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THE LAW CORNER Basics of Probate & Estate Planning.

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1 THE LAW CORNER Basics of Probate & Estate Planning

2 8 Basic Steps to Probate Step 1. Locate Will and Qualify Executor Is there a will and where is it? If no will, state statute determines who can qualify. Generally, the decedent's spouse or family members will qualify as the executor. Upon qualification, the court, will issue "letters" which are used to prove the executor's authority to administer the estate. Step 1. Locate Will and Qualify Executor Is there a will and where is it? If no will, state statute determines who can qualify. Generally, the decedent's spouse or family members will qualify as the executor. Upon qualification, the court, will issue "letters" which are used to prove the executor's authority to administer the estate.

3 8 Basic Steps to Probate Step 2. Conduct Estate Inventory Executor files an inventory statement with every asset owned by the decedent at death. The value of listed assets on the date of the decedent's death must also be provided by the executor. The inventories are public records. Step 2. Conduct Estate Inventory Executor files an inventory statement with every asset owned by the decedent at death. The value of listed assets on the date of the decedent's death must also be provided by the executor. The inventories are public records.

4 8 Basic Steps to Probate Step 3. Notify Creditors Legal notice in newspaper notifying all who may have any claim against the estate ("creditors") to give the executor notice of those claims. Potential creditors have THREE MONTHS to present their claims. Further, the executor must mail notice to those creditors the executor is actually aware. NO DISTRIBUTION from the estate (for bequests, debts, taxes, or other reasons). Step 3. Notify Creditors Legal notice in newspaper notifying all who may have any claim against the estate ("creditors") to give the executor notice of those claims. Potential creditors have THREE MONTHS to present their claims. Further, the executor must mail notice to those creditors the executor is actually aware. NO DISTRIBUTION from the estate (for bequests, debts, taxes, or other reasons).

5 8 Basic Steps to Probate Step 4. Pay Creditors The executor should pay all valid claims. If not enough assets, the executor must prioritize claims for payment. Beneficiaries named in the will may not inherit anything. Step 4. Pay Creditors The executor should pay all valid claims. If not enough assets, the executor must prioritize claims for payment. Beneficiaries named in the will may not inherit anything.

6 8 Basic Steps to Probate Step 5. Filing of Tax Returns The executor files tax returns for decedents estate and pays all taxes due. Those returns may include the federal estate tax return, the state inheritance tax return, the federal and state gift and income tax returns, and the state intangibles tax return. Step 5. Filing of Tax Returns The executor files tax returns for decedents estate and pays all taxes due. Those returns may include the federal estate tax return, the state inheritance tax return, the federal and state gift and income tax returns, and the state intangibles tax return.

7 8 Basic Steps to Probate Step 6. Preparing Annual Accounts If the probate exceeds one year, the executor must file an annual account with court. The annual account will detail all of the receipts and expenditures of the estate during the year of the account. Step 6. Preparing Annual Accounts If the probate exceeds one year, the executor must file an annual account with court. The annual account will detail all of the receipts and expenditures of the estate during the year of the account.

8 8 Basic Steps to Probate Step 7. Distribute to Beneficiaries The executor is responsible for distributing any remaining estate assets to the beneficiaries of the estate. If a will, to the persons named in the will. If no will or invalid will, the executor will distribute the assets TO THE PERSONS DESIGNATED BY STATUTE in the PROPORTIONS designated in the statute. Step 7. Distribute to Beneficiaries The executor is responsible for distributing any remaining estate assets to the beneficiaries of the estate. If a will, to the persons named in the will. If no will or invalid will, the executor will distribute the assets TO THE PERSONS DESIGNATED BY STATUTE in the PROPORTIONS designated in the statute.

9 8 Basic Steps to Probate Step 8. Prepare Final Account The executor will file a final account with the court in order to close the estate. The final account will detail all of the receipts and expenditures of the estate since the last annual account, or if the estate is closed within one year, during the entire probate process. Step 8. Prepare Final Account The executor will file a final account with the court in order to close the estate. The final account will detail all of the receipts and expenditures of the estate since the last annual account, or if the estate is closed within one year, during the entire probate process.

