NORTH CAROLINA WILLS PROFESSOR ALFRED L. BROPHY UNIVERSITY OF ALABAMA SCHOOL OF LAW

Transcription

1 NORTH CAROLINA WILLS PROFESSOR ALFRED L. BROPHY UNIVERSITY OF ALABAMA SCHOOL OF LAW INTESTACY A. Intestacy v. Testacy 1. Vcabulary When smebdy dies withut a will, the prperty is distributed thrugh. When smebdy has a valid will, we call the persn a. Smebdy wh dies withut a will is called the r the decedent. The peple wh are entitled t receive prperty under intestacy are knwn as heirs. If there is a valid will, the peple wh take are called devisees. Prbate Estate: The prperty that passes either by intestacy r by will. Nn-Prbate Estate: The prperty that passes utside f the will. 2. Partial Intestacy If a will des nt dispse f all the testatr s prperty. The prperty nt distributed by will is distributed accrding t the rules f intestacy. Exam Tip 1: Nrth Carlina bar examiners have tested n this in the past. B. Distributin f Intestate s Real Prperty 1. Share When There is a Surviving Spuse Exam Tip 2: First, lk t see if there is a surviving spuse. That spuse will take ne-third, ne-half, r 100% f the real prperty depending n the scenari f ther survivrs. Nte 1: Nrth Carlina has different rules fr distributing an intestate s real prperty and persnal prperty. a. Are there surviving issue (children r descendants f children)? Surviving spuse and n surviving issue: The surviving spuse takes f the real prperty. Surviving spuse and ONE surviving child (r surviving issue f that child): The surviving spuse takes f the real prperty. The surviving child r issue takes the ther half.

2 Nte 2: A surviving child r issue cuts ff the ability f parents and cllateral relatives t inherit frm the intestate decedent. Surviving spuse and TWO OR MORE surviving children (r issue): The surviving spuse takes a ne-third interest in the real prperty. The surviving children share the remaining tw-thirds interest. b. Are there surviving parents? N surviving children (r issue f children), but ne r mre surviving parents f the decedent: The surviving spuse takes a share f the decedent s real prperty. The ther half ges t the decedent s surviving parent r parents. N children and n surviving parents: The surviving spuse takes f the real prperty. Nte 3: Prperty wned by the surviving spuse as a jint tenant r tenant by the entirety with the decedent: The prperty passes utside f the prbate system and is nt gverned by the rules f intestacy. It ges immediately t the surviving spuse. 2. What if There is N Surviving Spuse? N surviving spuse but ne r mre surviving children: The surviving children r issue takes f the real prperty. N surviving spuse and n issue: The surviving parents take the real prperty in equal shares. N surviving spuse and n issue and n surviving parents: Lk t the issue f the decedent s parents (i.e., siblings and issue f siblings). N surviving spuse and n issue and n surviving parents and n issue f parents: Lk up t the level f the grandparents. If there are n surviving grandparents, then lk t issue f the grandparents. C. Distributin f Intestate s Persnal Prperty 1. Is there a surviving spuse? The surviving spuse takes the first $ f persnal prperty. 2. If there is mre than $60,000 in persnal prperty in the estate: Surviving spuse and ONE surviving child (r surviving issue f that child): The surviving spuse takes the first $60,000 plus half f the remaining persnal prperty. Surviving spuse and TWO OR MORE surviving children (r surviving issue): The surviving spuse takes the first $60,000 and f the remaining persnal prperty. The surviving children r issue take the remaining tw-thirds f the persnal prperty Themis Bar Review, LLC NC Wills

3 Surviving spuse and surviving parent but n surviving children: The surviving spuse takes the first $, plus ne-half f the remaining persnal prperty. The parent r parents take the remaining ne-half f the persnal prperty. Surviving spuse and n surviving issue and n surviving parents: The surviving spuse gets all f the persnal prperty. D. Surviving Spuse 1. Marriage Requirement Fr a surviving spuse t take under the intestacy statute, the cuple must have been married. Exam Tip 3: The exam may test yur recgnitin f cuples wh are married but are n their way t divrce. If the divrce is finalized, then a spuse can n lnger be a surviving spuse fr intestacy purpses. A spuse wh has willfully and withut cause anther is nt entitled t inherit thrugh intestacy. The abandning spuse is nt cnsidered a surviving spuse fr purpses f intestacy. Generally, separated spuses r spuses in the prcess f getting a divrce are cnsidered t be spuses until the final decree f fr purpses f intestate successin. 2. Survival Requirement Nrth Carlina has adpted the Revised Simultaneus Death Act. It requires that an heir be prven by evidence t have survived the decedent by hurs t take by intestacy r by will. (This is the default rule. It can be altered by a will.) Example 1: The will f JFK, Jr. altered the default rule by requiring that a beneficiary survive by six mnths. ISSUE A. Issue 1. Qualificatins Lineal descendants: Peple descended in the immediate line frm the decedent, i.e., children, grandchildren, great-grandchildren, etc. Des nt include siblings, nieces and nephews, and ther cllateral relatives. A child brn during a marriage is t be the marital child f the parties t the marriage. In Nrth Carlina, a child brn within 10 mnths after the intestate s death t that man s wife is t be the issue f that man. NC Wills 2017 Themis Bar Review, LLC 3

