Raleigh Estate Planning and Corporate Law Attorneys

Estates and Trusts

Does a Will have to be Recorded?

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I’m trying to dedicate a decent amount of this blog to common questions that our Clients have when they meet with us, since they are likely questions many folks have.  One of those questions relates to “recording the will” and often comes in one of these forms:

“Are you going to record the will?”

“Mom [who is alive] has a will, but it was recorded by the lawyer that did it.”

“Do I have to record the will with the Register of Deeds?”

A will does not have to be “recorded” to be valid while a person is living.  The only time a will needs to be “recorded” is following the death of the person that created the will, at which point the Will may need to be filed with the Clerk to start the probate process.  Until that time, however, provided that the will was properly executed and witnessed, the original will simply needs to be kept in a safe place.

Folks that talk about wills being recorded aren’t incorrect, however.  The Clerk of Superior Court in each county has a depository for original wills.  For a small fee, any person may take their original will to the Clerk, and ask that it be deposited with the Clerk for safekeeping.  If this has been done, the Clerk will give the person depositing a will a receipt in exchange for the will.  That receipt will outline whose will has been deposited, the date on which it was deposited, and the County where it was deposited.  Under the statute, once the will has been deposited, the only people that may access it while the person who created the will (the “Testator”) is living are the Testator, their duly-authorized agent, or their attorney.  This isn’t technically “recording” the Will, but it is deposited somewhere

Some attorneys may do this as a matter of course.  Clients are always free to do this as well.  I normally advise clients that it is available, but is not required.  So, to answer the question, “does a will have to be recorded”, the answer is “it depends.”

Celebrity Estate Planning

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Articles detailing the “failings” of celebrity estate plans are some of the more common “click-baitish” news items you’ll see related to estate planning.  The one I saw today related to Lou Reed, his 34-page will, and the fact that he should have done a revocable trust.  The article can be found here.

I bring this up for a few reasons:

  1. (shamless plug) I welcome all celebrities that would like me to handle their estate planning. (/shameless plug)
  2. Revocable trusts are amazing and affordable estate planning tools.  Admittedly, any revocable trust drafted for the estate of someone like Lou Reed wouldn’t be run of the mill, and would likely have made his 34-page will look like a blog post, but the importance of one can’t really be overstated.  If you have an estate that you’d like to keep private, or have real property in multiple states, or would like to provide for family members (like Mr. Reed wanted to provide for his elderly mother), a revocable trust can make the administration of your estate much easier.  BUT:
  3. Just because someone does a will instead of a trust doesn’t mean their estate plan is bad, or incomplete.  It is quite possible that Mr. Reed sat down with his estate planning attorney, and the attorney began discussing trusts, and Mr. Reed threw up his hands and said “I’m not interested in trusts — I just want to do a will.”  To which the attorney most likely protested, but at the end of the day, it’s the client’s decision.  And if Lou Reed only wanted a will, that’s the end of it.  It’s much better than doing nothing at all and leaving it to the laws of the State of New York.  His wishes were met through the will.  Was it the cleanest or best method?  Not in my opinion.  But just because you don’t do a trust doesn’t mean your estate planning was awful.  The key is having a plan, and that’s something we can help with.

Could competency litigation affect you?

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With the increase in lifespan and general health, we are also seeing an increase in the amount of competency lawsuits filed by nervous heirs. Generally, if a challenge arises to wills or trusts, it happens after the death of a person. However, as lifespans trend upwards, family members and others are looking to lock in their inheritances prior to death.

Recently, this has started to play out in the case of Sumner Redstone, the 92 year old controlling shareholder of Viacom and CBS. After he removed his longtime companion, Manuela Herzer, as his healthcare agent and kicked her out of his mansion, she sued to challenge his competency and the two are currently in settlement talks.

Dementia is the underlying driver in many of the cases, with over 5.3 million Americans over 65 living with the disease. That number is expected to rise in upcoming years, according to the Alzheimer’s Association.

Assessing someone’s competency in court is still a very inexact science, as there are a number of complex laws and inconsistent standards that courts are forced to wrangle with. While no uniform test exists, courts have used such tests as asking patients to count backwards from 100 by sevens, draw a clock showing a certain time, and name as many words as possible starting with a certain letter in the past.

Planning ahead and having good representation in the formation and defense of your estate and trust matters is a big first step in making sure you and your legacy are protected. If we can help, call our office today at 919-787-7711 or fill out the form on the side of this page to speak with one of our attorneys.

Will you be subject to estate tax?

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Many unsuspecting middle class households may be subject to estate tax even though they wouldn’t classify themselves as “rich”, according to a recent MarketWatch study. The current federal estate tax exemption is a generous $5.43 million for estates of individuals who die in 2015, but that can be easily exceeded by individuals with significant life insurance proceeds, a nice home and healthy retirement accounts.

The estate value for federal tax purposes includes a number of things, such as proceeds from any life insurance policies, any residences (primary/vacation/etc), retirement accounts, investment accounts, closely held business ownership interests, cars, boats, furniture and more.

To avoid estate tax where life insurance coverage puts you over the limit, you can have an experienced North Carolina estate tax attorney put together an irrevocable life insurance trust to own any policies that you may have, as well as help you determine the best option to proceed with the rest of your estate planning. There are downsides to an irrevocable life insurance trust, though, such as not being able to make changes to the policies after ownership is transferred to the trust.

