Money matters: Strong-willed

Estate planning documents should be revisited regularly, either after a change in circumstances or following the passage of a few years' time. (iStock.com/shapecharge)

Editor’s note: Money Matters is a monthly column exploring pertinent financial issues for older adults in or near retirement. In this installment, columnist Jenny Callison shares tips on getting – and keeping – your affairs in order. 

If you have moved to the Cape Fear area from another state, don’t assume that any estate planning documents you executed in that state leave you in good shape in North Carolina.

“We do have a large and growing population of folks who move to Wilmington to retire. Most of them have done [estate] planning before they move here. If they have signed a planning document in another state, it’s probably valid in North Carolina, but [their fiduciary or heirs] might run into red tape when the time comes,” said Jennifer Roden, an attorney with Craige & Fox. “If you have the ability, you might want to update [those documents] to North Carolina. If, however, your spouse lacks the capacity [to agree to and sign documents], then at least review what you have with an adviser who can give you guidance so you will have answers to any questions that may arise later.”

Roden, a specialist in Elder Law and a certified Elder Law attorney, says that even if you’ve had your future directives drawn up locally, it’s a good idea to review them every few years. She recommends starting any discussion of wills or trusts by identifying goals. “The first thing I ask clients is, ‘What are your goals? What do you want to leave for your beneficiaries?’ You hear stories: the family member who struggles with alcohol. The person with disabilities,” Roden said. 

Roden says she also asks questions about the clients’ circumstances. Do they have children? Children-in-law? Grandchildren? Do those family members get along with each other or is there potential for fighting? Is there a family member who will try to exert dominance over the others? “You can be very specific in your will about what goes to whom, but if someone wants to challenge the will, and if they are litigious, they are going to challenge it,” she said.

A family whose members are close might choose to have a conversation about how the parents intend to distribute their assets through their wills, and even allow heirs to discuss what tangible items – the heirloom jewelry, the treasured furniture – each of them would like. But if your family tends to squabble, maybe you shouldn’t have that conversation, Roden advises clients.

Clients who want to control how their financial assets are used might want to consider setting up a trust. “In North Carolina there are many different kinds of trusts,” Roden said. “The most common is the revocable or living trust, whose assets avoid the probate process and go directly to the beneficiaries. These trusts are good if, for example, you have a beneficiary who is a minor or who struggles with addictions.”

In those situations, a named trustee manages the flow of assets to the beneficiary. A trustee can also ensure that funds earmarked for a specific purpose: medical care or education, for example, are indeed used that way. A trust can also be useful if clients own real estate in more than one state by exempting from probate that real estate asset transfer, according to Roden. 

Additionally, a trust can protect a family asset, like a vacation home, by maintaining a clear title for the heirs.  “But if the heirs are irresponsible, [the trust] might direct that the vacation house be sold,” she said. “Or clients can put money in the trust to maintain the house, and pay taxes and insurance.”

What happens when clients want to exclude a family member who might expect to inherit?

“I am all about clients having their wishes followed,” she said. “If someone is not named in a will as a beneficiary, they will not be notified that the will has been probated. [Clients should] put in the will that excluding that person is done on purpose and document that meeting where clients have affirmed that decision. Notes and quotes should be part of the [clients’] file.” If a disinherited person challenges the will, the clients’ attorney can produce the file during the discovery process, and those “notes and quotes” will make it clear that the attorney’s clients were directing the will.

An important part of the estate planning process is deciding who the fiduciary or executor should be, Roden added. If a family member can be trusted to do an objective job, and if other beneficiaries will trust that person, that can be a good solution. If not, a trusted outsider can be named to the role. If the settling of an estate is likely to be contentious, the clients can direct that all assets must be sold and distributed according to the terms of the will.

In wrapping up the estate planning process with her clients, Roden emphasizes two important points. “The first is, decide where you need to store your documents,” she said. “There are ways to probate copies of documents, but it’s more expensive. Documents should be stored with the professional [estate planners] you work with. Then let your beneficiaries know where they are.”

The second point of emphasis is the need to review these future directives on a regular basis, especially if there is a significant change in financial or family matters. “Re-evaluate every three years at least,” Roden advises her clients.