4 2. Adptin In Nrth Carlina, an adpted child is treated as a bilgical child (bld issue) f the adpting parents. That child can inherit frm the adpting parents and the adpting parents can inherit frm the child. Adptin severs all inheritance rights between the parents and the adpted child and replaces the natural parents fr all purpses. Stepparent exceptin: The majrity f jurisdictins, including Nrth Carlina, allws a stepparent t adpt a child and that child can inherit frm bth the natural parent and the stepparent and vice versa. Example 2: A child is brn t a married cuple wh divrce. The child s mther remarries. The stepfather adpts the child. The child is still the child f the mther fr purpses f inheritance; the child is als the child f the adpting stepparent. Equitable adptin If there is n frmal adptin prcedure, generally, fster children and stepchildren have n right t inherit frm their fster parents r stepparents. Under the dctrine f equitable adptin, equity treats the children as thugh they have been frmally adpted, if certain requirements are met. Applies t nly, nt a will. A will can set ut wh takes the prperty. Standards: Equitable adptin requires prf by clear and cnvincing evidence that there has been: Express r implied t adpt the child; n the agreement; Natural parents gave up custdy; Child lived in the hme f and acted as the child f the fster parents; Fster parents tk the child int their hme and treated the child ; and A fster parent died intestate (i.e., withut a will). 3. Half-blds Siblings with ne parent in cmmn. Nrth Carlina treats whle-blded and half-blded relatives. Example 3: A half-brther dies leaving n children and n parents and n surviving spuse, but with a full-blded sister and a half-blded sister. The half-sister and the decedent had the same mther but different fathers. Bth sisters split their brther s intestate estate equally Themis Bar Review, LLC NC Wills

5 4. Nn-marital children In Nrth Carlina, a nn-marital child can inherit frm and thrugh a decedent if: Decedent was judged t be the father f the child by evidence; Decedent acknwledged himself t be the father in writing executed and acknwledged befre a certifying fficer and during his lifetime and the child s lifetime; Decedent died within f the child s birth and can be established thrugh testing as the child s father; OR Decedent acknwledged the child in his will. 5. Psthumusly Cnceived Children and Assisted Reprductin Technlgy A child brn within mnths f a decedent s death t the decedent s surviving spuse is presumed t be the decedent s issue and inherits intestate as if the child was brn during the father s life. In Nrth Carlina, any child brn as the result f reprductive technlgy is cnsidered legally the same as a naturally cnceived marital child f a husband and wife requesting and cnsenting in writing t the use f such technique. Exam Tip 4: Yu may see these issues in the cntext f determining whether the child is entitled t Scial Security benefits. That questin is determined based n Nrth Carlina law. CALCULATING SHARES A. Calculating Issue Shares: Per Capita at Each Generatin Exam Tip 5: This tpic frequently appears n the exam. Like the Unifrm Prbate Cde, Nrth Carlina uses the per capita at each generatin apprach t distributin. This treats peple wh are equally distant frm the decedent in an fashin. Example 4: Decedent has tw surviving children and n surviving spuse. If they are the nly survivrs, they are each entitled t a ne-half share. Example 5: A grandparent decedent passes away with n surviving spuse. The decedent had three children. If all three children were still alive, each wuld be entitled t a 1/3 share. If there were any grandchildren, the grandchildren wuld nt take because their share is represented by their parent. Prcedure: First, divide the prperty int equal shares at the first generatin where there is a surviving descendant; NC Wills 2017 Themis Bar Review, LLC 5

6 Each survivr at that generatin takes ne share. That satisfies that descendant s stck. If they have issue wh survive, it des nt matter. Fr thse wh have passed away at that level and leave issue wh survive, the remaining shares are gruped and are distributed at that next level t the issue wh have survived. Example 6: B B1 B2 A C C1 D D1 B1, B2, C1, and D1 are each equally related t the grandparent decedent, A. S, in Nrth Carlina, each surviving grandchild wuld take an equal share, a nequarter share. Example 7: A B B1 B2 C C1 D When ne child survives and the issue f the ther tw als survive, the estate is brken int three parts; D takes 1/3 and B1, B2, and C1 share the remaining 2/3 equally. They each take 1/3 f the 2/3, r 2/9. Nte 4: Under the per stirpes methd f distributin, D takes a 1/3 share; C1 takes a 1/3 share; and B1 and B2 share B s 1/3 share (1/6 each). B. Ancestrs and Cllateral Relatives If there are surviving issue wh are eligible t take, that cuts ff claims f parents and cllateral relatives like siblings, nieces, and nephews. If there are n surviving issue and there is n surviving spuse, then the intestate s parents share the intestate s estate in equal shares. If there is nly ne surviving parent, that parent takes the entire intestate estate. If there are n surviving parents, then intestate s and their issue take. If n surviving siblings r issue f siblings then and issue f grandparents take (ne half t the maternal and paternal grandparents) Themis Bar Review, LLC NC Wills

