Using a Charitable Remainder Interest Annuity or Unitrust (CRATs/CRUTs) and Charitable Lead Trusts (CLTs) Charitable Remainder Interest Annuity and Unitrust as well as Charitable Lead Trusts are vehicles for the charitably inclined that can provide significant income and estate tax benefits. Both charitable remainder trusts and charitable lead trusts are split interest trust where an annuity interest and a remainder interest are split among the grantor of the trust or other non-charitable beneficiaries and a qualified charity. CRATs and CRUTs Charitable Remainder Interest Annuity Trusts (CRATs) and Charitable Remainder Interest Unitrust (CRUTs) are the two types of charitable remainder trusts. … Continue reading
Category Archives: Estate Planning & Admin
Federal Gift and Estate Tax Planning- Part 5 of 7: Advanced Planning with IDGTs
Freezing and Reducing your Taxable Estate with Intentionally Defective Grantor Trusts (IDGTs) Likely the most effective and popular advanced planning techniques are the use of a Grantor Retained Annuity Trust (“GRAT”) or an Intentionally Defective Grantor Trust (“IDGT”). The general idea of both techniques is to transfer assets expected to appreciate in an amount that exceeds the current month’s Applicable Federal Rate or Section 7520 (120% of the AFR) rate and pass the excess growth to non-charitable beneficiaries, all while using little or none of the individual’s basic exclusion. In this part, I will discuss IDGTs. An Intentionally Defective Grantor … Continue reading
Federal Gift and Estate Tax Planning- Part 4 of 7: Advanced Planning with GRATs
Freezing and Reducing your Taxable Estate with Grantor Retained Annuity Trusts (GRATs) Likely the most effective and popular advanced planning techniques are the use of a Grantor Retained Annuity Trust (“GRAT”) or an Intentionally Defective Grantor Trust (“IDGT”). The general idea of both techniques is to transfer assets expected to appreciate in an amount that exceeds the current month’s Applicable Federal Rate or Section 7520 (120% of the AFR) rate and pass the excess growth to non-charitable beneficiaries, all while using little or none of the individual’s basic exclusion. In this part, I will discuss GRATs, which are likely the … Continue reading
Federal Gift and Estate Tax Planning- Part 3 of 7: Advanced Planning with ILITs
Creating and Irrevocable Life Insurance Trust aka ILIT The first advance planning technique I will discuss in this series of blogs and one of the simplest strategies is to have a life insurance policy held by an Irrevocable Life Insurance Trust aka an “ILIT.” While this strategy does not reduce the size of an individual’s taxable estate or estate taxes per se, it creates untaxed liquidity outside of their taxable estate to pay the taxes which may be due on the individual’s taxable estate. One question clients may have is why holding life insurance individually does not serve this same … Continue reading
Federal Gift and Estate Tax Planning- Part 2 of 7: Leveraging the Basic and Annual Exclusions
Maximizing Your Basic Exclusion The primary reason the vast majority of North Carolinians avoid estate tax is by simply using their basic gift and estate tax exclusion which is historically high. The 2024 amount is $13,610,000 per individual and $27,220,000 for a married couple who elects portability. Although some individuals may accomplish this without any planning, if an individual has a large estate, even if it is currently below the basic exclusion, there is simple planning which can leverage their basic exclusion. This leverage is due to the future growth of the gifted assets becoming removed from an individual’s taxable … Continue reading
Federal Gift and Estate Tax Planning- Part 1 of 7: The Unlimited Marital and Charitable Deductions
As discussed in prior blogs, North Carolina does not assess an estate or inheritance tax and the federal unified gift and estate tax exclusion as of 2024 is $13,610,000 per individual and $27,220,000 for a married couple who elects portability. Accordingly, the vast majority of North Carolinians do not have taxable estates. However, with the exclusion scheduled to sunset on January 1, 2026, and thereafter be greatly reduced to affect many more North Carolinians, I’d like to provide a summary of the most effective and popular strategies to reduce or eliminate gift and estate taxes. In part 1, I will … Continue reading
Effect of Separation and Divorce on Estate Planning in NC
If you and your spouse are separated or you have recently divorced, this blog will summarize the relevant North Carolina statutes. Separation and Estate Planning A separation alone has no legal effect on your estate plan. If you and your spouse have executed a separation agreement, it will likely have reciprocal renunciations of statutory spousal rights such as the Year’s Allowance, Intestate Succession, and the Elective Share. These spousal rights exist regardless of whether your Will or Trust includes your spouse. As my Wills and Trusts professor always said, “you can’t disinherit your spouse in North Carolina.” Without a … Continue reading
2024 Gift, Estate and Generation-Skipping Tax Exclusions
The unified lifetime general gift and estate exclusion, the generation-skipping gift and estate tax exclusion, and the annual gift tax exclusion are typically adjusted annually for inflation. On November 9, 2023, the IRS announced an increased exclusion for all three which will become effective on January 1, 2024. The annual gift tax exclusion will increase from $17,000 to $18,000 in 2024. This is the amount one can gift to a recipient during the year without filing a gift tax return and, therefore, without using any of their unified gift and estate tax exclusion. With gift splitting, married couples will be … Continue reading
Asset Protection in North Carolina (Part 2)
One of the primary strategies for protecting real estate for long-term care and Medicaid purposes involves a special kind of deed converting the real estate to a non-countable asset while also making it non-recoverable from the Medicaid estate recovery laws. Although generally used for Medicaid planning, I often inform clients that, in the event they never need long-term care or to apply for Medicaid, the deed provides a multitude of other benefits including general asset protection and probate avoidance. While changing the character of real estate ownership does not exempt the property from the claims of creditors, it can make … Continue reading
Asset Protection in North Carolina (Part 1)
I strive to write blogs that hit on the most frequent areas my clients inquire about in the first meeting. One of the most common, if not the most common, comments from clients in the first meeting is “we just want make sure things are protected”, “how can I protect what I have?”, or something along those general lines. These are, of course, very general comments so the natural next step is to find out exactly what the client means in order to begin formulating specific estate planning goals. In prior blogs, I have focused on long-term care expenses as … Continue reading
What’s the Deal with Death Taxes?
