BASICS OF WILL AND REVOCABLE TRUSTS DRAFTING February 7, 2014 NC Bar Center Cary, NC Table of Contents I. BASICS OF ESTATE PLANNING Robert H. (Rob) Wall Winston-Salem ESTATE PLANNING, ITS GOALS & OBJECTIVES... I-1 What is Estate Planning... I-1 Goals and Objectives... I-1 Methods... I-1 INFORMATION GATHERING... I-2 THE NEED FOR A WILL... I-4 General... I-4 CAPACITY TO MAKE A WILL... I-7 TYPES OF WILLS... I-7 Nuncupative Will... I-7 Holographic Will... I-7 Attested Written Will... I-8 Will of Serviceman-Merchant Marine... I-8 Joint Will... I-9 Witnesses... I-9 Self-proving Will... I-9 ALTERNATIVES TO WILLS... I-9 Probate vs. Non-probate... I-10 Joint Ownership... I-10 Beneficiary Designations... I-11 Revocable Inter Vivos Trust... I-11 Irrevocable Inter Vivos Trust... I-12 Custodianships under the Uniform Transfers to Minors Act... I-12 SPOUSE S ELECTIVE SHARE... I-12 Applicable Share... I-12 Total Net Assets... I-13 Net Property Passing to Surviving Spouse... I-16 Valuation... I-17 Procedure for Determining the Elective Share... I-20 Apportionment and Recovery of Assets by Personal Representative... I-21 Waiver of Right of Elective Share... I-25 FEDERAL TRANSFER TAXES... I-25 Transfer Taxes... I-25 Basic Exclusion Amount... I-25 Gift Tax Exclusions... I-26 Marital Deduction... I-26
Charitable Deduction... I-26 Generation-skipping Tax... I-26 Planning... I-27 NORTH CAROLINA GIFT AND ESTATE TAX... I-27 THE DURABLE POWER OF ATTORNEY... I-27 Durability... I-27 Recordation... I-28 Accountings... I-28 Tax Matters... I-28 Gifts... I-28 Selection of Attorney... I-29 Springing Power of Attorney... I-29 HEALTH CARE POWERS OF ATTORNEY AND LIVING WILLS... I-29 Health Care Power of Attorney... I-29 Living Will... I-30 APPENDICES... I-31 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 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 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-15 Basis in Property...II-15 BENEFITS OF A REVOCABLE TRUST...II-15 COMMON MISCONCEPTIONS ABOUT REVOCABLE TRUSTS...II-17 A Revocable Trust is about Revocable Trusts...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 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-25 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
North Carolina Slayer Statute... 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 Jessica Mering Hardin Charlotte OVERVIEW... IV-1 Scope... IV-1 Estate Tax Generally... IV-1 MINIMIZING ESTATE TAXES CREDIT SHELTER AND MARITAL SHARES... IV-3 Overview... IV-3 Disposition of Credit Shelter Share... IV-4 Disposition of Marital Share... IV-7 Funding the Credit Shelter and Marital Share... IV-17 Income Tax Consequences of Funding Methods... IV-22 Advantages and Disadvantages of Funding Methods... IV-24 MINIMIZING ESTATE TAXES DISCLAIMER... IV-24 Overview... IV-24 Requirements for Qualified Disclaimer... IV-25 Sample Provision... IV-26 MINIMIZING ESTATE TAXES PORTABILITY... IV-26 Overview... IV-26 Electing Portability... IV-27 Special Considerations... IV-27 Samples Provisions... IV-28 PAYING ESTATE TAXES APPORTIONMENT OF LIABILITY... IV-29 Overview... IV-29 Federal Provisions... IV-30 North Carolina Provisions... IV-33 Payment from the Residuary Estate... IV-33 TAX IMPLICATIONS OF FIDUCIARY SELECTION... IV-35 Beneficiary as Trustee... IV-35
Right to Remove/Appoint Trustee... IV-36 MISCELLANEOUS PROVISIONS... IV-37 Survivorship Provisions and the Revised Simultaneous Death Act... IV-37 Distributions to Save Taxes... IV-38