Estate planning has three basic building blocks: wills, durable powers of attorney, and health care powers of attorney. When people think of estate planning, they immediately think of wills, and rightfully so. A properly drafted Last Will and Testament is the best (and only) way to ensure that your estate is distributed as you desire. Without a will, you estate will be subject to distribution in accordance with the laws of the State of North Carolina.
What’s in a will, anyway?
A will contains many different items, but there are things that aren’t there as well. A basic Last Will and Testament will, in most instances, include the following items:
- A statement of the name of the person signing the will and their county and state of residence. The “statement of name” may seem obvious, but it is a very basic and important point. A will must be executed by the person in whose name the will is made out, and only that person. Your power of attorney cannot execute your will on your behalf. The State of North Carolina requires that a testator (that is, the person whose will it is) have “testamentary capacity”, which means that the testator understands what their property consists of, and who they’re giving it to. (Need statutory reference). A testator can only give away property in which they have an interest at death (discussed in the example below). Finally, the statement of county and state of residence are necessary because they establish the domicile of the testator. This is important because it provides the context for probate and proper rules regarding execution.
- A statement of the Testator’s immediate family as of the date of execution. The statement of family is important because it establishes who the testator considers an heir, and gives the testator the opportunity to specifically disinherit an heir (if the testator so desires).
- Statements regarding payments of debts, taxes, and expenses related to the testator’s estate, death, and estate administration. This allows the testator the opportunity to set out how expenses regarding his or her estate are to be handled. In the absence of such a statement, North Carolina’s General Statutes prescribe the method and manner of such payment. Generally speaking, however, a testator will request that his or her estate cover any and all expenses related to such estate’s administration, and request that any taxes owing or due because of a distribution be paid by the estate as well. These statements normally utilize form language, but if you have certain desires regarding the payment of expenses, be sure to articulate those to your attorney.
- A statement regarding this distribution of a testator’s personal property, followed by a statement regarding the distribution of the residue of a testator’s estate. Our firm includes two statements regarding the distribution of a testator’s property: distribution of the testator’s personal property and distribution of the residue of the testator’s estate. Some firms utilize one statement instead of two, choosing to lump all of a testator’s property together. This sort of single statement is fine when a testator desires all their property to go to one or more persons in equal shares. However, our documents separate the distribution into two sections: personal property and residue. We utilize the separate personal property provision as a way to provide the testator with an opportunity to distribute specific items of personal property, either in the will or in a handwriting attached to the will. We normally encourage clients to utilize a handwriting to distribute items like jewelry and furniture instead of including those provisions in the will – mostly because many times people change their minds regarding these distributions – and if they’re included in the will it will require execution of a codicil, whereas if they are set out in a separate handwriting they can be changed by the testator without changing the will. However, it is important to note that such a handwriting, if challenged, would be difficult prove as legally binding, so if there are specific pieces that you want to be absolutely certain of, they should be listed in your will.
Personal property includes items such as jewelry, furniture, clothing, vehicles – but does not include bank accounts, cash on hand, stock certificates, or the like. These items are covered by the residue.
The residue provision in our wills covers everything not distributed under the personal property provision. For the purposes of most estates, this includes real property owned by the testator at death, cash, and any bank accounts in the name of the testator that didn’t have named beneficiaries or named the testator’s estate as beneficiary. The testator can then distribute what is normally the larger part of his or her estate as he or she sees fit, whether it is outright to set beneficiaries, or distributed to a trustee for the benefit of a beneficiary.
- A statement nominating a person or persons to serve as Personal Representative of the Testator’s estate. In most cases, the person nominated to serve as initial Personal Representative is the testator’s spouse; however, this does not have to be the case. The testator can appoint anyone he or she sees fit to serve. In wills drafted by our office, we also name a person or persons to serve in the event the initial Personal Representative is unable to serve.
- A waiver of bond for the Personal Representative and a waiver of accounting requirements.
A personal representative is, by law, required to be bonded before they
can serve as personal representative. The bonding requirement is there
to protect the beneficiaries of the estate in the event the personal
representative fails to properly administer the estate or steals from
the estate. In that situation, the bond provides a pool of money from
which the beneficiaries’ distributions under the will can be satisfied.
This is normally an expense of the estate administration, and depending
on the size of the estate, can be a rather large expense. In
situations where a spouse or child is serving as personal
representative, it is often good to have the testator waive the bonding
requirement (which he or she is entitled to do under the law) to avoid
that expense. However, if the person nominated is not a family member,
it may be advisable to leave the bond requirement in place.
Additionally, our documents waive any accounting requirements outside of those prescribed by the estate administration statutes.
- Self-Proving Affidavit. Most wills now contain “self-proving” affidavits, and ours are no exception. The self-proving affidavit eliminates the need for signed statements from witnesses following the death of the testator. The self-proving affidavit is a notarized statement indicating that the testator and two witnesses signed the will in front of the notary, after the testator indicated to the witnesses and the notary that he or she was above the age of 18, of sound mind, and under no undue influence to execute the document.
However, many people mistakenly assume that a basic will includes things like a power of attorney or nomination of guardian for minor children. This is not the case. A nomination of power of attorney can never be in a will. North Carolina’s statutes require that nominations of someone as attorney-in-fact be set forth in a separate document with separate execution requirements and separate language requirements. For more information on Powers of Attorney, click here. Nomination of a guardian for minor children can be included in a will, but unless it is specifically set out in the document, it is not included. For an example of what can happen when there is no nomination of a guardian for minor children, click here.
It’s just my spouse and my kids – why do I need a will? Everything’s going to go them anyway, isn’t it?
This is one of the more common statements from clients in our office. Everyone assumes that their property just goes to their family – and that assumption is not incorrect. What is incorrect about that assumption is that it implies that property goes in that order; the idea that “if I die first, it goes to my wife; but if she dies before me, it just goes to the kids”. North Carolina’s statute says the following:
If a person dies, without a will, and is survived by their spouse and one or more children, the spouse and the children share in both the real and personal property of the decedent. Specifically:
- If a person dies leaving a spouse and one child (or issue of a deceased child), the spouse and the child each receive a one-half interest in the real property included in the decedent’s estate. From there, the personal property of the decedent (so money, vehicles, jewelry, etc) is valued, and the spouse receives the first $60,000.00. The spouse and the child then split the remaining value of the personal property.
- If a person dies leaving a spouse and two or more children (or issue of a deceased child), the spouse receives a 1/3 interest in the real property included in the decedent’s estate, while the surviving children or issue share the remaining 2/3 interest. From there, the spouse still receives the first $60,000.00 of personal property, but they only receive 1/3 of the remaining personal property, with the children or issue dividing the remaining 2/3.
A will is extremely important from a basic estate planning standpoint. For another example regarding what can happen to a single person’s estate in the absence of a will, click here. For an example of what can happen to a couple’s estate in the absence of a will, click here.