Category: Estate Planning

When people think of estate planning, they often picture wills and trusts – but one of the most powerful tools in your estate plan is often overlooked:  beneficiary designations. Those simple designations, tied to retirement accounts, life insurance, and even some bank accounts, can override your will and determine the direct transfer of wealth at death.  From an estate planning perspective, that makes them both incredibly useful – and potentially risky if not managed carefully.

Why Beneficiary Designations Matter So Much?

1. They Bypass Probate. Assets with named beneficiaries (like IRAs, 401(k)s, and life insurance) typically pass directly to those beneficiaries without going through probate. This means faster access for your loved ones and fewer legal fees.
2. They supersede your will. Even if your will says one thing, the beneficiary form rules.
3. They’re critical in tax planning. Designations can also affect how your heirs are taxed. For example, naming individuals as beneficiaries of a retirement account can help stretch the tax impact over 10 years, while naming your estate may accelerate taxes unnecessarily.

Common Mistakes We See:

• Outdated beneficiaries (especially after divorce, remarriage, or the birth of children)
• No contingent beneficiaries listed
• Minor children named directly (can lead to court-appointed guardianship)
• Mismatched designations and estate planning documents
• Failure to name a trust when appropriate (especially for special needs beneficiaries or complex family dynamics)

What You Should Do Now?

1. Review all beneficiary designations annually or after major life events.
2. Coordinate designations with your overall estate plan.
3. Consider when to name a trust as a beneficiary – for example, to manage distributions to minors or protect assets from creditors.

Need a Beneficiary Review?

We offer beneficiary audits as part of our estate planning services.  Whether you’re updating your old estate plan or just getting started, we’re here to help ensure your designations reflect your true wishes – and work in harmony with your plan.

About the Author

Hillary E. Mims
NC State Bar Certified Paralegal

As estate attorneys, one of the most valuable skills you can offer your clients is custom drafting that meet their unique needs and goals. In our initial planning conferences, we take the time to thoroughly discuss a variety of provisions that may be essential for your estate plan, including the inclusion of “takers of last resort.” These are individuals, organizations, or entities designated to inherit assets if no primary or secondary beneficiaries can be located. This provision is critical for clients who have complex family structures, multiple beneficiaries, or uncertain future circumstances.

For those who may not have clear successors or wish to ensure their estate plan remains relevant as family dynamics shift, a taker of last resort provision is especially important. It allows you to have peace of mind, knowing that, in the event your intended heirs are unavailable or cannot be found, the estate will still be distributed in accordance with your wishes—rather than subject to the state’s default laws, which may not reflect your desires or intentions. By proactively including this safeguard in the trust, we can prevent the estate from becoming entangled in lengthy probate proceedings or being distributed to unintended parties. This provision ensures that the assets go where you want, even as your personal circumstances and family structure evolve over time.

Additionally, the ability to craft specific gifts—whether monetary, real property, or sentimental items—is a crucial element of thoughtful estate planning. Many clients have particular wishes when it comes to leaving real property, businesses, or financial assets to specific individuals, whether it’s family land passed down through generations, a business venture, or a certain sum of money designated for a loved one or charitable cause. A well-drafted trust can clearly outline these specific gifts, ensuring that the client’s intent is carried out exactly as envisioned. Without clear documentation, these gifts could potentially cause confusion, disputes, or even litigation among heirs, leading to unnecessary delays, emotional stress, and financial burdens.

When an estate plan includes well-defined specific gifts, it allows for a smoother, more organized distribution of assets. You benefit from an estate plan that not only safeguards your legacy but also reduces the potential for disagreements among heirs. This level of specialization provides a sense of security, knowing your wishes are clearly understood and your beneficiaries will receive what you intended. Ultimately, a tailored estate plan that incorporates specific gifts ensures a streamlined administration process, protecting both your desires and the interests of your beneficiaries.

In summary, specialized estate planning, including provisions for “takers of last resort” and specific gifts, ensures that your assets are distributed according to your wishes, even in the face of changing family dynamics or unforeseen circumstances. By clearly outlining these provisions, we can help clients avoid potential disputes, reduce confusion, and streamline the estate administration process. Ultimately, a customized estate plan provides you with peace of mind, knowing your legacy will be preserved and your beneficiaries will be cared for.