10 ASSETS THAT TRANSFER OUTSIDE OF PROBATE Assets not subject to probate include: Joint tenants with right of survivorship. Tenants by the entirety between husband and wife. Life insurance proceeds, retirement plans and IRA proceeds, unless the estate is named as the beneficiary. WHY? These assets designate the beneficiary at the death of the owner and therefore probate is not necessary to determine the new owner or to make a transfer of the assets. Does NOT include property held as tenants in common. Assets not subject to probate include: Joint tenants with right of survivorship. Tenants by the entirety between husband and wife. Life insurance proceeds, retirement plans and IRA proceeds, unless the estate is named as the beneficiary. WHY? These assets designate the beneficiary at the death of the owner and therefore probate is not necessary to determine the new owner or to make a transfer of the assets. Does NOT include property held as tenants in common.

11 Intestate Succession Spouses Share No child or lineal descendant or parent entire estate both real and personal property No lineal descendant but parent survives ½ interest in real property, first $50,000 plus ½ balance of personal property Spouses Share No child or lineal descendant or parent entire estate both real and personal property No lineal descendant but parent survives ½ interest in real property, first $50,000 plus ½ balance of personal property

12 Intestate Succession One child or lineal descendant Spouse takes ½ interest in real property, first $30,000 plus ½ balance of personal property More than one child or lineal descendant Spouse takes 1/3 interest in real property, first $30,000 plus 1/3 balance of personal property One child or lineal descendant Spouse takes ½ interest in real property, first $30,000 plus ½ balance of personal property More than one child or lineal descendant Spouse takes 1/3 interest in real property, first $30,000 plus 1/3 balance of personal property

13 Intestate Succession Share of Others Decedent's lineal descendants Per capita at each generation B takes 1/3; D, E, and F take 2/9 Share of Others Decedent's lineal descendants Per capita at each generation B takes 1/3; D, E, and F take 2/9 DecedentW A B E F D C

14 Intestate Succession To parents if no child or grandchild To parents if no child or grandchild W takes ½ interest in real property, plus the first $50,000 of personal property and ½ any excess. The balance goes to M. W takes ½ interest in real property, plus the first $50,000 of personal property and ½ any excess. The balance goes to M. M F W Decedent

15 Basic Estate Planning Basic Estate Planning Package: North Carolina Will & Testamentary Trust Living Will Power of Attorney Health Care Power of Attorney The strange phenomena and statistics. Basic Estate Planning Package: North Carolina Will & Testamentary Trust Living Will Power of Attorney Health Care Power of Attorney The strange phenomena and statistics.

16 THE LIVING WILL Do you want life-sustaining treatments or procedures administered to you if you are in a terminal and incurable condition or a persistent vegetative state? It is called a "living will" because it takes effect while you are still living. Do you want life-sustaining treatments or procedures administered to you if you are in a terminal and incurable condition or a persistent vegetative state? It is called a "living will" because it takes effect while you are still living.

17 THE LIVING WILL A North Carolina living will goes into effect when: 1) your doctor has a copy of it, 2) your doctor has decided that you are no longer able to make your own health decisions, and 3) your doctor and another doctor have determined that you are in a terminal and incurable condition or a persistent vegetative state. A North Carolina living will goes into effect when: 1) your doctor has a copy of it, 2) your doctor has decided that you are no longer able to make your own health decisions, and 3) your doctor and another doctor have determined that you are in a terminal and incurable condition or a persistent vegetative state.

18 THE LIVING WILL Defining life-sustaining treatments or procedures These are treatments or procedures that are not expected to cure your terminal condition or make you better. They only prolong dying. Examples are mechanical respirators, which help you breathe, kidney dialysis, which clears your body of wastes, and cardiopulmonary resuscitation (CPR), which restores your heartbeat. Defining life-sustaining treatments or procedures These are treatments or procedures that are not expected to cure your terminal condition or make you better. They only prolong dying. Examples are mechanical respirators, which help you breathe, kidney dialysis, which clears your body of wastes, and cardiopulmonary resuscitation (CPR), which restores your heartbeat.

