Everyone has a default estate plan, but if you have no estate plan, you have the default plan set up by the legislature. Let’s take a look at that plan.
Part I – Incompetency and Guardianship
Estate Plans do more than just dictate where your stuff goes when you’re gone. A primary component of your estate plan is to protect you during your lifetime. If something happens down the road which prevents you from being able to make decisions and you do not have the appropriate documents in place, your family may be forced to go through Incompetency and Guardianship proceedings.
To do so, your family will need to file a lawsuit against you alleging that you are incompetent. They will need to gather evidence to prove that allegation to the court. But without documentation, your doctors are legally not allowed to speak with your family about your current condition or to provide that needed evidence.
Even if your family can gather evidence, the court will appoint a Guardian Ad Litem (GAL) to conduct his/her own investigation into your mental and medical condition. Armed with a court order, the GAL can interview your doctors, friends, family, and neighbors.
They can obtain documents about your spending and your assets. If they agree with the family that you are unable to manage your affairs, they will likely recommend that the court deem you incompetent. You can also hire an attorney to fight this determination and the two sides will likely have experts provide testimony or ask the Court to order a mental health evaluation.
If the court ultimately determines that you are in fact incompetent, the next step is to determine who should be appointed as your guardian of the person, guardian of your estate, or general guardian. If the family cannot agree, or if the court determines that the family members who have offered to serve in those roles are not capable, the court can ask the local County’s Department of Social Services, Adult Protective Services Division to get involved. A Social Worker will be assigned and will conduct his/her own investigation. This is not a process that you want to be subjected to. Lawyers, expert witnesses, and courts are not cheap, and they are not easy to navigate.
Thankfully, the documents you need to prevent this are straightforward. While we hope that you will utilize our office for your estate planning needs, if you decide not to use our office, I would strongly encourage you to visit the NC Secretary of State’s website and download the Healthcare Power of Attorney that they have available for free. If you fill out the form and call us to schedule a time, I’ll have two witnesses and a notary for free. EVERYONE needs this document and the potential impacts of not having it can be extreme. If you use our office for any estate planning, we include this at no additional cost.
The NC Legislature has also created a Shortform Statutory Durable Power of Attorney. This is not the one that I use for my clients. The one I use is almost 30 pages and is much more comprehensive. However, theirs is free and available online. Unfortunately, we cannot notarize these for non-clients.
Part II – Intestate Succession
The second component of an estate plan is setting out what happens when you are going. Who gets what and when? If you die without a Last Will and Testament. The Legislature has a plan called Intestate Succession. The rules of intestate succession are complicated and rarely do what the deceased would have wanted. The specific laws on intestate succession can be found in Chapter 29 of the Statutes (https://www.ncleg.gov/Laws/GeneralStatuteSections/Chapter29).
Every situation is different but let’s review a couple of examples. First, if you pass away and leave your spouse and three children, your real estate that was held by you is split with 1/3 going to your surviving spouse and 2/3 split between your three kids (leaving them with 2/9 each).
Anything that goes through your probate estate would also be split with the first $60,000 going to the surviving spouse plus 1/3 of the remaining assets and the children would split get 2/3 of the remaining assets (after the first $60,000 is given to the spouse). But, if one or more of the children is a minor, guardianship will need to be established and the assets may be held by the clerk until the child reaches 18. And that doesn’t even get into the discussion about spousal rights and elective shares.
Article 8 of Chapter 29 provides additional options to the surviving spouse beyond the percentages we just discussed. Those options include taking a life estate in the dwelling house as well as complete ownership of the household furnishings therein. Alternatively, the spouse can take an elective share that is based on the number of years the couple was married.
Phew! This is just the surface level of the complications created in an intestate succession. Without a Will, other simple things get much more complicated by the courts. Most Wills waive the need for the executor to post a bond. A person administering an estate without a Will is generally required to post a bond based on the amount of assets that go through the probate estate. We haven’t even discussed the asset protection components of a Will that are lost to intestate succession.
I’ve never met anyone whose wishes match the intestacy laws of NC. Thankfully, a simple estate plan can quickly and easily fix these issues, but it is critical to have an estate plan suited to your needs and wishes. If you don’t utilize our office, please find an attorney that you think is a better fit (and who routinely practices in estate planning) to get a plan together for you. This area is complicated and very specific things must be met for a Will to be valid and to accomplish the deceased’s wishes.