BASICS OF WILL AND REVOCABLE TRUST DRAFTING February 9, 2018 NC Bar Center Cary, NC. Table of Contents

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1 BASICS OF WILL AND REVOCABLE TRUST DRAFTING February 9, 2018 NC Bar Center Cary, NC Table of Contents I. BASICS OF ESTATE PLANNING Samuel R. BJ Kilgore, III Asheville ESTATE PLANNING, ITS GOALS AND OBJECTIVES... I-1 What is Estate Planning?... I-1 Goals and Objectives... I-1 Methods... I-2 INFORMATION GATHERING... I-2 Obtain Complete Names... I-3 Enter Other Names... I-3 Charitable Beneficiaries... I-3 Obtain the Social Security Numbers... I-3 Obtain the Birthdates... I-3 Do Not Take the Client s Word... I-3 Inspect Accounts Statements... I-3 Examine all Stock and Bond Certificates... I-4 Client Should Supply Complete Information... I-4 Client Should Provide Complete Information Concerning Retirement Plans... I-4 Ask Client for Most Recent Employee s Booklet... I-4 Federal Estate Tax Law Limits... I-4 Ask Client if He or She will Continue Ongoing Support Requirements.. I-4 Client Should Provide Relevant Information Pertaining to the Substantial Inheritance... I-5 Client Should Provide Information with Regard to Individual Entities... I-5 THE NEED FOR A WILL... I-5 General... I-5 EXECUTION AND VALIDITY OF A WILL... I-8 Requirements... I-8 Presumption... I-9 Declaration of Validity While Living... I-9 TYPES OF WILLS... I-9 Nuncupative Will... I-9 Holographic Will... I-9 Attested Written Will... I-10 Wills of Members of the Armed Forces of the United States... I-11 Joint Will... I-11 Witnesses... I-12 ALTERNATIVES TO WILLS... I-13 Probate vs. Non-Probate Assets... I-13 Joint Ownership... I-13 Beneficiary Designations... I-14

2 Revocable Trusts... I-15 Irrevocable Inter Vivos Trust... I-16 Custodianships under the Uniform Transfers to Minors Act... I-16 THE IMPACT OF STATUTORY RIGHTS ON ESTATE PLANS... I-16 Spouse s Elective Share... I-16 Elective Life Estate... I-31 Year s Allowance... I-31 Right of Surviving Spouse to Intestate Share... I-32 Community Property... I-32 FEDERAL TRANSFER TRUST... I-32 Transfer Taxes... I-32 Applicable Credit Amount... I-33 Annual Gift Tax Exclusion... I-33 Marital Deduction... I-33 Charitable Deduction... I-34 Generation-skipping Tax... I-34 NORTH CAROLINA GIFT AND ESTATE TAX... I-34 THE DURABLE POWER OF ATTORNEY... I-34 North Carolina Statutory Short Form Power of Attorney... I-35 Agent s Certification as to the Validity of Power of Attorney and Agent s Authority... I-35 North Carolina Limited Power of Attorney for Real Property... I-36 IN ANY CASE, POWER SHOULD CONTAIN, OR THE CLIENT SHOULD CONSIDER THE FOLLOWING... I-36 Durability... I-36 Recordation... I-36 Accountings... I-37 Authority of Agent... I-37 Selection of Agent... I-38 Springing Power of Attorney... I-38 Termination... I-38 Reimbursement and Compensation of Agent... I-38 HEALTH CARE POWERS OF ATTORNEY AND LIVING WILLS... I-39 Health Care Power of Attorney... I-39 Living Will... I-39 APPENDICES... I-41 II. REVOCABLE TRUSTS Jillian E. Brevorka - Greensboro OVERVIEW OF NORTH CAROLINA TRUST CODE...II-1 TERMINOLOGY...II-1 Express Trust...II-1 Settlor...II-2 Trustee...II-2 Beneficiary...II-2 Trust Property...II-3 Inter Vivos Trust...II-3