In my experience, one of the initial questions from clients is what can I do to minimize estate taxes? In many cases, clients initially express an interest in creating a trust based on the notion that it is needed to minimize taxes. While there are many types of advanced planning trusts which are intended to remove assets or appreciation from a person’s taxable estate, the benefits of a standard revocable living trusts commonly used in estate planning typically does not include avoidance of estate taxes because any assets transferred to a revocable living trust remain in the settlor’s (the person … Continue reading
The Cost of Estate Planning vs the Cost of No Plan
Many people may consider the cost of Estate Planning to be prohibitive. I’d like to dispel that notion, particularly compared to some of the possible alternatives. A reasonable analogy can be made to insurance (health, car, or home)—although we may grumble about paying for insurance, we know that not paying for insurance can be exponentially more expensive! The same is true of Estate Planning. In the following paragraphs I’ll describe the simplest complete Estate Plan commonly used; please note that if your circumstances require more complexity the pitfalls associated would multiply in complexity and ultimately cost as well. An Estate … Continue reading
5 Law Firm Carolinas Attorneys Recognized in The Best Lawyers in America
Five attorneys at Law Firm Carolinas have been named to the 2024 Edition of The Best Lawyers in America. Carole Albright, who is a Board Certified Specialist in Family Law, has been recognized in the practice of Family Law. Keith Black, who is a Board Certified Specialist in Family Law, has been recognized in the practices of Family Law and Family Law Mediation. Steven Black, who is a Board Certified Specialist in Residential Real Estate, has been recognized in the practice of Real Estate Law and Community Association (HOA and condo) Law. Jim Slaughter has been recognized in the practices … Continue reading
Guide to Fiduciary Compensation: Part 3 – Trustees
North Carolina courts have provided that a “fiduciary relation” exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence. Furthermore, North Carolina courts provide that a fiduciary duty can arise by operation of law or based on the facts and circumstances. In the case of estate planning and estate administration, we are speaking of clearly defined fiduciary roles which arise as an operation of law. The primary examples are agent and … Continue reading
Guide to Fiduciary Compensation: Part 2 – Personal Representatives
North Carolina courts have provided that a “fiduciary relation” exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence. Furthermore, North Carolina courts provide that a fiduciary duty can arise by operation of law or based on the facts and circumstances. In the case of estate planning and estate administration, we are speaking of clearly defined fiduciary roles which arise as an operation of law. The primary examples are agent and … Continue reading
Guide to Fiduciary Compensation: Part 1 – Agents under Powers of Attorney
North Carolina courts have provided that a “fiduciary relation” exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence. Furthermore, North Carolina courts provide that a fiduciary duty can arise by operation of law or based on the facts and circumstances. In the case of estate planning and estate administration, we are speaking of clearly defined fiduciary roles which arise as an operation of law. The primary examples are agent and … Continue reading
North Carolina’s Archaic Laws on “Legitimacy”
While many are fortunate enough to create a Last Will and Testament during their life dictating the disposition of their estates, many individuals pass away unexpectedly or simply lack the resources, knowledge, or motivation to create one prior to death. These individuals are referred to as Intestates and, for individuals who pass away as residents of North Carolina, the disposition of their estates is dictated by the North Carolina Intestate Succession Act. The North Carolina Intestate Succession Act (Chapter 29 of the North Carolina General Statutes) provides the scheme by which property passes from a person who dies without a … Continue reading
Filing an Income Tax Return for a Deceased Person
While I am not a CPA or tax attorney, I am often confronted with tax matters in my estate planning and estate administration practice. In this blog, I will focus on filing any outstanding federal and state income tax returns for a deceased individual. As a disclaimer, this blog should not be taken to provide tax advice and is intended only as general information on the types of returns and appropriate parties to sign. Information in this blog is gathered and, in some places, quoted directly from irs.gov. Consultation with a CPA is highly encouraged before any filing decisions or … Continue reading
Filing an Income Tax Return for an Estate Vs. Filing an Estate Tax Return
While I am not a CPA or tax attorney, I am often confronted with tax matters in my estate planning and estate administration practice. In this blog, I will focus on federal income tax returns for estates (Form 1041) versus federal Estate (and Generation-Skipping Transfer) tax returns (Form 706). As a disclaimer, this blog should not be taken to provide tax advice and is intended only as general information on the types of returns. Information in this blog is gathered and, in some places, quoted directly from irs.gov. Consultation with a CPA is highly encouraged before any filing decisions or … Continue reading
Tenants-in-Common: A Common Complaint and an Untenable Affair
With my primary areas of practice in estate planning, estates and real estate, co-owned real estate is a frequently discussed topic with clients. North Carolina recognizes three types of co-ownership in real estate. First, tenancy-by-the-entirety is a type of co-ownership in real property reserved exclusively for spouses. Tenancy-by-the-entirety has built in rights of survivorship and protections against the creditors of one spouse. Second, joint tenancy is a type of co-ownership for non-spouses with rights of survivorship which means when one co-owner dies, their share is automatically vested in the surviving owner/s. Joint tenancy in North Carolina at one time required … Continue reading