If you are looking at planning for end of life financial circumstances, you may be wondering about the tax laws in NC.
These and other questions are crucial to understanding how to plan for distribution of assets after you pass away. Probate and Taxes can take a chunk out of your estate. Read on to learn more about how NC handles it’s taxes and the finances of an estate after death.
After you die, your gross estate will go through a process known as probate if the estate is worth more than $20,000 as an individual or $30,000 with a spouse. Probate is the process in which the court opens up your financial documents as public information in order to pay the taxes and creditors of the estate and decide who will receive the remaining assets.
If you die without a will in NC, you have died “Intestate” and your family is subject to attending court to argue their case about which of your assets should go to whom. You can learn more about intestate succession laws here. Creditors and anyone who believes they are owed money can also make a claim on the estate. You don’t want to put your family through this type of situation.
Having a will makes the process of Probate much easier because the court understands what your wishes are. A will allows you to decide who gets what after you die as well as how to manage the assets of your estate. You can write a will by signing it in front of 2 witnesses who then sign the will in front of you. For further proof that it is your will, you can also have it notarized. The probate court must recognize a will made in this manner as long as you are competent when it is drawn up.
In the probate process, the court appoints an administrator or personal representative (often the spouse) to handle valuing the estate, gathering information, and paying the taxes that are due and any creditors who are owed. Inheritance is then paid out from the assets in accordance with the probate court decisions.
In probate court, the estate pays lawyer and court fees. According to Investopedia , “Probate can easily cost from 3% to 7% or more of the total estate value.” If there are creditors or others who contest the will and cause disagreements, your heirs could end up paying much more to hire other attorneys to fight for their inheritance.
Probate is an expensive process that can be entirely avoided with the right planning.
If you live or work in NC when you die, your estate may be subject to these taxes. If you are inheriting from someone in another state, your inheritance may also be subject to a state death tax from the originating state. Some states still charge an Estate Tax (Death Tax).
There is no inheritance tax in NC. However there are sometimes taxes for other reasons. These are some of the taxes you may have to think about as an heir.
Gifts of less than $15,000 per year per individual are not taxed. If you are planning your estate, you can also pay for certain expenses that are not taxed such as tuition for college or medical bills for your loved ones. You can reduce the size of your estate year by year by giving non-taxable money and gifts to your loved ones.
Trusts are a legal entity with a framework that allows for financial benefits. Often, they can help an estate pay less in taxes or keep heirs from having to pay capital gains taxes or retirement fund distribution taxes. Trusts have been and will continue to be a way to put money aside that does not have to pass through probate and can be given to your loved ones in the amounts and time periods that you choose to imply in the language of the Trust. Depending on your financial goals, an experienced attorney in Estate Planning can help you plan using trusts to meet your retirement and inheritance goals.
If you are planning how your estate will be handled at your death, starting early is key. Talk with an experienced Estate Planning Attorney to leverage your assets and skirt laws and taxes that may eat into your savings. A knowledgeable Estate Planning Attorney can walk you through all of the possibilities for future investments and inheritances and keep your nest egg safe for your retirement and beyond.