7 If there is n ne surviving frm any parent r grandparent and n surviving spuse r issue, and n will, the prperty escheats t the state. Nte 5: The intestacy system is a default system. Wills are the way t pt ut f the default system. Nte 6: In successful wrngful death actins, the peple wh receive the award are the decedent s intestate heirs, even if the decedent left a will. A. Frmalities EXECUTION OF WILLS Exam Tip 6: This is ne f the mst tested areas n the Nrth Carlina bar exam. 1. Attested (Witnessed) Wills a. Testatr s Capacity The testatr must be at least years ld and must have testamentary capacity. There are fur elements t mental capacity: Testatr must knw the natural bjects f her bunty (wh the recipients f her prperty wuld be); Testatr must knw the kind, nature, and f her prperty; Testatr must knw the manner in which she desires her act t take effect; and Testatr must knw the her act will have n her estate. b. Testatr s Signature Signed by the testatr r smene else in the testatr s and at her. The testatr s usual signature (r a mark, such as X ) is sufficient. c. Witnesses Witnesses d nt need t see the testatr sign as lng as the testatr her previus signature t the witnesses. Example 8: Testatr signs her will and then ges lking fr witnesses. Saying This is my will and this is my signature is sufficient acknwledgement. Tw cmpetent witnesses: Nrth Carlina requires at least cmpetent witnesses t a will. NC Wills 2017 Themis Bar Review, LLC 7

8 Cmpetency is determined at the time f. Subsequent incmpetency is irrelevant. Interested witnesses: Nrth Carlina allws witnesses t be interested and t take under the will. Hwever, if there are nt at least tw ther witnesses, the interested witness takes nthing under the will. Only gifts t the interested witness, the interested witness s spuse, and anyne claiming under the interested witness wuld be vid. The rest f the will is valid. Presence requirement: Thugh the testatr des nt need t sign in the presence f the witnesses (as lng as she acknwledges her signature), the witnesses need t sign in the presence f the testatr. Presence in Nrth Carlina is usually judged by the line f sight test, i.e., the testatr must be able t see the witness signing. d. Testamentary Intent The testatr must understand that she is signing a will. The testatr must the cntents f the will. Which dcuments are cnsidered part f the will? The dctrine f integratin says that all pages fund with the will and intended t be part f the will are cnsidered part f the will. There is n need t sign each page f a will. e. Date A will des nt need t be dated. f. Cmpliance In Nrth Carlina, cmpliance with the frmal requirements f wills is required. The intent is t reduce the pssibility f fraud. 2. Hlgraphic Wills Fr a valid hlgraphic (handwritten) will in Nrth Carlina, the will must be: Written in the testatr s handwriting; by the testatr either with the testatr s signature r name written in the will in testatr s handwriting; Fund after the testatr s death with the testatr s valuable papers r effects, r in a safe-depsit bx r ther place where imprtant papers are kept, r in the custdy f anther where testatr had depsited it fr safe-keeping Themis Bar Review, LLC NC Wills

9 A hlgraphic will des nt have t be fr it t be valid. The testatr must write her in her handwriting, but that can appear in the bdy f the will. A hlgraphic will des nt require witnesses. Clear testamentary intent: It must be clear that the dcument was intended by the testatr t be a will. At prbate, a hlgraphic will requires: The testimny f at least cmpetent witnesses that the will, alng with the name f the testatr, is written entirely in the testatr s handwriting; and The testimny f witness that the will was fund after the testatr s death amng her valuable papers r effects, r therwise in a place f safekeeping. OTHER TYPES OF WILLS; CODICILS; WILL SUBSTITUTES A. Self-Prved Will Includes ntarized signatures f the testatr and witnesses, acknwledging the will. A self-prved will facilitates prbate: There is n need fr further evidence f witnesses at a frmal prbate hearing. B. Nuncupative (Oral) Wills Exam Tip 7: Bar examiners have tested n the tpic several times. A nuncupative will is: Made by smene in their last sickness r imminent peril f death, wh in fact des nt survive that sickness r peril; and Declared t be that persn s will befre cmpetent witnesses wh are simultaneusly and asked t witness the will. Only prperty can be dispsed f by a nuncupative will. It must be prbated within mnths frm the time f C. Cdicils making unless it was reduced t writing within days f when it was made. A cdicil is a t a will that alters, amends, r mdifies it. Editr's Nte 1: The prfessr intended t say, In Nrth Carlina, a hlgraphic cdicil t an attested will and an attested cdicil t a hlgraphic will are valid. NC Wills 2017 Themis Bar Review, LLC 9

10 A cdicil republishes the will. D. Freign Wills Freign will: A will executed utside f Nrth Carlina (perhaps even utside the United States). A freign will is valid in Nrth Carlina if: It was validly executed in the place where the testatr executed it; It was validly executed in the place where the testatr was when it was executed; r The will is a military will and executed in cmpliance with the military cde. E. Will Substitutes (prbate avidance devices) Will substitutes are ways f transferring prperty at death r befre death withut a will. Types f will substitutes include: trusts; Pur-ver wills; Bank accunts and securities with a frm; Payable-n-death clauses; Life insurance; and Deeds. 1. Revcable trusts Revcable trusts are trusts int which the creatr (settlr) puts prperty, retains the ability t the trust, and includes instructins n what shuld happen with the prperty if the settlr des nt revke the trust befre death. 2. Pur-ver wills These wills pur prperty frm the will int a trust that is nt part f the prbate prcess r the public recrd. The trust is executed either r simultaneusly with the will. Example 9: Elizabeth Edwards used a pur-ver will. 3. Bank accunts and securities with beneficiary frm Prperty des nt need t pass thrugh prbate. The persn listed as beneficiary just needs t prduce a f the accunt wner t the financial institutin and the prperty will be transferred t the beneficiary. 4. Payable-n-death clauses Similar t abve; seen in cntracts with financial institutins Themis Bar Review, LLC NC Wills

