If you have a Will or Living Trust, you should consider the potential compensation of any executor or successor trustee who may be responsible for your assets after you die. In most states, executors and trustees are entitled to a certain level of compensation based on the overall value of the estate or trust. But you can also specify or limit such compensation in your own estate planning documents.

In North Carolina, for example, if a Will does not specify an executor’s commission, the probate court may award a commission of up to 5 percent of the estate’s total receipts and disbursements. The actual amount is decided by the court based on the executor’s time, responsibility, trouble and skill involved in the management of the estate.

Keep in mind, any commission paid to your executor or trustee will count as an administration expense and lower the amount of funds available for distribution to your heirs or designated beneficiaries. If your executor is a spouse or child, you may wish to consider how a commission might alter the balance of your intended distributions.

A qualified estate planning attorney can advise you on how to best deal with compensation for an executor or trustee as part of your estate planning documents. Your attorney can further explain your state’s specific rules regarding default limits on compensation and what type of recordkeeping may be required of an executor or trustee.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

Under federal law, a debt collector may not contact you about the debt of a deceased relative unless you are the executor of that person’s estate. The Federal Trade Commission recently issued a policy statement to explain to debt collectors what their obligations are when trying to collect such debts. Julie Brill, an FTC Commissioner and former deputy attorney general of North Carolina, said the policy statement was designed to “limit potential abuses” in several ways:

• If a debt collector contacts the family of a deceased individual, the collector must state he is looking for the person responsible for paying the outstanding bills of the decedent “from the decedent’s estate.”
• Until a debt collector establishes contact with the executor or other person responsible for the estate, the debt collector may not “reveal the decedent owes a debt.”
• A debt collector is responsible for informing the executor or other responsible person that he or she “is not required to use his individual assets to pay the decedent’s debt.”

The potential for debt collection abuses underscores the need to appoint a capable executor when creating a Will. If you die without a Will, in some states a creditor may attempt to gain appointment as Executor in order to protect his or her interests. To prevent this, you should work with a qualified estate planning attorney to identify the person who will be responsible for the administration of your estate, including the payment of any outstanding debts.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

The Oct 1 Women’s Only 5k for Breast Cancer, rescue dog stories from 9/11, probate seminars, identity theft, and more – we’ve got a lot going on that’s featured in our newest newsletter!   Click on the icon below to find out what’s new from The Law Offices of Cheryl David.  If you’re interested in receiving our e-newsletter, we encourage you to visit our site, www.cheryldavid.com, and sign up on the right column of our home page.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

Probate as it relates to the settlement of an estate may seem like something you want to avoid, but you may not be able to do so.

Are there ways to avoid Probate, and should you do all you can do avoid it?

Well, first, Probate is designed by each state to actually protect individuals and families.  It provides a legal process for the settlement of an estate through the courts.  So Probate is not necessarily a bad thing.

But Probate does have its drawbacks, and it can be avoided.  In other words, you can take steps related to Estate Planning to keep your assets out of the courts.

The first drawback to Probate is time: the Probate process can take months or even years, depending on the circumstances.  It can also consume a great deal of the executor’s time (the executor is the one designated to settle the affairs of the estate via the courts.)

The second drawback to Probate is cost.  While Probate is not always a costly process, it can be, especially if a Will is contested by heirs or people who think should be the heirs, or if the intentions of a Will are unclear or contested.  In these cases, an attorney is often required to step in to help you.

Avoiding Probate

The good news is that there are Estate Planning tools that not only ensure you avoid Probate, but also offer many advantages and some significant cost savings in terms of estate taxes (and maybe income taxes) paid by the heirs.

For example, a Living Trust is a legal Estate Planning vehicle that keeps your estate out of the courts.  It also affords you the opportunity to shelter your assets, reduce estate taxes and leave more of your estate to your heirs.

A Living Trust is also flexible: it can be revised by you to adapt to changing circumstances such as marriage, re-marriage, divorce, death of a spouse, gifting and many other life-changing situations.

No matter what Estate Planning tools you choose, it’s strongly recommended to seek the advice of an experienced Estate Planning attorney.  This way you can not only avoid risk but ensure that all of your wishes for your heirs are fulfilled.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

When you don’t make a will or living trust, your estate passes to your intestate heirs upon your death. These are the people, usually close family members, whom the law identifies as entitled to inherit from you. So, do you know who your intestate heirs are?

The North Carolina intestacy statutes can actually be quite complicated. If you’re married with no children when you pass away, but your parents survive you, then your spouse and your parents are your intestate heirs. The exact proportions in which they inherit are determined by the value of your estate and the type of property you own.

If you’re married and you have children, your estate will be divided among your spouse and your children.

What if you’re not married when you pass away? In this situation, North Carolina law provides as follows:

1. Your estate will pass first to your children or their descendants;
2. If you didn’t have any children, then your estate will pass to your parents;
3. If you had no children and your parents predecease you, your estate will be divided among your brothers and sisters;
4. If you leave behind no parents, children or siblings, then your estate will pass to your more distant relatives, until your family tree is exhausted; and, finally,
5. If you leave behind no living relatives, your estate goes to the State of North Carolina.

If you want to find out exactly how your property would be distributed if you died without an estate plan, you can take a look at this intestacy calculator.

Of course, the best way to ensure that your estate is distributed in accordance with your wishes is to get the help of a qualified estate planning attorney, and make sure you have a valid estate plan in place.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

If you anticipate leaving behind final bills and debts, you might be concerned about where the money will come from to pay those items. Many clients wonder whether the funds in their 401(k), IRA, or other retirement plan will have to be used toward payment of these expenses. The answer is…it depends.

