When crafting a will, some of your most critical decisions involve your beneficiaries. These individuals or entities receive assets and properties as outlined in the will.

In North Carolina, understanding who can be a beneficiary and the implications of this choice is crucial. A will serves as a voice from beyond, guiding the distribution of one’s estate. It reflects personal wishes and ensures that the right people benefit from a lifetime of hard work. In North Carolina, the law respects these wishes as long as they align with the legal standards in NCGS § 31.

Beneficiaries can range from family members to friends or even organizations and charities. Their role is not just to receive but to honor the legacy and intentions of the departed.

Read on as we explore the significance of a will and introduce the concept of beneficiaries, setting the stage for a deeper understanding of estate planning in North Carolina.

Understanding Beneficiaries

A beneficiary refers to any person or entity designated in a will to receive assets or benefits. A beneficiary is often also called a “devisee” or if there is no Will, the person receiving assets is often called an “heir.” However, the role of a beneficiary extends beyond mere receipt of assets. It embodies the trust and intentions of the will’s creator.

Beneficiaries come in various forms. They can be individuals like family members or friends. They can also be entities like charities or trusts.

Who Can Be the Designated Beneficiary?

The choice of beneficiaries reflects the personal values and relationships of the will’s creator. In North Carolina, anyone who writes a will (the testator) can decide who will receive all of their property, both real estate and personal items, after they die.

This includes property they own when they write the will and any property they get later. The testator’s decision in the will overrides what would happen if they didn’t have a will. This includes not only property they definitely own but also property they might own in the future or have a right to because of conditions in a contract or law.

The testator can also include in their will any property they get right before they die, even if they didn’t know they would get it when they wrote the will. NCGS § 31-40

Types of Beneficiaries: Primary Beneficiary vs Contingent Beneficiary Designations

Understanding the types of beneficiaries is crucial. Primary beneficiaries are those who first receive the assets. If they cannot, contingent beneficiaries step in. This hierarchy ensures that the will’s provisions are fulfilled even if circumstances change.

In essence, beneficiaries are the heart of a will. They ensure that a person’s legacy is honored and their wishes are carried out. Their selection is a deeply personal and significant aspect of estate planning in North Carolina.

What If the Beneficiary Dies Before the Will Maker?

If a beneficiary (devisee) dies before the person who wrote the will, NCGS § 31-42 lays out what will happen depending on the below circumstances:

  • If the devisee is the will maker’s grandparent (or descendant of grandparent), then the children (or descendants) of the devisee receive the inheritance.
  • In the case of a group gift, the descendants of the deceased group member will get the share that the deceased person would have gotten. If the deceased group member has no descendants, their share goes to the surviving group members and the descendants of any other deceased group members.
  • If a gift in the will can’t be given for some reason, the property goes to whoever is supposed to get the leftover property in the will (residuary devisees). They get it in proportion to their shares. If the gift that can’t be given is part of the leftover property, it increases the shares of the other people supposed to get the leftover property.
  • If someone chooses not to accept a gift from a will (renunciation), this is handled as stated in NCGS § 31B-1.

Legal Requirements for Beneficiaries in North Carolina

In North Carolina, the process of selecting beneficiaries for a will must comply with the state’s legal criteria. Carefully choosing the nomination of beneficiaries protects the intentions of the will-maker (testator).

A key aspect is the age requirement for making a will. According to NCGS § 31-1, any person of sound mind who is 18 years of age or over may make a will.

Minor beneficiaries require special arrangements such as a trust or a guardian to manage their inheritance until they reach the age of majority. For a legally incompetent person, a trust, named guardian, or attorney-in-fact could handle their inheritance for their benefit.

North Carolina does not allow individuals who unlawfully cause the death of the will-maker to inherit from them.

The state permits a broad range of entities to be named as beneficiaries, which includes individuals, organizations, and trusts. This flexibility in the law allows will-makers to customize their wills to reflect their unique wishes and circumstances.

Selecting Family Members as Beneficiaries

When creating a will in North Carolina, many people choose family members as beneficiaries. This decision is both personal and significant. It reflects the relationships and bonds within a family.

Spouse or Children

Spouses and children often top the list of beneficiaries. North Carolina law provides certain protections for spouses. For instance, a surviving spouse has the right to claim an “elective share” of the estate, regardless of the will’s provisions (NCGS § 30-3.1). This law ensures that spouses receive a fair portion of the estate.

The amount the spouse can claim depends on how long they were married:

  • If married for less than 5 years, the spouse can claim 15% of the estate’s total net assets.
  • If married for at least 5 but less than 10 years, they can claim 25%.
  • If married for at least 10 but less than 15 years, they can claim 33%.
  • If married for 15 years or more, they can claim 50%.

The spouse may also ask for a year’s allowance, which can be up to $60,000 of the estate. The court distributes this before estate administration occurs. This allowance is exempt from any lien acquired against the property of the deceased spouse. However, this amount is part of their total inheritance. (NCGS § 30-3.1)

Other Family Members

Extended family members, like siblings, parents, and grandparents, are also common beneficiary choices. The testator can distribute assets among these relatives as they see fit. However, it’s important to be clear and specific in the will to avoid any confusion or disputes.

Blended families require special consideration. Stepchildren and half-siblings might not automatically inherit unless the will explicitly includes them. It’s crucial to address these relationships clearly in the will to reflect the testator’s true intentions.

Selecting family members as beneficiaries is a common practice in North Carolina. It’s essential to understand the legal implications, especially regarding spouses and blended families. A well-crafted will can ensure that family members are cared for according to the testator’s wishes.

Talking with a local estate planning attorney can help you see all the angles you might miss when you initially think of writing a will. They can also help you update a will to include new family members or account for a death in the family.

