Source: https://www.harwelllawfirm.com/blog/category/estate-and-estate-planning
Timestamp: 2019-04-23 02:50:02+00:00

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Harwell Law Firm, PA is hosting an event on Tuesday, February 19, 2019 at 6pm at the Matthews Women’s Club located at 208 South Trade Street, Matthews, NC 28105. We will serve wine and appetizers and discuss the Estate Planning for Owners of Businesses and other Complex Assets. This will be tailored for those who own these assets and those who work with owners of businesses and other complex assets. Please let me know if you or someone you know would be interested in attending.
This is a reminder that you should review your estate planning documents periodcially (Financial and Health Care Powers of Attorney, Wills and if applicable Trusts) and review financial accounts and insurance policies to ensure the named beneficiaries are correct and that no changes or updates are needed. This is even more important if you have had any significant life changes within your family since the documents were signed. It is also a good idea to confirm the location of original documents and let those named know where it is. The documents should be in a safe fireproof place, but not in a safety deposit box because access to it may be difficult when needed.
The Federal Estate/Death Tax Exemption for 2018 will be $11.18 Million, unless changed by Congress. It will be indexed for inflation over the next few years but revert to a little over $5 million adjusted for inflation in 2026. If your spouse dies you may need to consider hiring a CPA to help you file an estate/death tax return for portability (applying for your spouses unused portion of the exemption, so that your estate can use it) within 9 months of the spouse’s death if there is any possibility of this tax applying to your estate. Also note, that the Federal Government could change these exemption amounts at any time and in the past the exemption amounts were scheduled to be reduced to $1 million.
As of January 1, 2019, North Carolina increased the amount a spouse is entitled to as spousal allowance out of the personal property when a spouse dies from $30,000.00 to $60,000.00 that is exempt from any liens and creditor claims. This increase will enable more estate clients to avoid probate when a spouse dies provided that the proper estate planning was done and other assets are titled and owned properly. Please let me know if you want to review how your assets are titled to confirm that they match your estate plan.
A little over a year ago I started volunteering for SCORE. It is a non-profit organization, affiliated with the SBA, that provides mentoring and education to small and potential business owners. This weekend at the annual holiday party I was especially honored to receive the Distinguished Service Award pictured below) for representing SCORE in the community, educating the chapter on legal issues and providing leadership for the Metro GEO Group. It was an unexpected honor.
Please note that this law changed again in 2015 after this blog was posted and the requirements for the protection have changed to require a joint trust or equal shares in each spouses individual trusts. Please contact me if you have any questions about this.
Requirements for this Act to apply?
3. The spouses must remain beneficial owners of the real property under terms of the trusts.
This section became effective January 1, 2015, and applies to real property transferred to an trust on or after January 1, 2015. H.B. 1133, 2014 Gen. Assemb., 2013th Sess. (NC. 2015).
In North Carolina, the common-law tenancy known as the tenancy by the entirety is recognized for married couples. Tenancy by the entirety is a type of co-ownership held by husband and wife with teh right of survivorship. When title of real property is acquired by husband and wife jointly after their marriage through a deed or will, a tenancy by the entirety is usually formed. The couple owns the undivided whole of the property, coupled by the right of survivorship so that upon the death of one, the survivor is entitled to the decendent's share. Tendency by the entirety must be created by deed or will. Any conveyance to a husband and wife by deed or will creates a tenancy by the entirety unless it is clear in the instrument that some other kind of tenancy is intended. James A. Webster, Jr., Webster's Real Estate Law in North Carolina, 109 (1981).
What are the protections under Tenancy by Entirety?
Creditors of an individual spouse may not attach and sell the interest of a debtor spouse. Only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety. See James A. Webster, Jr., Webster's Real Estate Law in North Carolina, 109-110 (1981). In addition, a husband or wife with property tenancy by the entirety may not sell or give away his or her interest in the property without consent of the other tenant. N.C.G.S.A. § 39-13.6(a).
What Happens to a Mortgage When the Borrower Dies?
Most people assume that when they die and are listed as the only borrower on the deed of trust (North Carolina is one of the few states that uses a deed of trust and not a mortgage, but for purposes of this article, we will refer to both as mortgages) on their home, their heirs will have to refinance the house or take out a new loan with the lender in order to avoid foreclosure. The heirs may even get a letter from the lender threatening foreclosure and stating an assumption, refinance, or loan modification is required.
Most people do not know, however, that so long as the heirs keep making payments on the mortgage, the lender is not allowed to foreclose. The heirs can even keep the mortgage in the deceased person's name. Additionally, so long as the heirs do not assume, refinance, or modify the loan, the lender cannot recover any money owed from the heirs personally; they may only recover what is owed through the original mortgage or secured interest in the home.
A borrower's mortgage typically contains contractual provisions which prohibit any transfers or property. These provisions are known as due-on-sale clauses, which give the lender the option to declare "due and payable" any sums secured if the real property is sold or transferred without prior consent by the lender. However, in 1982, Congress enacted the Garn-St. Germain Depository Institution Act. 12 U.S.C.A. § 1701(j)-3. This Act prohibits a lender from exercising its option under the due-on-sale clause (foreclosing on a residential mortgage) in the instance of certain transfers or dispositions like the following. 12 U.S.C.A § 1701(j)-3(d).
1. The Act protects a spouse or family members who inherit property and continue to promptly pay the mortgage even after the borrower's death. The Act prohibits lenders from foreclosing where the death of a joint tenant or tenant by the entirety of the property dies and the property was transferred by devise, descent, or operation of law. 12 U.S.C.A § 1701(j)-3(d)(3).
2. In addition, the Act protects relatives who gained property through the transfer after the borrower's death. 12 U.S.C.A § 1701(j)-3(d)(5).
3. The Act also protects spouses and children- a lender cannot exercise its due-on-sale option when the spouse or children of the borrower becomes the owner through transfer, sale, or gift, or when the transfer resulted from divorce, separation, or other property agreement and the spouse of hte borrower is now the owner. 12 U.S.C.A § 1701(j)-3(d)(6) & (7).
4. Finally, a lender cannot exercise its due-on-sale option when the property is transferred into a living trust and the borrower of the mortgage remains a beneficiary of that trust, as long as the transfer does not affect the rights of occupancy in the property. 12 U.S.C.A § 1701(j)-3(d)(8).
The Garn-St. Germain Act protects family members from unauthorized lender enforcement of a due-on-sale clause in the above situations. As long as the heir does not assume the loan, or refinance or modify the loan, the heir does not personally owe money to the lender. When the loan continues to be under the original borrower's name, the heir can continue to make payments to the loan and stay personally not responsible. Lenders may attempt to force a loan modification or tack on extra fees, but they are not allowed to do so unless payments are missed.

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