If you designate a beneficiary for your retirement plan, and that person is alive at the time you pass away, then your retirement funds will pass to your beneficiary. This transfer will happen outside the probate process, and because of this, your retirement money won’t need to be used toward paying your final bills and debts.

But what if your designated beneficiary passes away before you do, or you don’t designate a beneficiary before your death? This situation will be handled in one of two ways, depending on the policies of your retirement plan administrator.

Your plan administrator may have a policy of looking to state statute to identify your heirs at law (generally your closest living relative or relatives), and distributing your retirement funds accordingly. In this situation, as with a designated beneficiary, the transfer happens outside the probate process, and your retirement money won’t go toward paying your final bills and debts.

On the other hand, your plan administrator’s policy might be to transfer the funds into your probate estate in the absence of a designated beneficiary. In this situation, the retirement plan is pooled with your other probate assets, which are then used to pay your final bills and debts.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

We lawyers have our own language, full of unfamiliar terms with specialized meanings. This is especially true in the world of estate planning. One term that is commonly used when it comes to Wills and Probate is “intestate.” What does it actually mean?

The definition is actually pretty simple. If someone dies intestate, it means they’ve passed away without making a valid Will or Trust to provide instructions for how their property is to be distributed after they pass away. If you die without a Will or Trust, the property you leave behind is called your “intestate estate,” and state law controls what happens to that property. Usually, this means that your property is distributed to your spouse, your children, or sometimes your parents or siblings. Unfortunately, state law does not make allowances for your property to go to friends, charities, or even to support your pets.

Dying intestate is likely not anyone’s first choice. If you want to avoid this scenario, you’ll need to establish a valid Will or Trust that spells out exactly what should happen to your property at your death. Call us today (336.547.9999) to help you make a plan that suits you and your family and ensures that you dictate where your estate goes – not the state.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

Parents often give a large sum of money to one of their children during life with the intention of making that gift an advance against the child’s inheritance. When this situation happens and a parent passes away without an estate plan, that gift against the child’s inheritance is called an “advancement.”  Usually, in a situation where a parent leaves no estate plan, the existence of an advancement is proven by a written receipt from the parent, specifying that the money is intended to be counted against the recipient’s inheritance.

How it Works

How exactly is an inheritance calculated when there’s an advancement involved?  Here’s an example:

Bob is a widower with three daughters.  During his lifetime, his youngest daughter runs into some financial difficulty, and Bob gives her $20,000, specifying that the amount is an advance against her inheritance. Bob later dies without an estate plan, leaving a probate estate worth $100,000.

When Bob’s estate is probated,  the amount of the youngest daughter’s advancement is added back to the value of his probate estate in order to determine the true value of assets to be divided among his children.  When this amount is figured back in, the actual value of property to be divided totals $120,000.

Next, this amount is divided by the number of heirs who survive Bob; in this case, three daughters.  So, each daughter’s share of Bob’s estate is $40,000.

Finally, the youngest daughter’s advancement is subtracted from her share of her father’s estate, meaning that she’s entitled to $20,000, while the two daughters who waited to receive their inheritances each get $40,000.

What if You Have a Will or Trust?

If you pass away leaving behind a Will or Trust, the terms of that document control the amount of your loved ones’ inheritances. So, if you give your child a large gift during your lifetime and don’t account for it in your Will or Trust, then the terms of the document control the distribution of your estate. Your remaining beneficiaries can’t require that the gift be treated as an advance on that child’s inheritance.

If you intend to treat a lifetime gift to a loved one as an advance against his or her inheritance, you’ll want to put it in writing, preferably in your Will or Trust.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

If you own property with another person as Joint Tenants With Rights of Survivorship, you likely know that, when one of you passes away, the property will be transferred to the surviving owner without going through the probate process. Generally, all that’s needed in this situation is for the surviving owner to present the deceased owner’s death certificate in order to have the deceased owner’s name removed from the property.  There are potential pitfalls to this type of property ownership though:

Limited Probate Avoidance

If you and your spouse are using Joint Tenancy as a strategy for avoiding probate, it’s only a partial solution.  This is because the property will only avoid probate when the first spouse passes away.  When the remaining spouse passes away, if the property is still held in his or her name, then the property will have to be probated.  One option to  prevent this situation is a Revocable Living Trust.

Joint Tenancy is Not Controlled by Your Will

Many people don’t think about the fact that property owned as Joint Tenants is non-probate property, which is not controlled by your Will.  This situation can cause special concern when your co-owner is not your spouse.

So, you can’t use your Will to leave “your share” of this type of property to someone other than your co-owner. What happens if you try?  The property passes to your co-owner in spite of what’s in your Will.  If this is a concern for you, a better option might be to own property as Tenants In Common.

Additional Concerns

In addition to these concerns, owning property as Joint Tenants might create estate tax concerns.  Your attorney can help you find the method of property ownership that works best for your estate planning needs.

If you have concerns about how your property is owned and are looking for ways to avoid probate, we invite you to speak with our office – (336)  547-9999.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.

We hope you’ll take a moment to check our our November Newsletter.  With big law changes coming up in 2011 with regard to estate taxes, now is the time to make sure you (and your plan) are ready! 

Read our November 2010 Newsletter here.

The Law Offices Of Cheryl David is a member of the American Academy of Estate Planning Attorneys.