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  • Amy Privette

Service Highlight: Plan Audit

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So, what exactly is this service? Essentially, it’s a legal audit. Amy, our attorney, reviews every component of the client's existing estate plan to identify areas of exposure and risk, highlight sections that might need improvement, and pinpoint major planning flaws.

People who can benefit from our Plan Audit service typically fall into one of three categories:

  1. Their existing estate plan was drafted by an attorney in a different state.

  2. Their North Carolina-based estate plan has some age on it.

  3. They have a D-I-Y plan and are concerned about the coverage and efficacy.

Documents prepared based on the laws of a different state may have provisions that would not work well or make sense based on the laws of North Carolina. This is often the issue when clients move to North Carolina from a community property state, yet North Carolina is a common law property state. Some states, such as Florida, have substantial homestead exemptions that reduce the benefits of putting a home in a trust, but such is not the case in North Carolina. Every state has its own laws that need to be considered when planning.

With an older estate plan, it’s possible that a document in the plan has become obsolete. It’s also possible that the planning strategies used at origination are no longer appropriate or even allowed under today’s laws.

Here are three examples:

  • North Carolina implemented a completely new law for Durable Powers of Attorney in January 2018. An older document would not be covered under the new provisions of the law.

  • Federal tax laws governing the amount of money that can be passed from one generation to the next before incurring tax penalties have changed dramatically over the last 10 years or so. Older plans often include complicated multi-tiered trust structures designed to protect against inheritance taxes, but as the laws have developed, these intricate trust designs are no longer need for most families.

  • Historically, conduit or see-through trusts were more widely used because it offers more favorable income tax treatment than an accumulation trust. However, in 2020, the SECURE Act changed the rules controlling the inheritance of IRAs and 401(k)s of heirs other than the spouse. The effect of the new law may mean that an accumulation trust offers better asset protection for families with younger heirs than conduit trusts.

The issues with D-I-Y documents are too numerous to mention here. Nevertheless, a typical problem is that the D-I-Y Will omits key language that can save family members money (such as a bond waiver) or leaves out a specific grant of authority that is required to allow an Executor to sell real estate. We have also reviewed powers of attorney that never named the person to whom power was given. It also bears mentioning that many of the D-I-Y Wills we have reviewed have contained inconsistencies where a clause on one page is contradicted by a clause on another page.

Without the Plan Audit, none of the above issues would be exposed until after someone has died or become incapacitated. When someone is at their most vulnerable point, that is not the time to learn the documents are flawed. When the family is relying on a straightforward transfer of assets to keep the household going, that is not the time to be told a document has been rejected by the court. When you call the funeral home to arrange your loved one's service, that's really not when you want to hear the funeral director tell you, "I'm sorry, but we can't talk to you" because language is missing from a power of attorney [true story, by the way]. The Plan Audit is like a bloodhound that sniffs out trouble and problem areas while there's still time for the client to fix them!

The Plan Audit is not about reviewing the grammar and punctuation and formatting. It’s about making sure the plan adequately protects the client and the client’s family, that the plan does what the client expects and wants it to do, and, if it doesn’t, that a strategy is presented to the client on how to remedy the situation.

As a reminder, our Plan Audit service is geared toward those who already have some component of an estate plan in place, but those documents were not prepared by Privette Legacy Planning.

If you have a friend or loved one who has expressed reservations about whether their estate plan is up to par—perhaps after hearing you rave about the comprehensive plan Privette Legacy Planning prepared for you—then keep our Plan Audit in mind. A little peace of mind goes a long way!

Phone: (919) 678-5761

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