I am not certain through whose eyes they determined this. I look around and still see far too many families struggling to recover to consider it over.   And while I acknowledge things may be improving on some level, I still find it hard to objectively look at a parent who cannot find work or lost a huge chunk of a 401(k) plan to say our Country is officially in the clear.

The number of bankruptcies taking place right now equally saddens me.  For many families, bankruptcy may be the only way to break free from the mountain of debt that constantly rests on their shoulders.  Of course that’s not to say this decision is ever taken lightly by those who file, as the consequences of bankruptcy are long-lasting and sometimes severe—especially if you stand to inherit money.

Example: a family member passes away who left you a cash gift in a will or trust.  On the surface it seems like this would be a much needed and timely relief for a family going through bankruptcy.  However, Federal bankruptcy rules declare that if you inherit money from a person who dies within 180 days of the date you filed for bankruptcy, you must tell the courts.   In simple terms, that means the inheritance now becomes a part of your bankruptcy estate and will be distributed to your creditors as the courts see fit.

This also applies to items that you may inherit such as cars, jewelry or furniture.  All of these items are subject to the administration of the bankruptcy estate.  However, this doesn’t mean that items like this are certain to go up on the auction block.  You can claim exclusion on certain things and the bankruptcy trustee has a certain amount of discretion in choosing what to liquidate. However, it can be extremely stressful to think about a family heirloom that has been in your family for years going to auction.

Hopefully your loved one had a Charlotte wills and estates attorney who knew a thing or two about protecting their inheritance from things like bankruptcy, creditors, divorce and the like. Ideally, your loved one would have been advised to set up a trust so any inheritance passed down to their family members would be out of reach from creditors and the courts.  If they did not, and you have not filed bankruptcy yet, this may still be an option if your loved one is willing to have their plan looked at by a qualified Charlotte wills and estates attorney.

Planning to avoid giving your hard-earned wealth to creditors is not illegal or immoral either.  You should think of it the same way you would when considering tax planning.  Tax planning is legal, but tax evasion is not.  The difference is whether you play by the rules and are honest.  For example, not telling the courts you received an inheritance is illegal and you could face serious consequences.  However, you are not skirting the rules if you are the recipient of a spendthrift trust; that was not your choice.

If you or your loved one needs help facilitating such a trust to protect your inheritance from the claims of creditors, simply call our Charlotte wills and estates office at (704) 843-1446 to schedule a “Peace of Mind Planning Session” at no charge ($750 value).  We will walk you through the necessary steps that must be taken to protect your inheritance from a bankruptcy filing or any other creditor’s claim. However, these appointments are limited to 5 per month so call today!

Through the Probate process, beneficiary names, accounts, account numbers and values are required to be disclosed.  We can all agree, I am sure, that this seems like a huge violation of our privacy.  What goes hand in hand with this required disclosure are the potential safety issue this poses to those inheriting your estate.  There are a lot of unscrupulous people who prey on widows and beneficiaries to try to separate them from their inheritance.

So why then is this information made available to the public?

It may be easier to pallet the lack of privacy if you can better understand the true purpose of probate.  One of the primary purposes of probate is to make sure the creditors of the deceased person have an easy way to collect any debts they are owed from their estate. For that reason alone, the probate process must be open and public.  Notice to creditors is required to be given in North Carolina with a mandatory waiting period of 3 months to allow the creditors sufficient time to file their claims.

This information is also available to the creditors of your beneficiaries so that they have notice that they are inheriting an estate. Under this scenario, the creditors could bring an immediate claim against your beneficiary, which may ultimately result in your beneficiary never receiving the inheritance you wanted to leave them.

However, to be clear, I am in no way advocating that debts go unpaid.  In fact, you should instruct your executor to pay your debts.  But, wouldn’t you rather direct how this process goes rather than leaving it to the courts?

One way to do that while simultaneously stopping the violation of privacy and loss of control over the distribution of your estate is to create a revocable living trust.

Unlike a will, a living trust is a private document that will not become a matter of public record because it does not have to be filed with the probate court.  There is no statutory requirement in North Carolina for the Court to over see the management of a living trust.  Therefore, you can name beneficiaries and provide gifts while still attaining privacy since only the trustees and those involved in trust administration will know the contents of a living trust.  This means that no creditor of yours or your beneficiaries, no disgruntled relative, no scam artist, and no nosey neighbor will ever have access to the details of your financial history.

Remember, there are people out there who make a living preying on young or vulnerable people that have just inherited something from an estate. They troll these public records daily looking for victims of their next heist or scam.  Fortunately, with a bit of planning, you can protect your family from such privacy violations that accompany the probate process.  I recommend talking to your Charlotte trusts lawyer about living trusts and how they can help your family if something unexpectedly happens to you.

Fortunately, we’ve made that process easier than ever by making five (5) free “Peace of Mind” planning sessions available to readers of our blog.  Simply call (704) 843-1446 and mention this article to reserve your spot.  Your family will thank you for it.

A Guardian is named in a Last Will and Testament or a Living Trust.  He or she essentially is nominated to raise the chid or children and make parental decision until the age of 18.

A Trustee is appointed to manage the assets held in a Trust for essentially anyone.  A Trust can be created for a minor child or an older child and especially a child with special needs.