About the Author

Emily B. Johnson
Legal Assistant

As we step into the new year, it’s an ideal time to reflect on the state of our personal finances and take proactive steps toward securing the future for ourselves and our loved ones. Estate planning is a critical element in this process, providing the tools and strategies necessary to protect your assets, ensure your wishes are carried out, and reduce the burden on your family. In 2025, with evolving laws, emerging technologies, and societal shifts, estate planning takes on new importance, offering a chance to adapt and refine your approach to wealth preservation.

Why Estate Planning Matters

Estate planning is not just for the wealthy. Everyone, regardless of the size of their estate, can benefit from having a plan in place. At its core, estate planning is about ensuring that your assets are distributed according to your wishes, minimizing taxes, and avoiding conflicts among family members after your death. It also includes making provisions for your care in case of incapacity, ensuring your healthcare wishes are honored, and naming trusted individuals to manage your affairs.

Adapting to Change in 2025

The landscape of estate planning is evolving. With ongoing changes in tax laws, especially those related to estate and gift taxes, it’s essential to stay informed about new rules that may impact your planning strategies. For instance, the 2025 expiration of certain tax provisions, including higher estate tax exemptions, is creating urgency for many to reassess their plans. Actively working with an estate planning attorney can help you take advantage of tax-saving strategies before potential changes take effect.

Digital Assets and Technology

Another trend to consider in the new year is the rise of digital assets. In today’s digital world, many individuals hold valuable online accounts, cryptocurrency, digital art, and social media profiles. These digital assets require specific attention in your estate plan to ensure they’re properly managed and passed on to your beneficiaries. Make sure to review and update any digital accounts, passwords, and other online assets.

Additionally, technology continues to influence estate planning tools. Online platforms such as blockchain technology used for securely transferring assets, are becoming increasingly popular. These innovations make the estate planning process more accessible and efficient, ensuring your wishes are securely documented.

Healthcare and Long-Term Care

As the population ages and life expectancy increases, long-term care and healthcare planning become even more crucial. Whether it’s creating healthcare directives, selecting a healthcare proxy, or securing long-term care insurance, preparing for medical needs in later life is an essential part of a comprehensive estate plan. With the rising costs of healthcare, planning ahead for these potential expenses can safeguard your wealth and provide peace of mind.

Estate planning in the new year offers a fresh opportunity to review and refine your plans. Whether you are addressing new tax laws, digital assets, charitable giving, or healthcare concerns, the time to act is now. By taking a thoughtful, proactive approach to estate planning, you ensure that your wishes are respected, your loved ones are cared for, and your legacy endures for generations to come. Don’t wait for the unexpected; start the year off with a clear, updated estate plan that will guide you through the future with confidence.

About the Author

Todd A. Stewart, JD
Founding Partner

In the context of the current election, it’s important to proactively plan for potential shifts in tax laws and regulations that could significantly impact your estate planning. Elections often result in changes to fiscal policies, tax exemptions, and regulations that directly affect estate planning strategies. Here are some key areas you should be focusing on right now:

1.   Estate and Gift Tax Exemptions

• Federal estate and gift tax exemptions are a significant area to watch. As of 2024, the exemption is historically high ($13.61 million per individual), but this amount could be lowered, especially if there’s a shift in political power toward more tax-heavy policies. Even now, unless Congress acts, this amount is scheduled to expire on December 31, 2025, to about $6-7 million range per person beginning on January 1, 2026.
• Proactive Strategy: Consider making large gifts or transferring assets now under the current high exemptions. You can use strategies like spousal lifetime access trusts (SLATs), irrevocable children’s trusts, or dynasty trusts to lock in the current exemption for your heirs.