11 At the decedent s death, prperty held under the cntract passes t the beneficiary upn filing f the death certificate. 5. Life insurance Life insurance is paid t the named beneficiary withut having t g thrugh prbate. If the insured designates smene as a beneficiary, the beneficiary cannt be altered by. 6. Deeds In rder fr a deed t be valid, it must be validly delivered. Example 10: A prbate avidance device the grantr may give a deed t an escrw agent with instructins t deliver the deed at the grantr s death. Creditrs typically cannt reach prperty that passes by jint tenancy r tenancy by the entirety. A. Hw t Revke REVOCATION OF WILLS A will may be revked by: Subsequent instrument that meets the will frmalities; Physical destructin r cancellatin; r Operatin f. 1. Subsequent instruments Example 11: A new will that explicitly revkes a previus will. 2. Physical Destructin r Cancellatin A will may be revked by burning, canceling, tearing, bliterating, r destrying a prtin f the will with the t revke it. If a will was nce knwn t exist but cannt be fund at testatr s death r is fund mutilated there is a rebuttable f revcatin. A third party can physically destry and thus revke a will n a testatr s behalf s lng as it is dne (i) at the testatr s and (ii) in the testatr s. Example 12: The testatr calls the lawyer wh drafted her will and asks the lawyer t destry it. The lawyer des s. Thugh it is dne at the directin f the testatr, the will is nt revked because it was nt physically destryed in the presence f the testatr. NC Wills 2017 Themis Bar Review, LLC 11

12 3. Operatin f Law Disslutin f marriage revkes all will prvisins in favr f the frmer spuse, including appintments as executr, trustee, etc., and grants f a pwer f appintment, unless the specifically prvides therwise. Separatin withut divrce des nt affect the rights f the spuse r dmestic partner until a cmplete prperty settlement is in place. Caveat: In Nrth Carlina, a subsequent marriage des nt a will. Example 13: A testatr executes a will years befre marriage. Years later, the testatr marries. Upn marriage, the will is nt revked. The new spuse is limited t the spusal elective share. Nte 7: Partial revcatin f a will is allwed in Nrth Carlina. Nte 8: A hlgraphic will can be altered r revked in whle r part by hlgraphic changes and a new signature. B. Lst Wills There is a rebuttable presumptin f revcatin when a will knwn t exist and in the pssessin f the testatr is nt fund upn the testatr s death. If the presumptin is rebutted, yu want a cpy f the will. The burden is n the f the lst will t shw existence f a will. Revcatin f a will revkes its cdicils since they are cnsidered part f the will. C. Revival A revcatin f a subsequent will des nt autmatically revive a frmer will. T revive a frmer will, yu have t: Prperly it; r Incrprate it by in a subsequent will r cdicil that is prperly executed. D. Dependent Relative Revcatin (DRR) If a will is revked based n a mistake f r such as the mistaken belief that revking a subsequent will revives a previus will then a curt may apply DRR and say that the mst recently revked will is revived. Example 14: An early will leaves prperty t a friend wh later is nt cnsidered a friend. Testatr drafts a new will and then revkes it, mistakenly believing that the first will will be revived. If we d nt apply DRR, Testatr will die intestate because bth the first and secnd wills have been revked. DRR Themis Bar Review, LLC NC Wills

13 E. Will Cntracts 1. Examples allws us t prbate the secnd will BUT, it must be shwn that reviving the secnd will wuld be mre in keeping with the testatr s desires than wuld being intestate. Exam Tip 8: If yu see an therwise valid revcatin based upn a mistake (whether f law r fact), begin yur analysis by stating the DRR rule. Cntracts t a will: (e.g., If yu take care f me fr the rest f my life, I will leave yu prperty. ) Cntracts nt t revke a will: (e.g., a married cuple makes a mutual cntract that whever survives will nt revke their will and they will leave prperty t their children tgether.) Cntracts t die : (e.g., I prmise I wn t leave prperty t smene else. I will allw my prperty t pass by intestacy. ) Exam Tip 9: Nrth Carlina bar examiners have asked several questins n this tpic in the recent past. Apply principles f cntract law when faced with a questin invlving a will cntract. 2. Writing requirement The writing may be a will that states the material prvisins f the cntract; r A separate writing with the material terms f the cntract; r Reference in a will t such a cntract and extrinsic evidence prves the terms. Lk fr fr the prmise. Exam Tip 10: Yu may see will cntracts in the fllwing cntexts: Jint wills (e.g., a married cuple signs the same dcument); Reciprcal wills (wills with identical r reciprcal prvisins). If yu see this fact pattern, analyze if there is a cntract between the parties t cntinue t have that will prvisin. Lk fr clear evidence f intent nt t revke. A. Definitins CONSTRUCTION AND INTERPRETATION OF WILLS A gift f real r persnal prperty is a called a. Specific devise: Example 15: I leave my car t my next-dr neighbr. General devise: Example 16: I leave $100,000 t my niece. NC Wills 2017 Themis Bar Review, LLC 13

