Weathering the Storm: How to Get Your Affairs in Order

In the aftermath of Hurricane Florence in 2018, I wrote this article to help individuals and families navigate the legal and financial issues that often follow a devastating storm.

I remember the incredible outpouring of support that came together as we worked to recover from the immense challenges it brought to our state.  Now, in 2024, our friends and colleagues in Western North Carolina are grappling with similar hardships after Hurricane Helene.  The resilience and sense of community are just as strong, but the difficulties of power outages, displacement, and rebuilding remain daunting. 

The advice I shared back then continues to hold true.  Whether dealing with property damage, sorting through insurance claims, or ensuring your legal affairs are in order, these steps are still just as important today as they were six years ago.  As we once again come together to weather the storm, it is essential to revisit the guidance below to protect your loved ones and secure your future.

Do I need a will?

Consider: Do I have minor children or stepchildren and want to choose who will care for them?  Do I care who will receive my assets at my death?  Have I protected assets passing to my family from their creditors?  Will some of my beneficiaries need help in managing assets?  Do I have a blended family?  Do I care who will handle my family’s affairs after my death?  If the answer to any of these questions is yes, then you probably need to prepare a Will. 

Minor children cannot receive property directly from an estate.  Instead, the court must appoint a guardian to hold the property for the minor.  The time, trouble, and expense of a guardianship can be avoided by simply designating in a Will a trustee or custodian for minor beneficiaries.  A Will also allows you to express your choice of a guardian, the person for your minor children who will be responsible for the care and well-being of your minor children. 

Likewise, in your Will, you can choose who you would like to serve as your Executor to carry out your wishes and who you would like to receive your assets.  Without a Will, the clerk of court determines who will handle your affairs, and the laws of North Carolina determine who will receive your assets.  Often, the results are dramatically different from your wishes.  For example, if you die without a Will, leaving a spouse and two children, your spouse receives only the first $60,000 of your personal property and 1/3 of the balance of your property.  Your remaining property would go to your children.  If you have any stepchildren, they will not inherit from you. 

Finally, if you have a blended family, plan to leave assets to someone who needs "help" managing the assets, or plan to leave assets to someone who has special needs or creditor issues, your Will can provide for the creation of a trust for an individual rather than leaving your assets outright to him or her at your death. 

Do I want to reduce expenses and red tape in winding up my affairs after my death?

Consider: Do I want to avoid probate costs?  Do I care if my assets and beneficiaries are part of the public record?  Do I want to simplify and ease the administrative burden on my family after my death?  If the answer to any of these questions is yes, then you may want to use a revocable trust in your estate planning. 

A revocable or "living" trust may simplify the transfer of assets to your family, reduce administration expenses, and provide privacy.  A revocable living trust is a trust established by you during your lifetime, which becomes the owner of your assets.  Assets intended to be owned by the trust must be transferred or titled in the name of the trustee (the person or entity in charge of managing the trust – typically, you).  A revocable trust is ignored for income tax purposes, so no additional income tax returns must be filed.  When you die, your trust becomes irrevocable and designates who will receive the trust assets, just like a Will. 

There are several substantial benefits that may be obtained from using a revocable trust instead of a Will.  A properly funded revocable trust avoids the statutory probate fees and the expense of preparing inventories and accountings for the clerk of court.  If you own real estate in more than one state, the use of a revocable living trust can help avoid the cost and complication of having to administer your estate in more than one state.  Moreover, the administration of a trust can be completed more efficiently than probate administration, which can drag on for a year or more. 

In addition, a revocable living trust can be useful if confidentiality is important to you.  Wills, inventories, and accountings are filed with the probate court and are matters of public record.  The details of your assets passing under a Will, their value, and who receives them can be obtained by anyone.  By contrast, the terms of your revocable trust and information about its assets and beneficiaries typically remain private.   

What will happen if I become incapacitated?

Consider: Do you want to choose who will make financial and health care decisions for you if you become unable to make those decisions for yourself?  Do you want your family to be able to handle emergency situations for you quickly, efficiently, and privately without court involvement?  If so, it is crucial to implement the proper documents now.  

Creating the proper documents now will reduce some uncertainty should you become incapacitated.  If you do not have these simple documents in place and become incapacitated, the court will appoint a guardian to make financial and health care decisions for you.  Most people would rather decide for themselves who should make these decisions and avoid the time, expense, and stress of court involvement.  

If you have created a revocable trust, any assets transferred to your revocable trust will be managed by a person you choose to serve as Trustee in the event you are unable to manage them.  For assets not held in a revocable trust, a Durable Power of Attorney allows you to choose a trusted person or persons and grant them authority to act on your behalf if you cannot manage your financial matters.  Similarly, a Health Care Power of Attorney allows you to grant authority to another person to act on your behalf in making health care decisions, including withholding or withdrawing life-prolonging procedures.  Finally, if you desire that your life not be prolonged by extraordinary measures should your medical condition become hopeless, it is important to memorialize that desire in an Advance Directive for a Natural Death, otherwise known as a “Living Will.” 

Do I need to worry about estate taxes?

The estate tax exemption was dramatically increased in 2018 so that each person is allowed an "exclusion amount" of $10,000,000, adjusted for inflation.  The exclusion amount in 2024 is $13,610,000 for an individual, and a married couple could exclude $27,220,000.  However, the new law is only in effect through 2025.  In 2026, the exemption amount will be lowered to the 2017 exemption level of $5,000,000 per person (adjusted for inflation) unless Congress changes the law. 

Are there other planning opportunities?

Certain individuals may benefit from more advanced planning that can minimize estate taxes for future generations.  There are a number of sophisticated planning techniques that can be utilized, such as an installment sale to a grantor trust, the creation of an irrevocable life insurance trust, a spousal lifetime access trust (SLAT), a charitable remainder trust, and a grantor retained annuity trust, to name a few.  While these more sophisticated techniques are not right for everyone, significant benefits may be realized in appropriate circumstances. 

Conclusion: Taking the Rights Steps

In summary, please take time to make sure that you have a plan in place in the event of your incapacity or death.  Hopefully, it will be a long time before you need to implement the plan, but when the time comes, you and your family will be prepared. 

Ward and Smith’s Trusts and Estates attorneys are here to help you ensure your plan is comprehensive, secure, and tailored to your needs.  Whether updating an existing plan or creating one for the first time, our team is ready to guide you through every stage.  Reach out today to schedule a consultation and start planning for the future with confidence.

This is a part of our November series: "Family Matters."  For more insights, click here.

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© 2024 Ward and Smith, P.A. For further information regarding the issues described above, please contact Eldridge D. Dodson.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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