Delivering News and Updates on Wills, Trusts, and Estate Administration Matters |
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In this sweet edition of our newsletter, consider whether your heirs would benefit from a protected inheritance, discover the questions you should ask when you inherit real estate, register for our Executor's Workshop, see what we've been up to in the community, and connect with us!
WE β₯οΈ OUR CLIENTS!
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Dearly Beloved: The Six Heirs Who Would Benefit from a Protected Inheritance
Whether we want to admit it or not, there are some people in our lives who may not be the best candidates to receive a direct inheritance of our assets. By direct inheritance, we mean an outright inheritance, free of any type of guardrails or structure. A direct inheritance is typically what heirs receive via your Last Will and Testament or through intestate succession (the state's plan that applies when you have no plan of your own). For example, a clause in a Will saying, "I give 50% of my estate to each of my children," is a direct inheritance. Once probate is finished, your child will get a check for whatever 50% of your estate comes out to be. Whether the check is for $100.00 or $100,000 or $1,000,000, it doesn't matter. With a direct inheritance, your child gets a check with no strings attached.
For some loved ones, however, a direct inheritance is unwise and perhaps even dangerous. For these heirs, it may actually be more beneficial to them, due to their circumstances, to have a protected inheritance. By protected inheritance, we mean an inheritance that has careful guardrails placed around it, one that incentivizes desirable behaviors or achievements, one that allows money to flow to the heir but not in such great sums that it's the equivalent of drinking from a fire hose. We mean one that is more likely to be administered via some type of trust.
Let's look at the six "dearly beloved" heirs who would benefit from a Protected Inheritance:
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A disabled spouse and children with special needs. A spouse who is disabled may qualify for or already be receiving government benefits, such as Medicaid or Social Security Disability. These benefits are typically income-based. Thus, if your disabled spouse receives a direct inheritance from you, your spouse risks losing their benefits. Similarly, minors with special needs may also be eligible for or receiving certain government benefits. Again, these benefits may be disrupted (or even discontinued) if your child receives a direct inheritance.
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Minors. Under current law, minor children cannot inherit directly from an estate until they reach the age of majority, The age of majority in North Carolina is 18. If you leave an inheritance to someone under the age of 18, that inheritance will be paid to the court. The court will hold on to and maintain the inheritance until such time as your heir turns age 18. If you'd rather not have the court in charge of your heir's protected inheritance, then you should set up a trust.
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Young Adults. Even once your heir has reached age 18, you may question his or her ability to handle money responsibly. Much has been written about the effect COVID-19 has had on children's development in many areas. That should lead you to consider whether an 18-year-old today is the same as an 18-year-old 5 years ago or 10 years ago. Lack of financial maturity or sophistication may be a sign that a protected inheritance is the way to go. There's no rule that says you have to give your heir all of their inheritance at once. With young adults, it may be more appropriate to stage it out such that they receive money at different times during their lives.
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Heirs with creditors. Financial woes are not unique to young adults. You may have loved ones in their 30's, 40's, and 50's who have filed for bankruptcy, who struggle with low credit scores, who use their Visa credit card to pay off their American Express, or who simply spend every cent they get and more. If you do not want your assets to be frittered away due to frivolous and reckless spending, then consider leaving a protected inheritance for these heirs.
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Heirs with dependency problems. Addiction knows no boundaries. It does not matter how old you are, how educated you are, or how wonderful a person you are. Still, heirs who are battling addiction issues or who struggle with alcohol or drug dependency issues would certainly benefit from a protected inheritance. If you give a direct inheritance to an heir with a substance abuse problem, the best-case scenario is that they spend through their entire inheritance in a matter of weeks. The worst-case scenario is that they cause irreparable harm to themselves or others.
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Heirs with rocky marriages. If your child's marriage is in trouble and the writing is on the wall, so to speak, then a protected inheritance would be helpful. You could place guardrails around your child's inheritance to prevent it from being divided with his or her ex-spouse as part of a divorce proceeding or being counted against your child in an alimony case. However, you should also consider that your heir may need the inheritance to pay for a good divorce attorney and that without a direct inheritance, they may be forced to stay exactly where they are.
A protected inheritance is not a punitive measure. A punitive measure would be to strip the heir of his or her inheritance entirely. Rather, a protected inheritance is a loving way to give your heir what you want them to have in a way that will not cause unintended harm. What's love got to do with it? Everything!
Love them enough to recognize and accept their limitations and challenges.
Love them enough to put them in a position to be successful.
Love them enough to help them resist temptation.
Love them enough to still allow them an inheritance.
Love them enough to put the right kind of guardrails in place for them.
Love them enough to PLAN.
If you are interested in setting up a protected inheritance for your dearly beloved heir, reach out. We can help you navigate your heir's specific situation. It's the loving thing to do.