14 Demnstrative devise: Gifts paid frm a particular surce. Example 17: I leave $10,000 frm my BB&T bank accunt t my cusin. Residuary devise: Whatever remains after we ve made all the specific, general, and demnstrative devises. The persn wh receives prperty is the. B. Incrpratin by Reference A will may incrprate anther writing that was nt executed with all the frmalities f a will, if the ther writing: Existed at the time the will was ; Is t be incrprated int the will; and Is described in the will with sufficient certainty t permit its identificatin. C. Acts f Independent Significance A will may designate a beneficiary r make a dispsitin by reference t an act unrelated t the executin f the will, and maybe ccurring after executin, as lng as that act has significance independent f its testamentary significance. Example 18: A testatr leaves whatever mtrcycle I wn at the time f my death t my belved nephew. Since executing the will, the testatr has purchased and sld a few mtrcycles. Whatever mtrcycle the testatr wns at the time he passes away will be given t the nephew. The significance f the act f purchasing r selling a mtrcycle is independent f the testamentary functin. D. Dctrine f Lapse Exam Tip 11: This tpic is asked abut very frequently n the exam. 1. Lapse If a beneficiary des nt survive the testatr, the gift t them lapses. The beneficiary generally needs t be alive at the time f the gift t take it. Example 19: A testatr leaves smething t his belved sister. The sister passes n befre the testatr dies. That gift, withut a curative dctrine, lapses. Example 20: A testatr leaves my mtrcycle t my best friend and law partner. He passes away befre the testatr. That gift lapses, and either becmes part f the residuary r passes accrding t an alternate dispsitin. 2. Anti-Lapse Statute Anti-lapse statute: Preserves gifts frm lapsing, in certain circumstances Themis Bar Review, LLC NC Wills

15 Prvides an exceptin if a beneficiary wh predeceases the testatr is related t the testatr at the level f r descendant f grandparent. If the deceased beneficiary is clsely enugh related, the surviving f the deceased beneficiary take in her place. Example 21: A testatr devises prperty t his sister. She s passed away but she leaves issue wh survive her (the sister) and wh take in her place. Editr's Nte 2: Under the anti-lapse statute, the issue f the deceased sister will take the prperty in place f the sister. Keys t lk fr: 3. Class Gifts Is the beneficiary wh has passed away sufficiently clsely related? Has the beneficiary wh has passed away left issue wh survive? Typically, when there is a gift t a class, nly the members take. Example 22: A gift f $100,000 t the class f the siblings f my best friend may be t a class that cntracts as members die r expands as members are brn. Class gifts wrk in cnjunctin with the anti-lapse statute: The anti-lapse statute nly applies if the testatr is related t the beneficiary at the level f grandparent r belw. Example 23: I leave prperty t my siblings. If sme f the siblings pass away during my life but leave issue wh survive, the issue wh survive will stand in the shes f the deceased sibling and take by representatin. 4. Residuary The anti-lapse rule applies t residuary beneficiaries: If a residuary beneficiary dies befre the testatr and either is nt related at the level f grandparent r leaves n issue, then the ther residuary beneficiaries take the deceased beneficiary s share. Example 24: I devise my residuary t my best friend, Fred. Fred predeceases me and leaves issue wh survive. His issue d nt take. E. Abatement Occurs when the testatr gives away mre than he wned. Order f abatement: First, prperty; Then, residuary devises; General devises; devises. NC Wills 2017 Themis Bar Review, LLC 15

16 Example 25: A beneficiary receives a specific devise f a car and a residuary devise f a ne-half interest in a farm. There were sme debts and the farm was t be sld. The beneficiary wuld lse sme f her interest in the farm, but wuld receive the specific devise f the car. F. Ademptin When a testatr des nt wn specifically devised prperty at the time f her death, the gift is generally, unless the testatr was incmpetent r the prperty is. Ademptin by, i.e., the prperty n lnger exists. Ademptin by, i.e., the prperty has already been given t the beneficiary during the testatr s life. G. Exneratin f Liens Specifically devised real prperty is given t a beneficiary with liens still n the prperty. This is a default rule. Example 26: Testatr devises his huse t his daughter. There is a $50,000 mrtgage n the huse. Unless the will specifies therwise, the daughter takes the prperty subject t the $50,000 mrtgage. Nte 9: Yu can, by will, explicitly exnerate the lien (mrtgage). H. Ambiguities and Mistakes Generally, Nrth Carlina adheres t the f the will and generally des nt allw extrinsic evidence t interpret the will. Latent ambiguity (i.e., the ambiguity is nt apparent frm reading the will): Nrth Carlina the intrductin f extrinsic evidence in the case f a latent ambiguity. Example 27: I give $1,000 my cusin, Chuck is a latent ambiguity when there are tw cusins named Chuck. Patent ambiguity (i.e., the ambiguity is apparent frm reading the will): Nrth Carlina generally des nt allw extrinsic evidence BUT allws extrinsic evidence if the patent ambiguity relates t the testatr s intent. Example 28: I give my brther ne-quarter f a millin dllars ($25,000) t my favrite nephew, Sam Themis Bar Review, LLC NC Wills

17 RESTRICTIONS ON THE POWER TO TRANSFER A. Rights f the Surviving Spuse 1. Spusal Supprt: The surviving spuse is entitled t the fllwing means f supprt: Nrth Carlina Hmestead exemptin; Family allwance (free frm any creditrs claims): $30,000 fr ne year f supprt and maintenance; and $5000 fr each minr child fr ne year f supprt. The fllwing children are eligible fr the child s benefit: Each minr child; Each child under wh is a full-time student; Each child under age wh is incmpetent r disabled. Scial Security survivr benefits; Pensin plan with survivr benefits. 2. The Elective Share The surviving spuse can elect against the will and receive the elective share in place f the will. Gal: Take a picture f the prperty that the decedent had cntrl ver at the time the decedent died, including the prbate estate and ther prperty that passes thrugh will substitutes. That adds up t the ttal assets f the decedent. Ttal assets include: Decedent s prperty that wuld pass via if he died withut a will; Prperty ver which the decedent held a presently exercisable general pwer f appintment; Prperty held as tenants by the entirety r jint tenancy, measured as ne-half f the value f the prperty held with the surviving spuse; Payments made as a result f the decedent s death under any plicy (e.g., life insurance) that the decedent wned r culd exercise a right f appintment ver; Prperty transferred during life ver which the decedent retained the right t pssess r the right f incme r pwer ver (e.g., revcable trust); Prperty transferred t smene ther than the surviving spuse within ne year f and during marriage t the spuse, except fr prperty fr which there was full and adequate cnsideratin r that the spuse cnsented t in writing. NC Wills 2017 Themis Bar Review, LLC 17

