Top 10 Estate Planning Myths: #2 - My Spouse Gets Everything
As an estate planning attorney, I routinely hear estate planning myths. This blog series is designed to dispel those myths by providing general legal knowledge about estate planning. There will also be accompanying videos that follow each blog post. This week’s myth covers the mistaken belief that you don’t need an estate plan because your spouse will receive all of your property.
As I discussed in my blog about Myth #1, dying without a Will is called dying intestate. If you die intestate, your spouse is unlikely to receive all of your estate unless you have no children and both of your parents are dead. Under North Carolina Intestacy law, the General Assembly has created a default plan for what your spouse will receive depending on the factual circumstances at the time of your death.
Married with children - Your spouse will receive either a one-half or a one-third interest in all of your real property (land and houses) within the State of North Carolina, depending on whether you have one or more children. With regard to personal property (anything that isn’t land or houses), the spouse will receive the first $60,000 in personal property, and if there are sufficient assets, an additional one-half or one-third interest in the remaining personal property depending on the number of children you have.
Married with No Children - Your spouse will receive all of your real property. With regard to personal property, your spouse will receive the first $100,000 in personal property and if there are sufficient assets, an additional one-half interest in the remaining personal property. Who receives the other one-half you ask? Possibly your parent(s)! If one or both of your parents are alive at the time of your death, they will receive the other one-half of the personal property. I have seen this result in parents receiving several hundred thousand dollars that they did not expect to receive. If your parents are not alive at the time of your death, your spouse will receive all of the personal property.
If you do nothing, your spouse is not likely to receive your entire estate. As such, I recommend that clients revisit their plan or put a plan in place when they get married, buy a house, have a child, or the other spouse dies.
Additionally, not having a plan in place leaves your children at risk. First, in the event that you and your spouse die simultaneously, say while on a trip together, there will be no plan in place for who should take care of your children. This could result in your family members fighting over custody or even having a family member you don’t want caring for them. As part of the Will-making process here at Coastal Legal Counsel, we ensure that our clients designate a guardian for their children. Second, we also put a contingent trust into your Will so that there is a plan for what happens to the assets your children inherit. Without the Trust, your children cannot manage their inheritance if they are under the age of 18 and a guardian of the estate will need to be appointed to manage their finances. A guardian of the estate can be very expensive due to ongoing costs like bond premiums, and the guardian is entitled to an annual commission.
If you do not have a plan in place, you are also not protected in the event that you are alive but unable to make financial or medical decisions for yourself. This could be if you are in a coma, if you suffer from cognitive impairment, or if you are out of the country. If you do not have a durable power of attorney or healthcare power of attorney in place, your spouse may be unable to make financial and medical decisions for you. I’ve seen this inability to act cause disastrous results, both financially and medically. In the end, the competent spouse usually ends up filing a petition with the Court seeking to adjudicate their spouse incompetent and seeking an appointment as the spouse’s guardian. No one wants to strip their spouse of their rights, which is exactly the legal effect of an adjudication of incompetence.
The old adage that a failure to plan is a plan to fail is quite apt in this scenario. Without a proper estate plan in place, you are leaving your spouse and children at risk. You need an estate plan, even if you don’t think you have much. Give your family peace of mind and schedule a free estate planning consultation with me at your convenience using my Calendly scheduling link: https://calendly.com/coastallegalcounsel/epconsult.
Check back with us next week for Myth #3.