Archive for the ‘Wills (or Not!)’ Category

Many persons who have accumulated wealth during their lifetime die without a valid will. When this happens, the decedent’s property passes by intestate succession to the decedent’s heirs at law according to law. In other words, if you don’t have a will, the state will make one for you. All fifty states have laws of this sort. The North Carolina Intestate Succession Act is codified at Chapter 29 of the General Statutes.

The purpose of intestate succession statutes is to distribute the decedent’s wealth in a manner that closely represents how the average person would have designed his or her estate plan had that person had a will. However, this default can differ dramatically from what the person really would have wanted. Even where is it is known what the person intended, no exceptions are made where no valid will exists. Nor are there any exceptions made based on need or special circumstances. As will be explained below, in North Carolina an intestacy can create unintended (and sometimes tragic) consequences.

The North Carolina Intestate Succession Act

Under the Act, close relatives take property instead of distant relatives. The classes of relatives whose members receive property under the Act include the decedent’s surviving spouse, descendents (children, grandchildren, etc.), parents, descendents of decedent’s parents (siblings, nieces and nephews), grandparents, and descendents of grandparents (aunts and uncles and cousins). Adopted descendents are treated the same as biological descendents. If none of the above-named classes of relatives include any persons qualified to take the estate, the property “escheats” (goes by default) to the state.

The North Carolina Act is considerably different from the Uniform Probate Code and many other states’ acts. The way in which a surviving spouse is treated upon intestacy should alone be enough to entice most individuals to have an enforceable will prepared to avoid the following situations.

Share Of Surviving Spouse

Under the Act, a surviving spouse receives the entire estate ONLY if the deceased spouse is not survived by a child or a parent. If the deceased is survived by one or more children or grandchildren (who could be step-children or step-grandchildren of the surviving spouse) and/or one or more parents, the surviving spouse will take only a share. Children and grandchildren are referred to below as “descendants”. The rules are as follows:

If there is one descendant surviving, the surviving spouse is entitled to the first $30,000 of personal property and one-half of the rest of the real and personal property in the probate estate.

If there are two or more descendants, the surviving spouse takes the first $30,000 of personal property and only one-third of the rest of the estate.

If there are no surviving descendants, but the deceased is survived by one or more parents, then the surviving spouse is entitled to the first $50,000 of personal property plus one-half of the balance of the estate.

It takes no imagination to see the havoc that can be created by an intestacy. An individual leaving a young family will subject one-half to two-thirds of his or her estate to continuing clerk of court supervision until minor children are 18 because a guardianship will likely be necessary. If one member of a childless couple married for a long time dies intestate with a surviving parent, that parent will take up to one-half of the estate. The situation can be even more critical in second marriage/second family situations.

Share of Descendents

Under the Act, if no spouse survives but descendents of the decedent survive, the descendents take the entire net estate by “representation.” (See discussion of “Representation,” below.)

Share of Parents

Under the Act, if a decedent is not survived by a spouse or descendents, the entire net estate passes to the decedent’s parents equally or, if only one survives, to the survivor.

Share of Other Relatives

Under the Act, if a decedent is not survived by a spouse, descendents, or parents, the entire net estate passes to the decedent’s siblings or the descendants of any deceased siblings (nieces and nephews).

If there are no siblings or descendants of siblings, then the estate is divided among the paternal and maternal relations (grandparents, aunts, uncles, cousins) of the decedent.

Net Estate

The “Net Estate” is the amount left for distribution to heirs after all debts, family allowances, taxes, and administrative expenses have been paid. “Family allowances” include a $10,000 year’s allowance to surviving spouses and $2,000 with respect to each surviving minor child.

If a will is valid, it is effective until it is changed, revoked, destroyed, or invalidated by the writing of a new will. Changes or additions to an otherwise acceptable will can be most easily accomplished by adding a codicil. A codicil is a document amending the original will, with equally binding effect. Therefore, a codicil must be executed using the same formality as the original will. Wills cannot be changed by simply crossing out existing language or adding new provisions, because those changes do not comply with the formal requirements of will execution.

Changes to an individual’s personal property may prompt a change to an existing will. Although many states allow a will to specify that personal property (property other than money and real estate) is to be distributed in accordance with instructions provided in a separate document, North Carolina is not one of those states. A document in existence at the time a will or codicil is executed may be incorporated by reference and have effect. But if the intent is to continuously update a “memorandum” or “letter” after the will is executed and have the updated document be of legal effect, it will not work in North Carolina. That being said, wills are often drafted that refer to a statement or a memorandum that is a list of personal property the decedent wishes for the executor to distribute in a certain manner (Grandma’s china to Sue, Grandpa’s shotgun to Ned). Many individuals do not wish to “clutter up” an already lengthy document (a tax planning will can easily run 30 or more pages) with relatively minor items that may change over time. Such lists and statements are useful as long as the client understands that the list might be morally persuasive to the Executor and Beneficiaries, but the list will have little authority beyond that. I suggest that if certain items are important enough and may be the subject of contention, list them in the will.

An outdated will may not achieve its original goals because its underlying assumptions have changed. Additionally, changes in probate and tax law may change the effectiveness of certain provisions. This is especially true as tax law changes accelerate. What may have been sound tax planning a few years ago could be disastrous now. If a will is based on outmoded circumstances, for example if a chosen devisee has died or has alienated the testator, the probate period may be extended as the court determines how to construe the old provisions. Wills should be reviewed at least every two years, as well as upon major life changes such as births, deaths, marriages or divorces, and major shifts in a testator’s property. Because state law governs wills, if a testator moves to another state, the will should be reviewed for compliance with the new state’s laws. If you have recently moved to North Carolina, please call us to make arrangements to review your estate planning documents.

As long as the testator is mentally competent, his or her will can be revoked entirely without replacement by a new document. A testator can revoke a will by intentionally destroying, obliterating, burning, or tearing the will. If the will was executed in multiple originals, or if additional copies exist, those should be treated in the same fashion. If undertaken, however, the testator would be wise to have the revocation witnessed and recorded to avoid future contentions that the will is still valid, but has been lost.

A word of caution: Revoking a will without preparation of a new will result in an intestacy if you die before preparing a new will. Serious problems can result from an Intestacy. Please see discussion at Intestacy: When You Die Without a Will – Why to Avoid It.