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π 10 Questions to Consider When Inheriting Real Estate
Real estate is often one of the most valuable assets in an estate. Proper handling of an inherited home or parcel of land could yield significant financial gains for your family, so it's important that you fully consider your options. It is also important that you piece together the legal steps which may be necessary in order to effectively transfer title of the property to you. To help you organize your thoughts, we've put together the following list of questions for you to work through:
π Where is the property located respective to me and where is it located respective to the person
who died (for example, is the property situated in the same county and state where the deceased person resided)?
π How did the real estate pass to me (e.g., by trust? by Will? by intestate succession?)?
π If the property is coming to me outside of a trust, then what are the probate rules that govern
real estate in the county and state where the deceased person resided (and also the rules for
real estate in the county and state where the property is situated if the locations are different)?
π Did I inherit 100% of the property or am I one of several heirs, each with a percentage
interest in the property (and is that percentage interest held as tenants in common or joint with the right of survivorship)?
π If I am only a partial owner, what is my relationship like with the other heirs, and do I want to be
co-owners with them?
π What is the value of the home, and how do I document this for tax purposes (e.g., do I need to
have a formal appraisal, or can I ask a realtor to prepare a set of comparables)?
π What kind of monthly expenses am I on the hook for (whether in the short-term as I prepare
to sell or in the long-term if I plan to keep the property), and when does my obligation start?
π What do I want to do with the property (e.g., take ownership and move into it, take ownership
and rent it out, take ownership and sell the property, disclaim ownership entirely)?
π If I decide to take ownership of the property so I can sell it, when can I sell (i.e., what timing
rules must I adhere to) and who needs to sign the deed (just me, me and my spouse, me and the
Executor of the estate, etc.)?
π If I take ownership of the property, does the property need to be re-titled, and if so, how should
it be titled (e.g. in my name alone, in my trust's name, in an LLC)?
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Out and About with Privette Legacy Planning!
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Last week, Amy popped up in Raleigh as the featured speaker for RE/MAX United. Amy spoke to RE/MAX real estate clients about general estate planning and the inheritance laws which intersect or affect real estate. The program went so well that the head of the RE/MAX United group has asked Amy to lead another program for his agents! |
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Where will Amy pop up next? |
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Kim Moser served as Privette Legacy Planning's very own Cupid this year by delivering Valentine's Day goodies to several of our business partners. Referrals are the heart of our business, and we wanted to let our partners know how thankful we are for them.
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Jason York, Senior Vice President and Wealth Management Development Officer with Trust Company of NC, was all smiles after receiving his treats!
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We teased our first-ever Executor's Workshop in last month's newsletter, and you responded in a BIG way! Half of the spots have already been taken! We do have room for a few more people, so here are the details:
Dates: March 22 and March 29, 2023
Time: 6:00-7:00 pm
Location: TBD but hoping to use the Conference Room at The Cary Arts Center, 101 Dry Avenue, Cary, NC 27511 (about 1.5 miles from our office)
The purpose of the Workshop is for Amy to teach you the skills you'll need when you are called upon to serve as the Executor of your loved one's estate! As the saying goes, "forewarned is forearmed." So, come join us and arm yourself with knowledge in order to be prepared for battle probate when the time comes!
The Workshop consists of two sessions carefully designed by Amy to provide you with real, practical experience navigating the steps of probate. Although this event is primarily directed at probate and the responsibilities of the Executor, many of the skills needed for probate are also needed when serving as the Trustee for someone's trust.
In Session 1, you will learn all about the probate process, including the different types of court proceedings available (small estate, spousal allowance, full probate, etc.), the rules and timeline and costs involved in each type of proceeding, and your duties as the Executor for each type of probate proceeding.
In Session 2, you will be given an opportunity to practice what you learned in Session 1 when you are asked to administer the estate of your dear [yet imaginary] Uncle Bob, Aunt Betty, Sister Sue, or Cousin Carl. Amy will provide you with the contents of your relative's will (if they had one!) and a list of his or her assets. You will then analyze your relative's estate to determine if they would qualify for a small estate, can get by with only a spousal allowance election, or require a full probate. You'll even prepare the necessary court forms yourselves!
You do not need to bring anything with you. We'll have pen and paper for notetaking at the ready.
It is important that you attend both sessions. If you are interested in the Workshop but these dates in March do not work for you, please let us know. If we have enough interest, we will offer another 2-week session in May or June.
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It really IS different at
Privette Legacy Planning.
We want to build a lasting relationship with you. Even if you've finished your planning, even if that probate case is finished, we want to celebrate life's successes and mourn life's tragedies with you. The best way to do that is to stay engaged with us across our various social media platforms.
Also, we are already in planning mode for "Summer Fun With PLP," and you'll miss out if you're not following us!
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