Unit 8, part 2 Estate Planning for Agriculture & Forestry: Basic Documents,  Tax Issues, and Conservation Easements An Edu...
Basic Documents <ul><li>Will </li></ul><ul><li>Durable power of attorney </li></ul><ul><li>Health care power of attorney <...
North Carolina Inheritance Taxes <ul><li>Repealed effective January 1, 1999 </li></ul><ul><li>Tax waivers eliminated </li>...
N.C. Estate Tax <ul><li>Deaths after December 31, 2004 </li></ul><ul><li>Equal to allowable federal state death tax credit...
What is a Durable Power of Attorney? <ul><li>A document under the terms of which you give someone the legal authority to a...
What is a Health Care Power of Attorney? <ul><li>A document under the terms of which you give someone the legal right to m...
What is a Living Will? <ul><li>A statement that you want to die a natural death </li></ul><ul><li>You do not want life pro...
What is a Trust? <ul><li>A legal arrangement by which a  grantor  transfers legal title of property to a  trustee  who hol...
Types of Trusts <ul><li>Living trust </li></ul><ul><li>Testamentary trust </li></ul><ul><li>Revocable trust </li></ul><ul>...
Uses for a Living Trust <ul><li>Provide financial management for the grantor’s benefit </li></ul><ul><li>Will substitute t...
Uses for a Testamentary Trust <ul><li>Make full use of unified credit </li></ul><ul><li>Provide financial support for surv...
Advantages of Trusts <ul><li>Flexibility </li></ul><ul><li>Control </li></ul><ul><li>Solutions to difficult family and fin...
Disadvantages of Trusts <ul><li>Expense </li></ul><ul><ul><li>Cost of establishing </li></ul></ul><ul><ul><li>Cost of oper...
Tax Consequences of Irrevocable Trusts <ul><li>Maximum individual rate applied to income at low (<$10,000) threshold </li>...
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  1. 1. Unit 8, part 2 Estate Planning for Agriculture & Forestry: Basic Documents, Tax Issues, and Conservation Easements An Educational Program of the North Carolina Cooperative Extension Service Adapted for ARE 306
  2. 2. Basic Documents <ul><li>Will </li></ul><ul><li>Durable power of attorney </li></ul><ul><li>Health care power of attorney </li></ul><ul><li>Living will </li></ul><ul><li>Trusts </li></ul>
  3. 3. North Carolina Inheritance Taxes <ul><li>Repealed effective January 1, 1999 </li></ul><ul><li>Tax waivers eliminated </li></ul><ul><li>N.C. gift tax not repealed </li></ul><ul><ul><li>$100,000 exclusion amount </li></ul></ul><ul><li>N.C. Estate Tax </li></ul><ul><ul><li>Replaces inheritance tax </li></ul></ul><ul><li>N.C. probate tax – up to $6,000 </li></ul>
  4. 4. N.C. Estate Tax <ul><li>Deaths after December 31, 2004 </li></ul><ul><li>Equal to allowable federal state death tax credit allowable under IRC §2011, as the IRC existed prior to 2002 </li></ul><ul><li>May take deduction under IRC §2058 </li></ul><ul><li>Inequity: no estate tax due under pre-2002 IRC, then no NC estate tax due </li></ul>
  5. 5. What is a Durable Power of Attorney? <ul><li>A document under the terms of which you give someone the legal authority to act for you if you should become physically or mentally unable to handle your own affairs </li></ul><ul><li>The person who acts for you is called your “agent” or “attorney-in-fact” </li></ul><ul><li>May continue giving program if language explicit </li></ul>
  6. 6. What is a Health Care Power of Attorney? <ul><li>A document under the terms of which you give someone the legal right to make your health care decisions when you cannot make them yourself </li></ul><ul><li>The person who acts for you is called your “health care agent” </li></ul>
  7. 7. What is a Living Will? <ul><li>A statement that you want to die a natural death </li></ul><ul><li>You do not want life prolonged by artificial means if there is no reasonable hope of recovery </li></ul>
  8. 8. What is a Trust? <ul><li>A legal arrangement by which a grantor transfers legal title of property to a trustee who holds and manages the property for the benefit of the beneficiaries. </li></ul>
  9. 9. Types of Trusts <ul><li>Living trust </li></ul><ul><li>Testamentary trust </li></ul><ul><li>Revocable trust </li></ul><ul><li>Irrevocable trust </li></ul>
  10. 10. Uses for a Living Trust <ul><li>Provide financial management for the grantor’s benefit </li></ul><ul><li>Will substitute that provides privacy for intergeneration farm transfers </li></ul><ul><li>Revocable trust </li></ul><ul><ul><li>No tax consequences </li></ul></ul><ul><ul><li>Can be undone </li></ul></ul>
  11. 11. Uses for a Testamentary Trust <ul><li>Make full use of unified credit </li></ul><ul><li>Provide financial support for surviving spouse while preserving farm assets for children </li></ul><ul><li>Irrevocable trust (after testator’s death) </li></ul><ul><ul><li>Separate taxable entity </li></ul></ul><ul><ul><li>Difficult to modify for unforeseen circumstances </li></ul></ul>
  12. 12. Advantages of Trusts <ul><li>Flexibility </li></ul><ul><li>Control </li></ul><ul><li>Solutions to difficult family and financial problems </li></ul><ul><li>Potential tax benefits (full use of unified credit) </li></ul>
  13. 13. Disadvantages of Trusts <ul><li>Expense </li></ul><ul><ul><li>Cost of establishing </li></ul></ul><ul><ul><li>Cost of operating </li></ul></ul><ul><li>Complexity </li></ul><ul><ul><li>Record keeping </li></ul></ul><ul><li>Loss of control of assets (irrevocable trusts) </li></ul><ul><li>Income tax consequences (irrevocable trusts) </li></ul>
  14. 14. Tax Consequences of Irrevocable Trusts <ul><li>Maximum individual rate applied to income at low (<$10,000) threshold </li></ul><ul><li>May avoid tax if all income distributed </li></ul>

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