Including Non-Family Members as Beneficiaries

In North Carolina, wills often extend beyond family, including friends, caregivers, or charitable organizations as beneficiaries. This choice reflects the diverse relationships and values of the testator.

Friends as beneficiaries showcase personal bonds. They can inherit specific items, sums of money, or percentages of the estate. The testator must clearly identify these beneficiaries in the will to ensure proper execution.

Caregivers also frequently appear in wills. This acknowledges their support and care. However, if the family contests the will, it’s crucial to demonstrate that a choice to leave a bequest to a caregiver was made freely and without coercion.

Charitable organizations are another popular choice. Bequests to charities can create lasting legacies. They can also offer tax benefits to the estate. The testator should specify the charity’s name and the nature of the bequest clearly. You can also set up a charitable trust to benefit you, your beneficiaries, and a charity — all at the same time.

Including non-family members as beneficiaries in a North Carolina will is a testament to the testator’s broader social and personal connections. It’s important to clearly identify these beneficiaries and understand the legal implications, especially when including caregivers. This ensures that the testator’s wishes are honored and the bequests are legally sound.

Working with an estate planning attorney can ensure your last will meets all the legal requirements to be valid in the state of North Carolina.

Non-Probate Court Assets and Beneficiaries

In North Carolina, non-probate assets are those that do not go through the probate process upon someone’s death. These assets are transferred directly to beneficiaries, bypassing the will and probate court.

If you name someone as a beneficiary on these accounts, that person will receive the asset. Even if your will says something different, the named beneficiary on the account takes precedence.

Jointly Owned Property with Right of Survivorship

When two or more people own property together with a right of survivorship, the surviving owner(s) automatically inherit the deceased owner’s share. This is common in real estate and bank accounts.

Payable-on-Death (POD) Accounts

A testator can designate a beneficiary to receive the funds from a bank account upon their death. The beneficiary has no rights to the funds until the account holder’s death.

Transfer-on-Death (TOD) Securities

Similar to POD accounts, TOD allows for the direct transfer of securities, like stocks or bonds, to a named beneficiary upon the account holder’s death.

Life Insurance Policy

The proceeds from a life insurance policy are paid directly to the named beneficiaries, avoiding probate. If a life insurance policy has minor beneficiary designations, the court will appoint a guardian to manage the minor’s inheritance. This process requires an expensive surety bond. In addition, the court gives the life insurance policy inheritance to the child in a lump sum at the age of 18. Many 18-year-olds are not ready for a lump sum inheritance and squander the money.

One way to avoid the expensive surety bond and guardianship process that eats into the child’s inheritance is by naming a trust as the beneficiary. In that way, the trustee you choose holds onto the life insurance proceeds for your child. They also manage the money and give it to the child in increments or at whatever age you name in the trust documents.

Retirement Accounts (IRAs, 401(k)s, etc.)

Retirement accounts typically have designated beneficiaries who receive the account’s assets upon the account holder’s death.

Living Trusts

Assets held in a living trust are distributed according to the terms of the trust, bypassing probate. The trust creator can control how and when the assets are distributed.

Certain Types of Personal Property

In North Carolina, there’s a provision for a small amount of personal property to pass outside of probate through an affidavit procedure, provided the value does not exceed a certain threshold.

Vehicles Registered in Transfer-on-Death Form

North Carolina allows vehicles to be registered in a way that they can be transferred directly to a beneficiary upon the owner’s death.

Each of these non-probate assets provides a way to streamline the transfer of assets upon death, making the process simpler and often quicker for beneficiaries.

Challenges Beneficiaries May Face

Beneficiaries in North Carolina may encounter several challenges during the estate administration process. Understanding these potential issues can help beneficiaries navigate them more effectively.

Disputes Over the Will

Beneficiaries might face disputes over the interpretation of the will’s provisions. Conflicts can arise among beneficiaries regarding asset distribution. Legal challenges, such as contesting the will, can delay the process.

Delays in the Probate Process

The probate process can be lengthy, delaying asset distribution. Complex estates or legal challenges can extend this timeline. As the will-maker, working with a knowledgeable attorney can help prepare your estate assets for your beneficiaries.

Tax or Other Implications

Inheritances may have tax implications for beneficiaries. It’s crucial to talk with your attorney before leaving assets to someone who must refuse due to a problem. For example, a primary beneficiary with special needs may not be able to accept a lump sum inheritance in their name. 

However, if you leave money to a special needs trust, they can accept it without losing their means-tested government benefits. In this way, you don’t overlook the needs of your primary beneficiary and end up leaving their intended inheritance to a contingent beneficiary.

As a will-maker, it’s crucial to be aware of potential disputes, delays, and tax implications. Being prepared for these challenges can help ensure a smoother estate administration process for your family.

We Can Help

At Hopler, Wilms, and Hanna, we understand the complexities of estate planning and administration can be daunting. Our team is committed to offering comprehensive support and guidance at every step.

Knowledgeable Legal Guidance

Our experienced attorneys are well-versed in estate law in North Carolina. We provide personalized advice tailored to your unique situation, helping to clarify legal terms and simplify complex procedures.

Support Through Challenges

We assist in resolving disputes and addressing challenges that arise during the estate process. Our team works diligently to expedite the probate process and offers guidance on tax implications and other financial aspects of inheritance.

Ensuring Your Rights are Protected

As your advocates, we prioritize protecting your rights as a beneficiary. Our goal is to honor the testator’s wishes while safeguarding your interests and maintaining transparent and open communication throughout.

Contact Us Today

For more information or to schedule a consultation, reach out to Hopler, Wilms, and Hanna. Let us guide you through the legal landscape with confidence and peace of mind.

At Hopler, Wilms, and Hanna, we are more than legal advisors; we are your partners in ensuring that your estate planning and administration needs are met with experienced and attentive care.

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