3 Testamentary Trust...II-3 Charitable Trust...II-3 Power Holder...II-3 TYPES OF EXPRESS TRUSTS...II-3 Revocable Trust...II-4 Irrevocable Trust...II-4 METHODS OF CREATING A TRUST...II-4 Transfer of Property...II-4 Declaration by the Owner of Property...II-4 Exercise of Power...II-4 Court by Judgment...II-4 REQUIREMENTS FOR CREATION...II-5 Requirements...II-5 Elements of Requirements for Creation of a Trust...II-5 TRUSTS CREATED IN OTHER JURISDICTIONS...II-7 DEFAULT AND MANDATORY RULES...II-8 REVOKING/AMENDING A REVOCABLE TRUST...II-9 Who May Revoke/Amend a Trust?...II-9 When Can a Trust be Revoked or Amended?...II-11 How Can a Trust be Revoked or Amended?...II-11 DEATH OF A BENEFICIARY...II-12 FUNDING A REVOCABLE TRUST...II-13 Types of Assets...II-13 Funding the Trust...II-14 Pour Over Will...II-14 TAX EFFECTS OF A REVOCABLE TRUST...II-14 Estate Tax...II-14 Income Tax...II-14 Basis in Property...II-15 BENEFITS OF A REVOCABLE TRUST...II-15 COMMON MISCONCEPTIONS ABOUT REVOCABLE TRUSTS...II-17 A Revocable Trust is an Absolute Substitute for a Will...II-17 A Revocable Trust will prevent the Government from getting all Of My Money...II-17 A Revocable Trust will help me Qualify for Medicaid if I Need to Go into a Nursing Home...II-17 A Revocable Trust will Shield my Assets from Creditors...II-18 III. WILL DRAFTING: NON-TAX ISSUES Janice L. Davies - Charlotte SIMPLE WILL... III-1 Exordium... III-1 Devise, Bequest or Testamentary Gift of Tangible Personal Property.. III-3 Devise, Bequest or Testamentary Gift of Intangible Personal Property... III-9 Devise of Real Property... III-10 Devise of Residuary Estate... III-13

4 Payment of Debts, Expenses and Death Taxes... III-17 Funeral, Burial or Cremation Instructions... III-20 Executor... III-21 Administrative Powers of the Executor... III-23 Guardian for Minors... III-24 Presumption of Survivorship... III-25 Execution Procedures... III-26 MISCELLANEOUS... III-29 Safekeeping of Wills... III-29 In Terrorem Clause... III-29 Definition of Child, Children, and Descendants... III-30 Per Stirpes and Per Capita... III-30 Avoidance of the Anti-Lapse Statute... III-34 Spouse Omitted from Premarital Will... III-35 Divorce... III-35 After-born, After-adopted or Entitled After-Born Illegitimate Child.. III-36 Summary Administration Where Spouse is Sole Beneficiary... III-37 DISCLAIMER WILL... III-38 HOLOGRAPHIC WILL... III-39 Statutory Authority... III-39 Writing, Signature and Safekeeping Requirements... III-39 Testamentary Intent Required... III-40 No Witnesses Required... III-40 No Date or Place of Execution Required... III-40 Revocation of Holographic Will... III-40 NUNCUPATIVE WILL... III-41 Statutory Authority and Requirements... III-41 Probate of a Nuncupative Will... III-41 Revocation of Nuncupative Will... III-41 IV. WILL DRAFTING: TAX ISSUES John W. Forneris - Charlotte OVERVIEW... IV-1 Scope... IV-1 Estate Tax Generally... IV-1 MINIMIZING ESTATE TAXES CREDIT SHELTER AND MARITAL SHARES... IV-4 Overview... IV-4 Disposition of Credit Shelter Share... IV-4 Disposition of Marital Share... IV-8 Funding the Credit Shelter and Marital Shares... IV-17 Income Tax Consequences of Funding Methods... IV-23 Advantages and Disadvantages of Each Formula... IV-24 MINIMIZING ESTATE TAXES - DISCLAIMER... IV-25 Overview... IV-25 Requirements for a Qualified Disclaimer... IV-26 Sample Provision... IV-26

5 MINIMIZING ESTATE TAXES - PORTABILITY... IV-27 Overview... IV-27 Electing Portability... IV-28 Special Considerations... IV-28 Sample Provisions... IV-29 PAYING ESTATE TAXES APPORTIONMENT OF LIABILITY... IV-30 Overview... IV-30 Federal Provisions... IV-31 North Carolina Provisions... IV-34 Payment from Residuary Estate... IV-34 TAX IMPLICATIONS OF FIDUCIARY SELECTION... IV-36 Beneficiary as Trustee... IV-37 Right to Remove/Appoint Trustee... IV-38 MISCELLANEOUS PROVISIONS... IV-38 Survivorship Provisions and the Revised Simultaneous Death Act... IV-38 Distributions to Save Taxes... IV-40