19 THE LIVING WILL Defining terminal and incurable condition A terminal and incurable condition is defined as a condition for which the administration of medical treatment will only prolong the dying process, and without administration of these treatments or procedures, death will occur in a relatively short period of time. Defining terminal and incurable condition A terminal and incurable condition is defined as a condition for which the administration of medical treatment will only prolong the dying process, and without administration of these treatments or procedures, death will occur in a relatively short period of time.

20 THE LIVING WILL Defining persistent vegetative state A persistent vegetative state means that a patient is in a permanent coma or state of unconsciousness caused by illness, injury or disease. The patient is totally unaware of himself, his surroundings and environment and to a reasonable degree of medical certainty, there can be no recovery. Defining persistent vegetative state A persistent vegetative state means that a patient is in a permanent coma or state of unconsciousness caused by illness, injury or disease. The patient is totally unaware of himself, his surroundings and environment and to a reasonable degree of medical certainty, there can be no recovery.

21 POWER OF ATTORNEY What is a Power of Attorney? Gives one person the full power and authority to represent another person. Principal, Agent (attorney-in-fact) and fiduciary duties. Must be signed by both the agent and the principal, be witnessed by two people and signed in the presence of a Notary Public. What is a Power of Attorney? Gives one person the full power and authority to represent another person. Principal, Agent (attorney-in-fact) and fiduciary duties. Must be signed by both the agent and the principal, be witnessed by two people and signed in the presence of a Notary Public.

22 POWER OF ATTORNEY Two kinds of Power A General Power of Attorney covers all of your legal, financial and personal decisions except those pertaining to your medical care and treatment. A Limited Power of Attorney only covers decision-making in areas that you specify. Two kinds of Power A General Power of Attorney covers all of your legal, financial and personal decisions except those pertaining to your medical care and treatment. A Limited Power of Attorney only covers decision-making in areas that you specify.

23 POWER OF ATTORNEY When do they become effective? Immediately. A Durable Power of Attorney-even in the event you become mentally unable to make decisions on your own (incompetent). A Springing Power of Attorney-only in the event you become incompetent. When do they become effective? Immediately. A Durable Power of Attorney-even in the event you become mentally unable to make decisions on your own (incompetent). A Springing Power of Attorney-only in the event you become incompetent.

24 POWER OF ATTORNEY Use of the Power of Attorney Nothing to do with mental incompetence. Military people Overseas contractors Spouses or family members who travel abroad for extended periods of time Why? They are immediately effective, so their agent can deposit paychecks, make purchases, pay bills and otherwise represent them financially or legally while they are away or otherwise not available to handle these matters themselves. Use of the Power of Attorney Nothing to do with mental incompetence. Military people Overseas contractors Spouses or family members who travel abroad for extended periods of time Why? They are immediately effective, so their agent can deposit paychecks, make purchases, pay bills and otherwise represent them financially or legally while they are away or otherwise not available to handle these matters themselves.

25 HEALTH CARE POA Gives broad powers to make health care decisions, including mental health treatment decisions, for you. This power includes the power to authorize routine medical tests, scans or surgery, admit you to a facility and administer medications. This power exists only when you are unable to give informed consent and will allow timely permission and consent so proper care can be received. Gives broad powers to make health care decisions, including mental health treatment decisions, for you. This power includes the power to authorize routine medical tests, scans or surgery, admit you to a facility and administer medications. This power exists only when you are unable to give informed consent and will allow timely permission and consent so proper care can be received.

26 HEALTH CARE POA It may be activated if a person is temporarily unconscious, confused or unable to communicate medical desires. Must be mentally competent and of sound mind when signing. Utmost confidence in your designated person. It may be activated if a person is temporarily unconscious, confused or unable to communicate medical desires. Must be mentally competent and of sound mind when signing. Utmost confidence in your designated person.

27 NORTH CAROLINA WILL Common Misnomers Wills are just for the wealthy. I already have a will from another state. I dont plan on having anything left after I die so I dont need one. I am either young or healthy and Ill get to it later in life. Common Misnomers Wills are just for the wealthy. I already have a will from another state. I dont plan on having anything left after I die so I dont need one. I am either young or healthy and Ill get to it later in life.