18 Add all thse tgether; then give the surviving spuse a percentage f that ttal based n the. Exam Tip 12: This has been recently revised in Nrth Carlina. Bar examiners might test n this change. Surviving spuse s share: If the marriage is less than five years: 15% f the decedent s ttal assets; At least five years but less than 10 years: %; At least 10 years but less than 15 years: 33%; 15 years r mre: % f the decedent s ttal assets. Net prperty passing t the surviving spuse includes: Prperty devised t spuse r passing thrugh r beneficiary designatin; Surviving spuse s interest in ; Prperty transferred during life t the surviving spuse fr which there is a signed acknwledgement; Prperty awarded psthumusly pursuant t an equitable distributin claim; Prperty held in a spusal trust. Example 29: A husband dies with the fllwing assets: (i) $100,000 in life insurance prceeds, payable t his surviving spuse, (ii) nn-marital real prperty wrth $500,000, devised t his adult children in his will, and (iii) $50,000 in stcks, devised t his children. The husband s Ttal Net Assets equal $650,000. The cuple have been married 30 years; the surviving spuse s applicable share f the Ttal Net Assets is 50%, r $325,000. The prperty passing t the surviving spuse is $100,000 (the insurance plicy). Therefre, the surviving spuse is entitled t an elective share f $225,000. The spuse may waive her right t the elective share: B. Gifts t Children Fair and reasnable disclsure f the decedent s prperty; unless The spuse has waived her right t the disclsure. 1. Advancements Nte 10: A will executed befre marriage is nt revked upn marriage; the spuse is entitled t an elective share. That is the extent f her prtectin. Nte 11: Hw Nrth Carlina treats a spuse wh gets married after the executin f a will is different frm hw it treats children brn after the executin f a will. Advancements apply nly t, nt wills Themis Bar Review, LLC NC Wills

19 In Nrth Carlina, there is a presumptin that gifts t children during the decedent s life are nt advancements. The estate culd shw that a gift during the decedent s lifetime is an advancement. Must lk t the f the decedent. If the gift is shwn t be an advancement, its value is brught int the htchpt with the intestate estate: Start with the intestate estate; Add the value f the advancements t calculate the ttal estate; Divide the ttal estate s that each child receives an equal share. Example 30: A decedent died leaving tw children and n surviving spuse. The decedent s intestate estate was $75,000. If ne child received an advancement f $25,000, that $25,000 wuld be added back int the estate fr a ttal estate f $100,000. Each child wuld be entitled t half (r $50,000). Because the first child had already received an advancement f $25,000, that child wuld receive $25,000 frm the decedent s estate and the ther child wuld receive $50,000 frm the estate. They end up with equal amunts. 2. Satisfactin f Devises: The Wills analgue t advancements. Example 31: If a gift f mney is devised in a will, but the amunt is prvided during the decedent s lifetime, the devise is said t have been. 3. Transfers t Minrs: Prperty transferred t minrs may be held by a guardian, a cnservatrship, a custdian, r a. C. Omitted Children: If a will mits a child brn (r adpted) after its executin, that child may claim an intestate share f the estate, unless: The testatr made a prvisin fr the child in the will; Example 32: A class gift t all f my children. It appears frm the will that missin was ; Example 33: Anna Nicle Smith s will expressly excluded after-brn children. The testatr had ther children at the time f the executin f the will and nne f thse children tk under the will; The spuse takes the estate under the will; The testatr prvided fr the child utside f the will, whether adequate r nt. NC Wills 2017 Themis Bar Review, LLC 19

20 BARS TO SUCCESSION; WILL CONTESTS Exam Tip 13: This is a ppular tpic fr the bar exam. A. Bars t Successin 1. Hmicide (Slayer s Statute) A slayer may nt inherit frm the decedent s estate. A slayer is a persn wh: Is guilty as principal r accessry in the and killing f the decedent; Fund liable in a actin within tw years f decedent s death fr the willful and unlawful killing f decedent; r Is a juvenile wh is adjudicated fr an act that wuld be a willful and unlawful killing. Nte 12: A persn fund nt guilty by reasn f insanity is nt cnsidered a slayer fr purpses f the Nrth Carlina slayer s statute. Slayers are treated as if they had the decedent. If the slayer and decedent hld prperty as tenants by the entirety, then ne-half passes t the decedent s estate immediately and ne-half passes n the f the slayer. If the slayer has issue wh wuld be entitled t take if the slayer had predeceased the decedent, then the living issue take. This applies t all prperty, bth prbate and nnprbate (e.g., life insurance plicies). Exam Tip 14: Past exams have stressed willful and unlawful killing. 2. Surviving Spuse: The fllwing acts disqualify the spuse frm taking: An abslute, annulment, r divrce frm bed and bard; Separatin and chabitatin that has nt been cndned; Willful withut cause; Knwingly entering int a marriage. 3. Parents: Any parent wh has willfully abandned a child lses all rights t successin, including the right t administer the child s estate, except when a parent: Resumed care and maintenance at least ne year befre the child s death, and cntinued care and maintenance; r Had been deprived f custdy under a curt rder, and has substantially cmplied with all curt rders regarding Themis Bar Review, LLC NC Wills

