An Introduction to North Carolina Estate Planning Documents

An Introduction to North Carolina Estate Planning Documents

If you’ve never gotten an estate plan, or you got one a long time ago, you may not be familiar with the documents that make one up. Have no fear! This article will give you the basics to help you feel more comfortable before meeting with an attorney.

Will

Known more formally as a “Last Will and Testament,” a will is the most basic element of an estate plan. It lays out who will receive your possessions when you die and names a person (called an Executor) who will be in charge of distributing your assets (a process known as estate administration or probate). If you have minor children, you can also use your will to name a guardian(s) who you’d want to take care of them if you die before they reach legal adulthood (age 18 in North Carolina). (Go here to learn about what happens if you die without a will.)

Notably, once a will is probated—that is, handed over to the court after your death—it becomes a public document, meaning that anyone who wanted to read it could do so. This fact, plus the expense and delay that estate administration often entails, motivates some people to want to avoid it. For for more on this, see “Revocable Living Trust” below.

Also notably, not all of your assets will pass through your will. For example, accounts with named beneficiaries (like a 401K) and assets you own jointly with right of survivorship with another person (like a joint bank account or your house, if you and your spouse bought it together) won’t be affected by your will. This is a good reason to talk to an attorney during your estate planning process—you’ll want to be sure your will does what you think it does.

Durable Power of Attorney

This document identifies a person (called your Agent under current North Carolina law) who can make financial decisions for you, like pay your bills and manage your assets, if you become incapacitated. You can give your Agent limited powers, broad powers, or something in between. You can also choose whether you want your Agent to have those powers as soon as the document is signed, or only if and when you’re declared incompetent by a physician. (Go here to learn why it’s not a good idea to handle incapacity planning by adding someone to your bank account.)

Beware: some powers that can be given to an Agent, like the power to sell property, have the potential to alter your estate plan. So think carefully about the powers you give your Agent, especially if you have specific items or property you’d like to leave to particular people. Also, be sure to name someone you trust not to abuse their power.

Healthcare Power of Attorney

Sometimes known as a Healthcare Proxy, this document permits a specified person (your Healthcare Agent) to make medical decisions, like authorize medical procedures, on your behalf if you become unable to.

Living Will

Also known as an “Advance Directive,” a Living Will outlines your wishes regarding life support (and related life-prolonging measures) in certain situations, such as if you are in a persistent vegetative state and are unlikely to recover. (At least one physician will need to certify that you meet one of these conditions for the Living Will to be effective.) In North Carolina, you can choose to make this document binding, or you can can allow your Healthcare Agent to override it if he or she disagrees with your selections. Having a Living Will can make an emotional situation a little easier on your loved ones by telling them what you would want instead of leaving them to wonder.

HIPAA Release

Also known as an “Authorization for Use and Disclosure of Protected Health Information,” this document allows you to authorize your medical providers to release your “protected health information” (according to the federal statute commonly known as “HIPAA”) to specified individuals. It’s a good idea to name at least your Healthcare Agent here, since that person may need access to your health records to begin exercising his/her authority as your Healthcare Agent.

Revocable Living Trust

Sometimes known as a “living trust” or “revocable trust” for short, a Revocable Living Trust (“RLT”) can be understood as a sort of imaginary basket for your assets. Just like baskets can be made out of many different materials, come in different shapes and sizes, and hold a variety of objects, RLTs can be used to hold many different types of assets (including real estate) and accomplish a variety of goals. One benefit of RLTs is that they help you reduce probate costs, since any asset you put into your RLT (by retitling it in the trust’s name) won’t go through probate when you pass away. Trusts, including RLTs, can also be used to provide asset protection for your heirs—that is, you can structure payouts in ways that will prevent heirs from spending all their inheritance at once and/or protect the funds from claims by the heirs’ creditors (like divorcing spouses). Other advantages of the RLT include privacy (because, unlike a will, the trust document never becomes public) and potentially a smoother transition for whomever is to manage your finances if you become incapacitated. RLTs tend to cost more than a will on the front end, but depending on your priorities, the difference in cost may be worth it.

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