Posts Tagged ‘intestacy’

As an elder law and special needs attorney I get a track-side seat for a pile of planning train wrecks: Here are the best ones . . .

This is a column for the contrarians among us who will insist, against mounds of advice, on creating maximum legal havoc. Here are ten great ways to insure a successful train wreck!

Great Idea One: Do not have a will. Let state law determine how assets will be divided (they won’t all go to a spouse if there are any children). Without a will many valuable planning opportunities are missed, thus insuring maximum havoc.

Great Idea Two: Do not have an effective power of attorney. Without a power of attorney, a guardianship may be the only option, which will be expensive and subject the guardian to court supervision and bonding.

Great Idea Three: Sign over all property to the kids if bad results are the goal. Mom may believe she is protecting her property, but she is subjecting the property to the liabilities and risks of the kids (divorce, anyone?), not to mention that some of the kids may be thinking of moving to Rio. Giving the property to the kids can also insure they pay maximum capital gains taxes when they sell the property. Certain types of trusts are a much better alternative, but not as much fun if creating maximum damage is the goal!

Great Idea Four: Skip the health care advance directives. Let everyone argue among themselves to decide who gets to make health care decisions.

Great Idea Five: Do not do any long term care planning. Buying long term care insurance is way too responsible. Also, it is better to wait until there is a crisis (Dad has gone into the nursing home) because at that time there are fewer options and any course of action will likely be more expensive.

Great Idea Six: If there is a disabled child, duck parental responsibilities and avoid taking advantage of the many planning opportunities available for a special needs child. Disinherit the child and leave everything to the siblings. Maybe “they’ll do the right thing.”

Great Idea Seven: Carry inadequate insurance. This is a real winner! Do not carry a good Medicare supplemental policy so that there will be maximum exposure to whatever Medicare does not cover (which is plenty).

Great Idea Eight: Do not do any planning after a “late” second marriage, especially if there are children from the previous marriages. In this manner a perfect storm of battling families can be hoped for. Also, treasured family assets can be used to pay for the nursing home expenses of old Whatsisname instead of going to the kids.

Great Idea Nine: Do not, under any circumstances, update an old estate plan. Laws may change, but the dedicated Train Wrecker knows that he need never change!

Great Idea Ten: Never, ever seek good professional advice. With good professional assistance things may go too smoothly. If you absolutely must have some help, limit expenses to less than $100 and buy something online. Or better yet, seek the advice of a neighbor.

Bonus: Do not do anything.

Someone told me not to write this because it would be bad for business (because guess who gets to clean up the wreck?).  “Nope,” I said, “people will do it anyway!”

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.