21 4. Renunciatin Exam Tip 15: There has been a recent bar exam questin n the effect f a parent s abandnment f a child. A devisee (r intestate heir) must renunce if they chse nt t accept prperty. The renunciatin must: Identify the transferr f the prperty interest r creatr r hlder f the pwer; the prperty r interest renunced; the renunciatin; and Be and acknwledged by the persn renuncing. The renunciatin must be filed within mnths f death t be a qualified disclaimer fr federal estate and gift tax purpses (failure t d s results in the beneficiary being cnsidered t have accepted the prperty and then making a gift f the prperty). The f the renuncing party has n elective share r ther marital interest in the renunced prperty. B. Will Cntests Nte 13: A will cntest in Nrth Carlina is called a. 1. Perid f Limitatins The general perid fr filing a caveat is years frm the filing f a will. But, if a will is prbated in slemn frm then the challenge must take place during the prbate and anyne prperly served cannt caveat the will. 2. Standing t Cntest: Any party can cntest a will. Example 34: Judgment creditr f a beneficiary under a will; a beneficiary under a prir will. 3. Testamentary Capacity: A testatr lacks capacity if she des nt knw: Natural bjects f her bunty; The kind, nature, and f her prperty; The manner in which she desires her act t take effect; and The effect her acts will have n her estate. 4. Insane Delusin A belief fr which n supprt, but t which the testatr adheres despite all reasn and evidence t the cntrary. In Nrth Carlina the caveatr must shw: NC Wills 2017 Themis Bar Review, LLC 21

22 That the testatr suffered insane delusin; That it was the f the dispsitin; and That the delusin was actually perative in the prductin f the will. 5. Undue Influence Exam Tip 16: This was asked abut n the bar exam fairly recently. The mental r physical exerted by a third party n a testatr with the t substitute the judgment f the third party fr the testatr. The caveatr must shw that the will wuld nt have been made the undue influence. Factrs that are signs f undue influence (nt all need t be present): Old age and physical r mental weakness; Testatr was in the f the beneficiary and subject t her cnstant assciatin and supervisin; Others had little r n pprtunity t see the testatr; The will is different frm and a prir will; The will was made in favr f ne with whm there are n ; The will disinherits the natural bjects f the testatr s bunty; The beneficiary has prcured its executin. 6. Fraud Fraud must be present at the time f the f the will. Elements f fraud: made by the beneficiary; With t deceive the testatr and fr the purpse f influencing the testamentary dispsitin; Reasnable by the testatr n the misrepresentatin; and Damages. Fraud in the inducement: Making a knwingly false statement t induce the testatr t make a different will frm the ne she therwise wuld have made. Fraud in the executin: Fraud as t the very nature f the instrument r its executin. Example 35: The testatr did nt knw she was signing a will. Cnstructive fraud: Using a cnfidential r fiduciary relatinship t harm the testatr Themis Bar Review, LLC NC Wills

23 There des nt need t be actual fraud nly abuse f a relatinship t gain an advantage. Remedy: Cnstructive trust 7. Frfeiture Clauses A n-cntest clause is an express clause in a will that disinherits a beneficiary wh challenges a will. They are generally enfrceable, but are nt enfrced against peple wh in gd faith and with prbable cause challenge a will. 8. Prvisins in Restraint f Marriage A brad restraint against marriage (e.g., frfeiture f a gift if a beneficiary ever marries) is generally vid. A reasnable restrictin n marriage (e.g., a restrictin against an ill-advised marriage t a specific individual) is valid. PROBATE AND ADMINISTRATION Exam Tip 17: Bar examiners have ccasinally tested n the wrkings f prbate and administratin because it is an imprtant part f the practice f lawyers whse practice is wills and trusts. A. Vcabulary Prbate: The judicial prcess that establishes the validity f a will, determines wh the devisees/heirs are, issues letters t the executr (r, if intestate, the administratr) f the estate, allwing the persn t (i) give ntice t, (ii) cllect mney wed t the estate, (iii) pay creditrs, (iv) distribute prperty t the heirs r beneficiaries. Prbate deals nly with prperty subject t a will; administratin deals with intestate prperty. Prbate als deals nly with prbate prperty; it des nt deal with nnprbate prperty. Nnprbate prperty: Includes prperty passing by jint tenancy r tenancy by the entirety; B. Prcedure prperty paid pursuant t a plicy; pensin plan prceeds; prperty subject t a revcable trust. Exam Tip 18: The Nrth Carlina examiners are very likely t ask a questin in this area. NC Wills 2017 Themis Bar Review, LLC 23

