North Carolina Modifies Provisions Regarding Trusts, Estates, and Powers of Attorney
by: Louis Danastorg
On June 5th, 2013 the General Assembly of North Carolina passed an act purposed to update and clarify provisions of the laws governing estates, trusts, guardianships, powers of attorney, and other fiduciaries. These revisions become effective October 1, 2013 and apply to estates of decedents dying on or after that date.
Wrongful Death Statute
Additions to the NC wrongful death statute provide the superior court clerk authority to approve all claims filed for burial expenses and reasonable medical and hospital expenses.
Notice to Creditors/Limited Personal Representatives
The application for appointment as limited personal representative shall be in the form of an affidavit when: 1) decedent has left no probate personal property and no real property devised to the personal representative; 2) the estate is administered by collection by affidavit; 3) the estate is administered under summary administration provisions; 4) estate consists only of a motor vehicle; or, 5) the decedent left assets that may be treated as assets of an estate for limited purposes.
Elective Share Change
The new applicable share of total net assets passing to a surviving spouse no longer considers the number of lineal descendants, but rather the length of the marriage. If survivor has been married for less than five years, he or she would be awarded 15% of the total net assets. The share increases to 25% for marriages at least five years but less than ten; 33% for those marriages lasting 10 to 15 years. Should the surviving spouse have been married for a period greater than 15 years, he or she may elect to take 50% of total assets. The changes also remove the reduction provision, which limited the amount taken by elective share when lineal descendants exist from sources outside the surviving spouse’s marriage to the decedent.
Attorney’s Fees on Year’s Allowance
Attorney’s fees and costs shall be paid as an administrative expense of the estate where the clerk of the superior court has assigned a petitioner year’s support from a decedent’s estate. The clerk must duly consider all other person’s entitled to year’s allowances from the estate, and the total value of all allowances must not exceed one half the decedent’s average net income for the three years leading to his or her death.
Out of State Will Probate and Military Wills
A will shall be considered valid should its execution comply with the state law in which it was executed, the execution complies with the laws of testator’s domicile, or the instrument is a military testament. The General Assembly provides the form and language to be used when simultaneously executing, attesting and self-proving a will; a form displaying similar intent may serve the same function. Any will executed and shown to have been self-proved under the laws of another state shall be considered self-proved within North Carolina. A military testamentary instrument executed in compliance with 10 U.S.C. ยง 1044d(d) or other relevant federal statute shall also be considered self-proved.
A certified copy of a will may be considered valid should the execution of such devise, either at the time of execution or testator death, affirmatively appear to the satisfaction of the superior court clerk.
Insurable Interest of Trustee
A trustee has an insurable interest in the life of an individual insured under a life insurance policy considered trust property if: 1) insured is settlor of the trust or an individual in whom a settlor of the trust has an insurable interest; 2) the proceeds from the life insurance policy are for the benefit of one or more trust beneficiaries. The term settlor has been amended to mean a person that executes a trust instrument, including a person for whom a fiduciary or agent is acting.
Uniform Trust Code Clarification as to Settlor’s Spouse
The settlor is a beneficiary whether so named or through the exercise of a limited or general power of appointment. A subsequent dissolution of marriage will terminate claims by settlor’s spouse as successor to the irrevocable intervivos trust.
Trustee Powers
A trustee may exercise elections pertaining to taxes including, but not limited to, considering discretionary distributions to a beneficiary from capital gains accounts realized during the year.
Decanting Statute Improvements
When determining a trustee’s special power to appoint to a second trust, the terms of the second trust may not reduce any fixed income, annuity, or any unitrust interest that has come into effect for a beneficiary.
Inherited IRA Creditor Exemption
Any debtor is entitled to retain free of the enforcement of creditor claims any money, other asset, or interest in an individual retirement plan as define in the Internal Revenue Code after an individual’s death if held by one or more subsequent beneficiaries by direct transfer or eligible rollover.
Directed Fiduciaries
The terms of any instrument, other than a trust instrument, that creates a fiduciary relationship with a person other than a trustee may confer upon a person certain powers with respect to the fiduciaries actions including, but not limited to, investments or any other matter. If the terms confer a power other than to direct or consent to actions of the fiduciary, the fiduciary is not liable for any direct or indirect loss resulting from the exercise or non-exercise of the power. A person who holds a power with respect to the actions of a fiduciary is a fiduciary that must act in good faith with regard for the purposes of the estate. However, if a beneficiary is a person with such a power, he or she is not a fiduciary with respect to an appointment held by a beneficiary or a power to remove and appoint a fiduciary.
Guardianship Gifting
The judge shall not approve gifts from income to individuals unless after making the gifts and paying the relevant taxes, the remaining income of the incompetent will be reasonable and adequate to provide for the incompetent’s support, maintenance, comfort, and welfare in a manner they and other dependents have become accustomed. The judge must also determine that the donee is the spouse, parent, descendent of the incompetent or incompetent’s parents, and the gift qualifies for the federal gift tax exclusion or is a qualified transfer for tuition or medical expenses.
NC Investment Advisors Act
It is unlawful for any person to transact business in North Carolina as an investment adviser unless the person, during the past 12 months has had fewer than 15 clients, and neither holds themselves out to the general public as an investment advisor nor acts as such for any registered investment company.
About the Author:
Louis Danastorg, J.D., M.B.A. is Associate Counsel and Compliance Specialist at Bankers Advisory, Inc. He is a graduate of Vanderbilt University and earned his Juris Doctor and Masters of Business Administration from Suffolk University. He can be reached at Louis@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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