Either appointment comes with big responsibilities and the person being appointed should be responsible enough to carry out those responsibilities.

“Guardian v Trustee”

1. both pass along specific assets,

2.  both name guardians,

3. both are written,signed and witnessed;

4.  both can be amended and revoked.

The differences between both are what sets them apart:

A Last Will and Testament, appoints an Executor who then takes the original Last Will and Testament to the Probate Court after the person dies. The assets are then collected and distributed according to the directions in the Last Will and Testament.  There are North Carolina Probate Court rules and regulations that need to be followed by the Executor once he or she has been appointed.  During the lifetime of the person who created the Last Will and Testament, the title of assets are not changed.  However, the names of beneficiaries may need to be changed to keep everything consistent with the Last Will and Testament.

A Revocable Living Trust appoints a Trustee and a Successor Trustee. This person manages the assets in the trust after death.  If done properly, a Revocable Living Trust will avoid probate. How?  Because the title of assets (not all) will be changed to the name of the Trust.  This is called Funding the Trust.  If the asset is not in the name of the person who died, then there is nothing to probate.  Ultimately, avoiding Probate.

I must caution you that there are certain assets that should not be titled into the name of the trust and there are beneficiary designations that must be changed in order for the Revocable Living Trust plan to work.  You should consult with an attorney, a financial planner and a CPA prior to making any changes – if you don’t you will run the risk of unwanted tax liabilities.

“What is the Difference Between a Last Will and Testament

and  a Revocable Living Trust?”

1. Where are the assets located?  All with one institution or several?

2.  How much time does the appointed Executor or Administrator have to dedicated to collecting the assets?  His or her time may be limited due to his or her own personal responsibilities.

3.  Do we need to locate beneficiaries or heirs?

4.  How quickly does the financial institution provide the information requested?

5.  What is the size of the estate?

6.  The requirements pertaining to filing deadlines, notice requirements, etc. of the Probate Court are always factors to consider as well.

If your goal is to avoiding Probate, have a  smoother and quicker transition of assets then an alternate planning option for you to consider is a  Revocable Living Trust.

1. Complete all documentation necessary to become the personal representative (Petition for Letters and Oath at a minimum)

2. Gather information on the decedent and the decedent’s probate assets (this is required for the Petition)

3. Make an appointment with the probate clerk (not always necessary)

4. Meet with the probate clerk (again, not always necessary)

5. Inventory Safe Deposit boxes (You may need a Court Order to open this if you are trying to do it before the Letters are issued by the Clerk)

6. Gather and protect estate property

7. retain experts (CPA’s, Attorneys, Financial Planners, for example)

8. determine value of non-probate assets (probably won’t get far with this until you have the Letters issued from the Clerk)

9. investigate potential wrongful death claims (you will have to disclose whether there is a wrongful death claim)

10. obtain tax identification number (you will need this before you open an Estate Account)

11. open estate bank account (using the tax identification number as the “social security number” so to speak of the Estate Account)

12. pay the year’s allowance (if the surviving spouse requires it)

13. activate or terminate government benefits

14. obtain prior tax returns

15. obtain death certificates (the funeral home usually orders these for the family when they burial arrangements are made. I would order at least 10)

16. publish notice to creditors (cannot do this until the Letters have been issued by the Clerk)

17. identify legal obligations of the decedent (creditors, etc.)

18. start going through decedent’s personal effects to determine where assets may be held and or any liabilities he or she has outstanding

19. keep very detailed records on any checks deposited into the Estate Account as well as any checks written from the account

20. Call an attorney if you get too overwhelmed with the process!

The one page document contains the following information:

1.  The State and County the Estate was filed;

2.  The name of the Decedent (person who died);

3.  A statement that the application has been reviewed and the Court “adjudged legally sufficient the qualification of the fiduciary (Executor)”;

4.  The name of the Executor ;

5.  The date of the appointment (the date that the Clerk of Court signed the Letter);

6.  The raised seal of the Court

Once this Letter is issued, it will need to be provided to whatever institution the Executor will need in order to collect the assets.  It also needs to be provided if the the Executor needs to obtain information on an account or other asset.

In North Carolina, the Court provides five (5) Letters Testamentary which is included in the filing fee of $88.00.  If the Executor needs additional ones then they are $1.00 each.  For a list of additional Court fees please see http://tinyurl.com/probatefees.

Keep in mind that unless the Court is satisfied with the initial filing documents, the Letters will not be issued.

1.  The original Last Will and Testament;

2.  All the full names, mailing addresses and ages of each Beneficiary named in the Last Will and Testament;

3.  Application for Letters Testamentary;

4. Oath of Office;

5. Bond (if required);

6. Appointment of Resident Process Agent (if the Executor resides outside of North Carolina);

7. Filing fee of $61.00 and

8. Notice to Beneficiaries

Once the initial documents are filed and approved by the Clerk of Court, he or she will issue Letters Testamentary.  Letters Testamentary is the legal authority for the named Executor to investigate the location of assets and to collect the assets.  The Executor is not required to supply exact information regarding the assets on your initial Application for Letters Testamentary.  The Court will require that information 90 days later when the Executor files the 90 Day Inventory.