Even if you don’t have exposure to the federal estate tax due to the generous exemption, you may be subject to state taxes. In North Carolina the legislature repealed the estate tax in July 2013. Florida also has no state estate tax, and has also done away with any inheritance tax.

For any questions about your estate planning or personal tax situation, call one of our estate planning experts at 919-787-7711 or contact us online to schedule a consultation.

Are you liable for the Trust Fund Recovery Penalty?

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What are “Trust Fund Taxes”?

“Trust Fund Taxes” refer to any taxes required to be withheld on behalf of an employee by an employer for federal tax purposes. These include income tax withholding, social security, and Medicare taxes. Simply put, as an employer you do not pay your employee all of their wages. Instead, you have a duty to withhold certain federal tax portions from your employees’ paychecks. You hold these funds “in trust” for the federal government.

What is the Trust Fund Recovery Penalty?

The Trust Fund Recovery Penalty (“TFRP”) is penalty on responsible individuals who fail to withhold and/or pay Trust Fund Taxes to the federal government. Many individuals view a business’ tax debts as separate from their personal tax debts. However, some individuals may be personally liable for the tax debt of their business. The key to understanding the TFRP lies in two key terms: “responsible person” and “willful.” The first term identifies who the penalty may be proposed against. The second term broadly defines the actions, or lack of actions, required to be liable for the penalty.

Who is a “Responsible Person”?

The term “Responsible Person” includes only those persons who are responsible for the nonpayment of taxes.   In determining who may be a “Responsible Person,” the IRS includes a great number of potential roles within every type of business. However, your title or role within a company is not the actual deciding factor. Rather, your status, duty, and authority within the organization determines your “responsible person” status.

The courts have further identified the following 7 legal factors in deciding the status of an individual:

i. Is the individual an officer or member of the board of directors;

ii. Does an individual own shares or possess an entrepreneurial stake in the company;

iii. Is the individual active in the management of day-to-day affairs of the company;

iv. Does the individual have the ability to hire and fire employees;

v. Does the individual make decisions regarding which, when, and in what order outstanding debts or taxes will be paid;

vi. Does the individual exercise control over daily bank accounts and disbursement records; and

vii. Does the individual have check-signing authority

If an individual is determined to have “responsible person” status, then that individual may be personally liable for the trust fund tax debt of the business.

What does it mean to “willfully” fail to collect, truthfully account for, and pay over Trust Fund Taxes?

In a civil context, in order to determine “willful” failure to collect, truthfully account for, and pay over trust fund taxes, the  focus is primarily on your knowledge of your duty to withhold and pay the Trust Fund Taxes and your willing and conscious decision not to pay those taxes. This knowledge element includes not only things you actually knew at the time but also things you should have known undertaking reasonable efforts to determine your tax duties.

How do I avoid the TFRP?

The best way to avoid the TFRP is to be aware of your Trust Fund Tax requirements and to make timely reports and payments to the IRS. If you are uncertain about your reporting or payment requirements, it will be well worth your time and resources to seek out an experienced tax professional.  Contact the attorneys at Wilson Ratledge today if you have any questions regarding the Trust Fund Recovery Penalty.

Estate Litigation

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However unpleasant, a person’s death may result in controversy as to the validity of a last will and testament or the distribution of assets.  When this happens, families may ultimately decide to resolve such controversies in court.

In North Carolina, a party that is arguing that a will is not valid may decide to bring a caveat proceeding.  “The purpose of a caveat is to determine whether the paperwriting purporting to be a will is in fact the last will and testament of the person for whom it is propounded.” In re Spinks, 7 N.C. App. 417, 423, 173 S.E.2d 1, 5 (1970).

We provide counsel to parties who either seek to contest a will (the “Caveators”), or are forced to defend a will being contested (“the Propounders”), as well as issues which may relate to this process.  In North Carolina, the two primary reasons a will may be contested are due to:

  • Lack of Capacity

When a party feels that the testator lacked the mental capacity to make a last will and testament, or “testamentary capacity,” that party may decide contest the will.  Medical evidence tends to be very important in these types of contests and/or

  • Undue Influence

“Undue influence” is when a person in power psychologically manipulates and persuades the testator to sign a will, eliminating the free will and judgment of the testator. In North Carolina, undue influence has been defined as “something operating upon the mind of the person whose act is called into judgment, of sufficient controlling effect to destroy free agency and to render the instrument, brought in question, not properly an expression of the wishes of the maker, but rather the expression of the will of another.” In Re Will of Jones, 362 N.C. 569, 575, 669 S.E.2d 572, 578 (2008).

Wilson Ratledge counsels parties in will caveat proceedings and other estate litigation actions.  Our attorneys represent anyone whose interests under a will or trust are in dispute, or anyone who is concerned about the way in which a vulnerable or incompetent relative’s estate is being managed.  We deal with business and partnership issues that need to be resolved in the estate administration process, as well as familial disputes with respect to a testator’s will.

We handle disputes involving estates of all sizes.  Please contact an attorney at Wilson Ratledge to discuss an estate litigation issue today.