Island Gazette

The Survivor’s Guide: XXXII - On this Fourth of July it is a good time for reflection and preparing your Estate Plan

The history of Independence Day and the reason for its celebration emphasizes the need to organize and detail our wishes regarding distribution of our assets for the future. 
Even the founders of our new and free Country had Wills dictating their beliefs in a future vision and continuance of an American populous.  Scriveners drafted on exquisite paper the determination of our leaders as to their inheritance provisions.  Since then with our ever changing environment, Wills have become increasingly more varied and complicated which can result in difficult and problematic Estate planning.  In today’s financial marketplace, many individuals want to distribute their assets to their spouse and their children. However, they often wrongly assume that the "default rules" may work just as well as anything that a professional preparer could create. The rules that the State apply to inheritances are often different than what one might suspect. For instance, it takes specific and careful planning to ensure that large taxes and potential creditors are limited in scope and do not deplete the inheritance passed to the heirs. In addition, without planning, there is a chance that your inheritance may leave the “bloodline” once you are gone. Some people will leave assets outright to a spouse then their children, without thought of creditors, divorce, mismanagement, eligibility for governmental benefits, etc.  Examination of the impact of income, gift and estate tax implications of gifts and bequests are necessary.  For example, gifting your house to your children during your lifetime without reserving a life estate for yourself or your spouse can cause your children to pay unnecessary capital gains taxes.  Considering who to choose as your Executor and who to choose as your Trustee; choosing two children to work together as co-Executors or co-Trustees can be challenging. 
Even if they get along they may have difficulties in distributing the assets together.  It may cause the family years of unnecessary court interaction.  It is important to name alternate and successor Executors and Trustees, or provide the beneficiaries with a way to fill the role of someone who has died, is incapacitated or declines to complete the distribution for any reason, so that a court proceeding is not required.  The failure to name someone or some charity to receive your estate, in the event that your beneficiaries all predecease you could also lead to unnecessary court procedures.  Life insurance and retirement accounts generally cannot be controlled by a Will, as those assets go to the named beneficiary.  One of the largest and simplest of Estate Planning errors is the failure to update or confirm beneficiary changes.  By leaving joint accounts with the right of survivorship, the surviving account holder has no legal obligation to distribute the funds in that account.  From the office of: Sharon A. Hatton Law Office P.C., 321 N. Front Street, Wilmington, NC  28401 Tel: 910-772-9455.  Send questions to IslandGazette


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