2.   Charitable Giving and Deductions

• Charitable giving could be impacted by changes to deductions or incentives. Certain platforms propose reducing the deductions available to high-income earners, which could lessen the tax benefits of charitable contributions.
• Proactive Strategy: If you’re planning to make significant charitable gifts, it may be better to do so before any deduction limits are imposed. Setting up a donor-advised fund (DAF) or charitable remainder trust (CRT) now could lock in current tax benefits.

3.   Trust and Estate Structures

• Depending on your estate size and family situation, you may want to reassess the types of trusts or estate structures you use. A revocable trust provides flexibility and avoids probate, but tax-driven structures like irrevocable trusts (e.g., Grantor Retained Annuity Trusts (GRATs) or Qualified Personal Residence Trusts (QPRTs)) may need adjustment based on new rules or limits.
• Proactive Strategy: If you have existing trusts, it’s worth reviewing whether these are still effective given potential policy changes.

4.   Review Your Estate Plan Regularly

• With elections comes uncertainty, and legislation can move quickly after new officials take office. It’s crucial to keep your estate plan flexible and updated regularly to reflect changing laws.
• Proactive Strategy: Work closely with your team (ie financial advisors, accountants, and your estate planning attorney) to ensure your plan is ready to adapt to any changes resulting from the election. Regularly reviewing and updating your will, trusts, and overall strategy is key.

Being proactive with your estate planning ahead of a current election can help mitigate potential negative impacts from policy changes while maximizing the use of current tax benefits and exemptions. It’s a good idea to have a firm understanding of your plan so that you can be prepared for any shifts that come after the election.

 

About the Author

Hillary E. Mims
Paralegal

About the Author

Todd A. Stewart, JD
Managing Partner

A number of topics may motivate someone to consider estate planning.  A change in family circumstances, a reminder of mortality, a new life, management of tax burdens, succession planning, and many others.  The tax system can feel especially intimidating.  In addition to managing the estate tax, estate planning can also help clients address income taxes.

One of the most effective ways to manage income taxes through estate planning is by addressing the step-up in basis at death.  At death, certain assets, such as real estate, stocks, or other investments, may receive a “step-up” in their cost basis. Cost basis is essentially the original value of an asset for tax purposes, typically the purchase price. The step-up adjusts this basis to the asset’s fair market value on the date of death.  But how does this help the beneficiaries who receive that asset?

Imagine you purchased a piece of property for $1,000,000 many years ago, and its value has appreciated to $5,000,000 by the time of your death. Under the step-up in basis rule, your beneficiaries would inherit this property with a cost basis of $5,000,000, not the original $1,000,000. If they decide to sell the property immediately, they would likely incur little to no capital gains tax, as the sale price would be close to the new stepped-up basis.  Alternatively, if you sold the property before passing away in order to transfer cash to your beneficiaries, you would pay capital gains tax on the $4,000,000 increase in value between the sale price (assuming the actual price matches the fair market value) and the cost basis.

Key Benefits of the Step-Up in Basis:

1. Significant Tax Savings: By resetting the basis of appreciated assets, the step-up in basis can eliminate substantial capital gains taxes that would otherwise be due upon the sale of inherited assets.
2. Simplified Record-Keeping: Your beneficiaries won’t need to track the original purchase prices and adjustments over the years. The step-up provides a clear, current market value basis for tax purposes.
3. Enhanced Estate Value: The step-up in basis can preserve more of your estate’s value for your beneficiaries because less will be lost to taxes.

Understanding the step-up in basis can help you make strategic decisions about which assets to retain in your estate. For instance, assets with significant appreciation might be better held until death to maximize the tax benefits for your beneficiaries.  Conversely, assets with little or no appreciation might be more advantageous to sell or gift during your lifetime, utilizing annual exclusion gifts or lifetime gift tax exemptions. Keep in mind, however, that not all assets qualify for a step-up in basis. Retirement accounts, such as IRAs and 401(k)s, for example, do not receive this treatment. Additionally, it is crucial to consider your entire financial picture, your goals, and the specific needs of your beneficiaries.

Looking for the best way to maximize the use of your Estate Plan? Contact our team to discuss the best way to review or create an Estate Plan that works for your family.

About the Author

S. Blaydes Moore, JD
Attorney