Estate Planning Considerations After New Baby

February 14, 2014
By: Christopher S. Morden

This article will summarize my thoughts on things new parents should consider with regard to estate planning; a topic which has become very important to me because of the recent birth of my second child.

1) Updating terms of Last Will and Testament. If parents have wills, then they should review the terms of their wills to determine whether the new child will be included in the existing distribution plan. Wills are commonly drafted so that children born or adopted after the will is signed are automatically included. However, it is very important that the parents’ wills be reviewed to ensure that this automatic inclusion is in fact the case.

If the parents are first-time parents, then it is unlikely their existing estate planning documents mention distributing assets to children. It is therefore highly recommended that first-time parents modify their existing documents so that provisions are made for the new child or children.

And if parents do not have any estate planning documents (like approximately 55% of Americans), then it is recommended that they meet with an attorney to discuss their estate planning needs.

2) Guardians. Our North Carolina laws allow parents to recommend a guardian for their minor children within the terms of their wills. Even though a clerk of court is not technically bound by parents’ recommendations, it is very important that parents give serious thought to who they want to be guardian should a guardian become needed. Our laws presume that parents know the best interests of their children and clerks are therefore directed to treat any such recommendation as “a strong guide” when determining who should serve as guardian.

3) Beneficiary Designations. Because life insurance, retirement accounts, and transfer on death or pay on death accounts do not pass pursuant to the terms of an individual’s will, it is important that new parents review the structure of the beneficiary designations on these assets. If these beneficiary designations name specific children, then they may need to be revised to add the new child as a primary or contingent beneficiary.

I would however caution parents on designated a beneficiary that is under the age of eighteen. Because minors may not receive assets while under age eighteen, a guardian would be needed to receive assets subject to beneficiary designation. It is therefore generally preferable that this property instead be directed to be distributed to either (1) a custodian under the North Carolina Uniform Transfers to Minors Act or (2) a trustee of a trust for the benefit of the child or children. I generally prefer to use a trust rather than a UTMA custodian because a trust allows for the control of funds for a longer period of time.

New NC LLC Statute: A Quick Overview

January 31, 2014
By David E. Miller, III

Monroe Wallace Law Group regularly advises individuals and companies regarding the optimal corporate formation for their business. We help clients understand how to structure entities that fit the needs of their business or a particular transaction. A limited liability company (“LLC”) is a popular choice for many companies who want the liability protections of a corporation and the flexibility of a partnership.

Effective on January 1, 2014, the North Carolina General Assembly repealed the old Chapter 57C of the North Carolina General Statutes and enacted the new Chapter 57D. The purpose of the new North Carolina Limited Liability Company Act is to give the maximum effect to the freedom of contract and the enforceability of operating agreements by providing a flexible framework for one or more persons to organize and manage their business or businesses as they deem appropriate with minimum prescribed formalities or constraints. Some of the changes to the Act include:

Rights and Duties of Parties
• Rights and duties of parties can be modified or waived by agreement.
• Ensures members’ rights to access certain company information.
• Provisions regarding contributions and distributions have been simplified.

Operating Agreements
• The operating agreement, including any portion of the operating agreement, may be written, oral or implied; however, oral amendments are not enforceable if the operating agreement requires that amendments be in writing or if oral agreements between parties to an operating agreement are inconsistent with written provisions in the operating agreement to the detriment of third parties that rely on the written operating agreement.
• If there is a conflict between the operating agreement and the articles of organization, the operating agreement controls for parties to the operating agreement and company officials, and the articles of organization control for anyone else who reasonably relied on the filed articles of organization.
• All LLCs will have an operating agreement because the articles of organization are now part of the operating agreement.
• Any provision that eliminates the right of a member to bring a derivative action or a demand for judicial dissolution will have no effect, unless an alternative remedy or means is provided to resolve disputes that would otherwise be the subject of such proceedings.

• The statute expressly allows for the appointment of “officials” (i.e., President, Vice President, etc.) who are not Managers.
• The statute allows for a distinction between a purely economic interest with no voting or management responsibilities and a membership interest with voting and/or management responsibilities.
• Provisions relating to low-profit LLCs have been removed.

• Specific items governing out-of-state LLCs were made consistent with the treatment of out-of-state corporations under the Business Corporation Act.
• LLC ownership interests are exempted from provisions of Article 9 of the Uniform Commercial Code that could adversely affect the interest of other members.