When people think about planning for the future, drafting a will might be the first thing that comes to mind. However, it’s crucial to understand that a comprehensive estate plan can encompass much more than a last will and testament. To ensure your wishes are carried out — and that your property passes to your chosen beneficiaries — there are several important estate planning documents you should consider including in your estate plan.
A last will and testament, commonly referred to as a “will,” is typically the foundation of every estate plan and is front-and-center among your estate planning documents. It outlines how you would like your property to be distributed upon your passing. A will can name the beneficiaries who will receive your property, designate a guardian for minor children, specify funeral and burial arrangements, and name an executor to ensure your assets are protected.
If you pass away without a valid will in North Carolina, you are considered to have died “intestate.” This means that your property will be distributed in accordance with state intestacy law, which may not necessarily be the way you had intended. In order for a will to be valid in North Carolina, the testator must be of sound mind, the document must be signed in front of two witnesses, and the witnesses must also sign in the testator’s presence.
A revocable trust is a strategic estate planning tool that can offer many advantages, including avoiding the probate process in some cases. This type of trust not only allows you to provide instruction as to how your property will be distributed when you pass, but it can also specify how your assets should be handled during your lifetime. In the event that you become incapacitated, the person who you have chosen to be the successor trustee of your revocable trust can step in to manage the assets.
Various types of trusts can be used based on your estate planning goals. Some examples of trusts you can set up to accomplish your specific objectives can include:
Importantly, while some trusts can only be set up as revocable trusts, there are certain circumstances under which it might be beneficial to create an irrevocable trust to add to your estate planning documents. Although you give up control of your assets once they are placed in an irrevocable trust, you may be able to minimize estate tax consequences and shield your assets from creditors.
A healthcare power of attorney allows you to provide another individual with the authority to make critical healthcare determinations on your behalf if you become unable to do so. This document covers a broad range of medical decisions and can help doctors avoid rendering unwanted treatment. Regardless of your age or income level, it’s essential to have a healthcare power of attorney in place as one of your estate planning documents in the event the unexpected should arise.
Similarly, a living will can communicate what medical procedures you request in the event that you are terminally ill and unable to make your own medical decisions. Along with a healthcare power of attorney, a living will can also indicate your preferences concerning life-prolonging measures such as artificial nutrition and hydration, kidney dialysis, and whether you wish to be placed on a ventilator.
It’s critical to understand that even if you have a valid will, it only becomes effective when you pass. By having a financial power of attorney in place, you can appoint a loved one to handle your financial affairs during your lifetime if you fall ill or become incapacitated. This document can give another the legal authority to make a wide range of monetary decisions, or it can be limited in scope. A financial power of attorney becomes effective when it is executed, unless the document specifies that it becomes effective upon the occurrence of a future event.
Some of your assets may be able to pass to your loved ones without going through the probate process, such as 401(k) assets, IRAs, or insurance plans. This is why it is vital to designate a beneficiary and a contingent beneficiary on these accounts. If you do not name a beneficiary on such an account, the assets will likely be paid to your estate and have to go through the probate process. Not only can this result in an outcome that you might not have intended, but there may also be tax ramifications.
Planning your estate can be a complex and emotional process. It’s best to have the guidance of a skilled attorney who can guide you through the process and assist you with drafting the necessary estate planning documents. At The Twiford Law Firm, our attorneys take the time to listen to your estate planning goals. We will work with you to ensure your loved ones are provided for in accordance with your wishes and you have peace of mind.
With offices located in Moyock and Elizabeth City, The Twiford Law Firm provides trusted counsel for estate planning matters to clients throughout Northeastern North Carolina and the Outer Banks. Contact us today to schedule a consultation.