Things To Consider When You’re Considering Your Will (Part 2)

Jumping off of the last blog post, which touched on distributing assets and dealing with beneficiaries with special or unique needs, this post is a continuation of key points to consider and touch on when you are considering the details of your Will.  For the preceding blog post, click [here].

Appointing a Fiduciary and a Guardian

Part of making your Will is appointing an individual who will be tasked with seeing that your wishes are carried out.  That individual might be identified as a Personal Representative, Executor or Executrix. 

Depending on the nature of your estate, this can be a very small job, or a very tedious and time consuming job.  It’s important to consider how much work is likely to fall to your designated fiduciary, and whether that person is comfortable taking that work on.

Like anyone you appoint to act on your behalf, it is important that your fiduciary be someone that you trust, as he or she will be the one who has access to your bank accounts and other assets after your death. 

Another key consideration is whether your fiduciary should be a child, or a family member, or whether it would be best to name a third party who has no relation to you, who can objectively manage things.  If you appoint one of your children, keeping all of your children in the loop about who you are appointing may reduce conflict following your death.  The death of a parent can sometimes have a tendency to bring out the worst in the surviving children.  If your children don’t get along, consider appointing a more removed family member, or a non-family member as a fiduciary.

Additionally, North Carolina law allows for the designation of a guardian for minor children to be included as part of an individual’s Will.  This can be crucial for a single parent who is concerned about appointing an appropriate caregiver for his or her young children. 

Before designating a guardian in your Will, you should always talk to the person you will be designating, to make sure he or she is willing and able to take on that responsibility. 

Tax Implications

To the extent that when you pass away, you leave assets that do not name a beneficiary or a joint owner, those assets will – in most circumstances – default to your estate, and become assets that are distributed pursuant to the terms of your Will. 

The effect of this can be quite significant, depending on the asset itself.  Special rules apply to retirement accounts like IRAs and 401(k)’s.  When retirement assets pass to an estate, different tax rules apply than would apply if those funds went directly to an individual, and generally not in an ideal way.

It is crucial that you fully disclose all of your assets to your estate planning attorney, so that proper planning can be utilized to mitigate a negative tax impact. 

Other tax considerations to raise in your estate planning include whether you have an estate sizable enough to be subject to estate taxes.  North Carolina has repealed the state estate tax effective for estates of those dying on or after January 1, 2013.  However, a Federal estate tax still applies to estates in excess of $5.43 million for those dying on or after January 1, 2015. 

In the past, estate tax thresholds were much lower.  As a result, it was necessary to frequently draft documents to minimize the tax hit an estate would take.  With the new, higher threshold in place, fewer estates require that kind of planning.  That said, if your assets are likely to exceed that amount when you die, or you might receive an inheritance that would put you over the threshold amount, appropriate planning steps should be taken.