28 NORTH CAROLINA WILL Any person 18 years of age or older who is of sound mind may make a will. A will is a legal document designating the transfer of your property and assets after you die, dictate funeral arrangements and who will care for your children after you pass away. It is the simplest way to ensure that your funds, property and personal effects will be distributed after your death according to your wishes. Wills are used to avoid the hassles of intestate succession and as much as possible, probate court. Without a will, your estate will be probated and the state, and not you, decides who is entitled to your property and granted custody of your children. Any person 18 years of age or older who is of sound mind may make a will. A will is a legal document designating the transfer of your property and assets after you die, dictate funeral arrangements and who will care for your children after you pass away. It is the simplest way to ensure that your funds, property and personal effects will be distributed after your death according to your wishes. Wills are used to avoid the hassles of intestate succession and as much as possible, probate court. Without a will, your estate will be probated and the state, and not you, decides who is entitled to your property and granted custody of your children.

29 NORTH CAROLINA WILL The Benefits of a Will You chose the executor, preferably two. You dictate funeral arrangements. You provide general and specific gifts. You make plans that benefit you, your family and the organizations and causes in which you care deeply. The Benefits of a Will You chose the executor, preferably two. You dictate funeral arrangements. You provide general and specific gifts. You make plans that benefit you, your family and the organizations and causes in which you care deeply.

30 NORTH CAROLINA WILL The Benefits of a Will…continued You can reduce or even eliminate estate taxes and save taxes in a survivor's estate. You can also create trusts to provide for your spouse, your children and other loved ones. You name a guardian (caretaker) for your children and a trustee (who distributes assets for children until they are mature and capable of making their own financial choices). The Benefits of a Will…continued You can reduce or even eliminate estate taxes and save taxes in a survivor's estate. You can also create trusts to provide for your spouse, your children and other loved ones. You name a guardian (caretaker) for your children and a trustee (who distributes assets for children until they are mature and capable of making their own financial choices).

31 Right to Dissent N.C.G.S. §29-30 (Dower) Spouse may elect not to take share under intestacy or will. May choose: 1/3 Life Estate in all real estate or Life Estate in dwelling house plus fee simple ownership in household furnishings. N.C.G.S. §29-30 (Dower) Spouse may elect not to take share under intestacy or will. May choose: 1/3 Life Estate in all real estate or Life Estate in dwelling house plus fee simple ownership in household furnishings.

32 Right to Dissent/Support ELECTIVE SHARE Provides protection from disinheritance In effect, ignores the will. Limited in apllication, have to value the assets and gifts. SUPPORT AND MAINTENANCE $10,000/yr. plus $2k for each minor child during administration. ELECTIVE SHARE Provides protection from disinheritance In effect, ignores the will. Limited in apllication, have to value the assets and gifts. SUPPORT AND MAINTENANCE $10,000/yr. plus $2k for each minor child during administration.

33 MORE ABOUT WILLS HOW TO REVOKE Subsequent instrument Physical act, i.e. burn, tear, destroy Operation of Law-Divorce or annulment; changes only provisions for spouse. HOW TO CHANGE Codicils Same formalities HOW TO REVOKE Subsequent instrument Physical act, i.e. burn, tear, destroy Operation of Law-Divorce or annulment; changes only provisions for spouse. HOW TO CHANGE Codicils Same formalities

34 SUMMARY ADMINISTARION Spouse receives all under the will. Petition for summary adm. Clerk verifies and signs order that further adm. is not necessary. All assets pass to spouse. Estate closed. Spouse receives all under the will. Petition for summary adm. Clerk verifies and signs order that further adm. is not necessary. All assets pass to spouse. Estate closed.

35 QUESTIONS 1. Who? 2. What? 3. Where? 4. When? 5. Why? 1. Who? 2. What? 3. Where? 4. When? 5. Why?

36 THANK YOU! The Law Corner Brian S. Demidovich 211 E. Six Forks Road Suite 205 Raleigh, North Carolina Tel: (919) Fax: (919) Web: The Law Corner Brian S. Demidovich 211 E. Six Forks Road Suite 205 Raleigh, North Carolina Tel: (919) Fax: (919) Web:


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