value of your estate? 
  
  • What are the values of the individual assets?
• Do you own real estate?
  
  • Where's it located?
• Do you own joint property?
  
  • With whom?
• Do you have any life insurance?
  
  • Who's the beneficiary?
• Do you have retirement accounts? 
  
  • Who's the beneficiary?
• Do you own a business?
• Have you made large gifts in the past?
• Do you have any debts or other financial obligations that will survive your death?

Then there are other questions to consider:

• Have you considered a living trust to provide privacy and avoid probate?
• What about Durable Powers of Attorney, Health Care Powers of Attorney, Living Wills and HIPAA Authorizations?  For some, these documents are more important than a Will.
• Do you want to protect your heirs from creditors, predators and mismanagement of the inheritance?
• What's the best way to handle estate tax planning (looking toward 2011 and a possible reduced exemption of $1 million).
• What's the best way to handle charitable gifts from an income and estate tax standpoint?
• What about advice and counseling about the process and pieces of estate planning

As you can see, it's virtually impossible to quote a one-size fits all fee for a Will (or complete estate plan, for that matter).  Any law firm who does that will most likely be providing a cookie cutter Will that doesn't fully address your particular situation.  And online and software do-it-yourself Wills are even worse! 

My advice is to make sure you have a lawyer who specializes in estate planning assist you with your estate plan. Isn't it worth the time and cost to ensure that you and your family are fully protected?

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I recently received the following email, and then had a phone conversation with its author.  This is a legitimate documentary, with filming to take place in Montreal over the course of the year.  All expenses for the trip to Montreal will be paid.  Feel free to contact me or Ms. Ouimet directly.  Click "Continue Reading" for the "looking for" message referred to by Ms. Ouimet.

Dear Mr. Herman-Giddens,

I'm a researcher working on a documentary series about people's first-hand experiences with a family will. The project is being produced for a major US broadcaster.

I came across your blog and found your knowledge very inspiring. I was hoping you may have stories to share with me and perhaps help me get in touch with families having dealt with a difficult will story. We would also very much appreciate having you on board as our legal expert to help us make sense of all the legal complexities surrounding wills in your state.

Our series explores various, unexpected family issues surrounding wills. We would like to showcase the powerful, true-life stories of family wills, in an effort to create a deeper awareness of the difficult subjects of legal wrangling, conflict, grief and deep-seeded dynamics that can often arise when the will of a loved one is read. 

We believe it will help others reach closure on their feelings concerning a past will, and help them make sense of their own experience with a will.

Please feel free to share the "looking for" text pasted below with your clients or on your blog if you wish and/or deem it acceptable.

Thank you, I look forward to hearing from you soon.

Katherine

--

Katherine OUIMET

___________________________________

CMJ Productions -

http://www.cmjprod.ca

The Will (working title) / a ten-part hour-long documentary series

koandco@gmail.com

514-277-5504

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They other day a client came in and said that he had heard that probate in North Carolina was a "breeze."  Wrong!  While probate here is less expensive than in some states, I still counsel my clients to avoid it in most cases.  Here are 10 Reasons to Avoid Probate in North Carolina:

1. Court fees can exceed $6,000.
2. Accountings must be filed reporting every penny coming into and going out of the estate.
3. Documentation of bank accounts and expenditures is required.
4. A formal inventory of assets is required.
5. Attorneys fees generally far exceed fees in similar non-probate estates.
6. All filings are in the public record.
7. Notices to creditors must be published in the local newspaper.
8. Delay due to court rules and busy Clerks' offices.
9. Bond may be required if not waived in the Will.
10. Stress induced by court deadlines and requirements.

My office handles dozens of probate matters every year, so we have first hand experience with all types of estates.  I recommend avoiding probate to save time, money and aggravation.  Generally, a Living Trust is the best way to avoid probate, but there are other methods as well.  An experienced estate planning attorney to help you make the right decision about handling you estate.

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The North Carolina Court of Appeals' recent decision in In re Will of John A. Jones, Jr.   deals with a Caveat against a Will in favor of the decedent's wife filed by the executor of the prior Will, which provided only a life estate for the wife.  The court affirmed the lower court's decision that there was no undue influence by the wife.

The Court of Appeals referenced the North Carolina Supreme Court case of In re Will of Turnage, 208 N.C. 130, 132, 179 S.E. 332, 333 (1935) in identifying seven factors that are probative on the issue of undue influence:

1. Old age and physical and mental weakness of the person executing the instrument.

2. That the person signing the paper is in the home of the beneficiary and subject to his constant association and supervision.

3. That others have little or no opportunity to see him.

4. That the instrument is different and revokes a prior instrument.

5. That it is made in favor of one with whom there are no ties of blood.

6. That it disinherits the natural objects of his bounty.

7. That the beneficiary has procured its execution.

If the person who contests the Will (the Caveator) can sufficiently prove some or all of these factors, he or she may be successful in having the Will declared invalid.

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Today I came across a question and answer column on the Raleigh News and Observer website called "Ask Holly."  The answers are written by a Holly Nicholson, a Raleigh Certified Financial Planner who also has a law degree.  The person posing the question about avoiding probate and finding a good lawyer erroneously referred to revocable trusts as "reversible" trusts.  Ms. Nicholson counseled her to begin the attorney selection process by asking the lawyer about reversible trusts, and then consider using any lawyer who nicely explains that the term is actually "revocable" trusts.

I must respectfully disagree with Ms. Nicholson's recommendation.  I believe that it is best to educate oneself about estate planning terms and techniques before attempting to choose a qualifed lawyer.  Purposely acting ignorant serves no useful purpose, is deceptive, and is not a good way to start off what should be a relationship of mutual trust.  Any attorney worth hiring will be polite and patient regardless of how much or how little a prospective client knows about estate planning.

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As reported in the Lincoln Journal Star, a recent survey by the website LegalZoom found that over 70% of Americans do not have a last will and testament.  Surprisingly, almost 75% of parents reported not having a will.  Many put off making a will because they could not decide who would be guardians of their children should both parents die.  That's consistent with what I see in my practice - many parents tell me they have never done a will because they don't know whom to name as guardian.  Of course, by not doing anything, they are leaving it up to the state to decide.

One can purchase a Will and other estate planning documents on LegalZoom and many other websites.  However, biased though I am, I do not recommend such do-it-yourself estate planning.  Especially when it comes to ensuring the security of your children, it is worth paying a qualified professional to do the job right.

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