Legal Question in Wills and Trusts in North Carolina
Using Life Estate Deeds ot change an incompetent's will
Mr. Jones, a widower, is permanently mentally incapacitated. He has a valid will made several years ago that makes specific bequests to each of his three children.
His daughter, Sally is the administrator of his estate. She also has �financial power of attorney� Mr. Jones� son Bill also has power of attorney as a back up to Sally.
Sally wishes to use Life Estate Deeds to convey the property and distribute it differently than was specified in Mr. Jones� will.
Jane, the third beneficiary, will not execute any deeds and will not provide written consent to the new distribution of the inheritance.
1. Can Sally legally use Life Estate Deeds that she executes as attorney in fact for her father to distribute the real property differently than is stated in Mr. Jones� will?
2. Will Mr. Jones or his estate be liable for Gift tax on any of the real-estate conveyed?
3. Will the redistribution of the real estate create any tax liability on the part of any of the children?
4. If Sally goes ahead with her plan without Jane giving her consent, what recourse will Jane have if any of Sally�s actions creates a tax liability for Jane?
1 Answer from Attorneys
Re: Using Life Estate Deeds ot change an incompetent's will
Great questions! Are you a lawyer or a Bar examiner? This would be an excellent bar exam question.
First off, I am offering my two bits in case no one from NC answers you. I am a lawyer here in Alabama so my licensure doesn't extend to NC. That being said, if Sally has the power to buy/sell/convey real estate under the POA, she is authorized to do just that. The will has no bearing so long as Mr. Jones is alive. She could just as easily sell it all to a 3rd party if she wanted to. The only concern I would have is whether her actions might be considered "self-dealing" under NC statutes. Mr. Jones would be liable for federal gift tax assuming the gift value totalled more than $1 million, and I believe NC also has a state gift tax as well, but check locally for that. There is no immediate tax liability to the kids; you could argue that their interest in the estate doesn't vest until after his death, and as such, there should be a stepup in basis, avoiding capital gains tax as well. Jane has no say in the process. She can renounce her portion of the gift but that is all she can do.
Hope this helps. I am interested to see what others post.
William G. Nolan
www.NolanElderLaw.com
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