24 1. Primary jurisdictin Primary jurisdictin: The cunty where the decedent was at the time f the. Prbate must be filed there. Other cunties where the decedent wned real prperty have jurisdictin, but that jurisdictin is dependent n prceedings where there is primary jurisdictin (where the decedent is ). 2. Persnal representative A will usually names an executr; if it des nt r the named executr(s) are unavailable, the pririty f naming a persnal representative is as fllws: Surviving spuse; Any devisee; Any ; Any next f kin, with clser next f kin having pririty; Any ; Anyne f gd character residing in the cunty; Anyne f gd character. The curt then issues letters testamentary (fr wills) r letters f administratin (intestacy) t the persnal representative. They authrize the persnal representative t make in the prperty. 3. Prceedings In Nrth Carlina, a will can be prbated, even decades after the testatr s death. Slemn frm prbate: Requires the clerk t give t all interested parties and t schedule a hearing; Caveats (bjectins t the will) must be filed within a fairly shrt time f receiving ntice; If n interested party with ntice cntests the will, the prbate is binding. Nte 14: Prbate in slemn frm is seen when a will cntest is anticipated, s as t restrict the time perid fr cntesting. Cmmn frm prbate: Mst cmmn (and standard) frm f prbate in Nrth Carlina. Caveats (bjectins t the will) can be filed within years after filing cmmn frm prbate (even after prbate has clsed) Themis Bar Review, LLC NC Wills

25 4. Creditrs Claims Perid f limitatins: In Nrth Carlina, claims that arse befre the decedents death must be filed with the persnal representative either: Within the time specified in the ntice t creditrs (must be at least three mnths); r Within days after the delivery r mailing f ntice t knwn creditrs. Ntice The persnal representative must ntice t creditrs wh can reasnably be ascertained; and a ntice t creditrs, which gives at least three mnths frm the first publicatin f ntice fr a claim. 5. Persnal representative Duties: Prvide t devisees, heirs, and claimants; Inventry and assets f the decedent; Manage the assets during administratin; Receive and f creditrs and tax cllectrs; Distribute the remaining assets t thse entitled t them. Fiduciary: The persnal representative wes fiduciary duties t the estate and may be liable fr breach f thse duties. Clsing the estate: After paying creditrs and distributing assets, the estate is clsed. POWERS OF APPOINTMENT; POWERS OF ATTORNEY A. Pwers f Appintment 1. Definitin: A pwer that can be given t smebdy by the creatr f a trust ( dnr ) t an individual ( dnee r pwer hlder ) t dispse f trust prperty. Exercisable by will: pwer f appintment. Exercisable during life: Presently exercisable pwer f appintment. 2. Purpse: The pwer t determine wh the next beneficiaries f a trust are. 3. Types: General pwer f appintment: The dnee can appint herself, her estate, her, r the creditrs f her estate as a new wner. Special ( nngeneral ) pwer f appintment: Mre limited. NC Wills 2017 Themis Bar Review, LLC 25

26 Exclusive: Pwer t appint t anyne except a grup, e.g., the dnee herself, her creditrs, r her estate; Nnexclusive: Allws the dnee t appint amng a class f peple, e.g., grandchildren; If the dnee fails t exercise the pwer, the curt will imply a gift t the bjects f the special pwer. Example 36: A trust creating the pwer t give issue r children the pwer t redirect prperty at a later date. It extends cntrl ver the trust: Testamentary trust: A trust established by a will, giving lifetime incme t each f the testatr s children and then giving the children the pwer t redirect r appint, within a class, wh will be the next generatin f takers. 4. Exercise f the pwer f appintment Testamentary pwers may be exercised nly by. In Nrth Carlina, any general devise includes prperty subject t a pwer f appintment. B. Pwers f Attrney Residuary clause: Exercises a general pwer f appintment if: The pwer is a general pwer f appintment; There is n taker in ; There is n cntrary intent in the dcument creating the pwer; and The pwer has nt been previusly released by the dnee. Blanket exercise clause (e.g., including any prperty ver which I have pwer f appintment ): Exercises the pwer f appintment unless the dnr required a f the pwer. Exam Tip 19: With questins n pwer f appintment, be prepared t answer whether the pwer has been exercised, and if s, whether it was prperly exercised. Be n the lkut fr a residuary clause and als fr a blanket exercise clause. Nte 15: If a decedent has a presently exercisable pwer f appintment, that gets added t the ttal net assets f the decedent fr purpses f the elective share. Exam Tip 20: This tpic frequently shws up n the exam. 1. Definitin: An fr smene else (an attrney in fact r agent ) t act n behalf f the principal wh executed the pwer. 2. Pwer f Attrney fr Financial Matters General: Authrizes brad pwers, such as thse related t financial transactins, tax filings, gifts. The pwer f attrney may even authrize agents t make gifts themselves. Special: E.g., t execute a deed t a particular piece f prperty Themis Bar Review, LLC NC Wills

27 3. Health Care Pwer f Attrney Allws an agent t make healthcare decisins fr the principal when the principal becmes ; A health care pwer f attrney must be: In ; by the individual wh is t receive care; In the presence f tw qualified witnesses; and Ntarized. Nte 16: General, special, and health care pwers f attrney can be made durable pwers f attrney (i.e., cntinue even if the grantr is incapacitated). 4. Scpe f Authrity: Fiduciary Duties Exercise f the pwers fr the f the principal; Hld separate the assets f the principal frm the assets f the agent; Exercise care; Accunt fr all transactins n behalf f the principal; and an accunting f administratin when directed by a curt. Example 37: The Nrth Carlina general statutes prvide a mdel frm fr a durable pwer f attrney fr financial matters. That frm allws the principal t give the agent the pwer t give herself a gift. [END OF HANDOUT] NC Wills 2017 Themis Bar Review, LLC 27

28 Themis Bar Review, LLC NC Wills